Third Bad News for Carlyle IPO: China Forestry

With a looming IPO the last thing The Carlyle Group needs is more bad news.  Yet, that's the story from affiliate China Forestry.  Bloomberg's headline stated:

China Forestry Probe Verifies Under 1% of Reported Sales 

The piece went on to say:

China Forestry Holdings Co. (930), the logging company that last week said its only able to account for 1 percent of its historical sales, still has value in its assets, according to its third-largest holder, Carlyle Group

This is but the latest bad news for China Forestry.  Even in "recovery" the company can't win for losing:

Acting (China Forestry) Chief Executive Officer Li Jian resigned April 15, after the company’s net loss widened in 2011 as it struggled to rebuild its management and business relationships, according to separate filings on April 27. China Forestry hired Crowe Horwath HK CPA Ltd. as its auditor in January replacing KPMG LLC which resigned, saying the company needs to verify ownership and valuation of assets. 

China Forestry's sins include overstating the area of forestry rights by 150%::

The area covered by forestry rights certificates reviewed by investigators represents about 41 percent of the area the company said it owned the rights to in its 2010 annual report. 

It's financial statements aren't verifiable.

Financial statements for the years from 2006 through 2009 aren’t verifiable because the independent board committee conducting the probe found that some of the underlying supporting information isn’t available, the company said on April 27, detailing findings from the investigation.  

Carlyle invested in China Forestry in January 2008.  What kind of due diligence did they do?  Did they find the double books in one China Forestry subsidiary?

Would Carlyle judge this puffery, their defense in a former investor lawsuit?

Huffington Deals Carlyle IPO Blow

Former Congressman Michael Huffington's payback for The Carlyle Group's losing his $20 million investment continued today.  His press release stated:

Claims for unfair and deceptive acts and practices leveled against the Carlyle Group, David Rubinstein, one of the Carlyle Group's founders, T.C. Group, LLC and Carlyle Investment Management LLC, by former Congressman Michael Huffington will be heard by a jury following a ruling by a Delaware Superior Court.

The Court further stated that "it is for the jury to decide whether Defendants engaged in an 'unfair or deceptive act or practice' by (allegedly) failing to tell [Huffington] about the use or extent of leverage" and the jury must also decide whether the overleveraging of the Fund constitutes an unfair or deceptive act or practice under the applicable law. 

If Huffington is successful in his claims, the law allows him to seek up to three times his damages as well as his attorneys' fees. 

How much might this bad publicity will cost Carlyle in its IPO?  If proceeds are more than $20 million below Carlyle's expected discount pricing, Rubenstein et al may wish they'd settled.

AlpInvest London Chief Exits Carlyle Prior to IPO

The Carlyle Group acquired AlpInvest in 2011.  It was cited as one "Deal of the Year" by Private Equity International.  When Carlyle announced the deal, Co-founder David Rubenstein stated:

We have the highest regard for (AlpInvest CEO) Volkert (Doeksen) and his investment team.

That team is lighter today, given two reports.  Dow Jones stated::

Europe’s largest private equity investor, AlpInvest Partners, no longer operates a London office and has closed its primary mezzanine investment arm in the first major developments since its spin-out backed by US alternatives firm Carlyle Group.

Financial News reported:

AlpInvest Partners, Europe’s largest private equity investor, now part of US alternatives firm Carlyle Group, has closed its London office, pulled out of primary mezzanine debt and seen the departure of London chief Erik Bosman. 

If Erik's parting had any acrimony, he may wish to call Brintons' founding family.  They have a score to settle with Carlyle and company.

As for AlpInvest, they may wish to update their website:

That's one picture to eliminate and a graphic to adapt, all courtesy of The Carlyle Group pre-IPO.

Carlyle's Gemcom Exit

The Carlyle Group will liquefy their stake in Gemcom, a mining software company.  .Carlyle was part of a consortium that took Gemcom private in June 2008. as PEU "Deal Frenzy" stood near collapse.  Carlyle and partners purchased Gemcom in a deal valued at $190 million.  They're monetizing for a near double under a $360 million deal.

