Carlyle