Carlyle is normally silent on proceeds from private sales.  Why share what appears to be a $170 million profit now?  It's IPO time!

I wonder how Brooke and Garth made out on the deal...

Milken the Globe

The Milken Institute Global Conference starts this weekend in the City of Angels.  I perused the Financial Track for politicians and private equity underwriters (PEU's).

 
I threw in Apollo Global's Senator Evan Bayh as a bonus track.  PEU positions are occupied by many former politicians and public servants.

Last year Maria refereed a Snark Fest.  I guess that's what happens when five billionaires occupy the same stage, each with a new investment offering to push. 

Carlyle Group co-founder David Rubenstein won't make the public dais at this year's Power PEU Platform  Rubenstein and his fellow co-founders are on a different global mission, hawking The Carlyle Group's IPO.  While Rubenstein can't make it, his wife will:

Giving a special address to Milken Globalists is President and PEU Bill Clinton.

His Clinton Global Initiative uses "a business-oriented approach worldwide" to solve pressing problems.  Clinton privatized the government security clearance function, which later enriched David Rubenstein.  Get the picture?

It's "Milkin' the Globe" time on at least two tracks.

Update 5-1-12:  Dealbook reported on the PEU session.

Will KKR's Lower Distributable Earnings Hurt Carlyle IPO?

KKR's distributable earnings drop came at a bad time for The Carlyle Group as it will price its IPO this coming week. Reuters reported:

KKR & Co LP said Friday that income from its share of investors' profits and the fees it charges for its assets slumped in the first quarter, prompting the private equity firm to cut its dividend.

KKR, whose investments include retailer Toys R US Inc, Internet domain registration company Go Daddy Group Inc and hospital operator HCA Holdings Inc, said first-quarter gross distributable earnings, which are used to pay dividends, fell 42 percent from a year ago, to $111.5 million.

Carlyle's DBD co-founders are in the midst of a global IPO sales blitz.  David Rubenstein says Carlyle is priced at a discount and ready to go up post offering.  Private equity firms are known for their earnings volatility and thus far in Q1 Blackstone and KKR have lower earnings.

A year ago Apollo Global Management went public at $19 a share  It's down to $13.11, a 31% drop .  Oaktree Capital priced weeks ago at $43.  It's down to $39.80, a 7.4% fall.  KKR's HCA priced at $30 and it closed today at $27.23, a decline of 9.2%.

The Carlyle Group believes it can beat this pattern.  Beware the PEU plague.

PEU Correspondents Weekend

Who says playfulness, pleasantry, politics, and PEU's (private equity underwriters) don't mix?  The tomfoolery continues this weekend.

SATURDAY

18th Annual White House Correspondents' Garden Brunch.  This brunch -- a.k.a. "Tammy's Brunch" -- is an annual tradition that used to take place at the residence of Veteran TV Producer Tammy Haddad and her husband, World Bank Attorney Ted Greenberg. This year, it's switching to the former residence of (former Queen of WaPo) Katharine Graham, which is now owned by (Media PEU) Mark Ein. Honorary event co-chairs are Wendi Murdoch (filmmaker and maternal health advocate) and Epilepsy Activist Susan Axelrod (the duo will be on hand to bring awareness for The White Ribbon Alliance for Safe Motherhood and CURE, an epilepsy research organization). Kick off is 11 a.m.

Location: The Beall-Washington House - 2920 R St., N.W., Washington, D.C. 20007 [map]

The guest list includes Twitter founder Evan Williams, Google's Eric Schmidt, Olympian Shaun White, The Carlyle Group founder David Rubenstein, Majority Leader Eric Cantor (R-Va.), White House Senior Advisor Valerie Jarrett, "Dancing With The Stars" Co-Host Brooke Burke, White House Chief of Staff Bill Daley and "Modern Family" Stars Jesse Tyler Ferguson and Eric Stonestreet.

There will be a press line and red carpet arrivals. In addition to the media frenzy, guests will enjoy scrumptious treats from The Georgetown Cupcake sisters (stars of TLC's "DC Cupcakes").

If we can't have profundity, PEU-ffoonery will have to do.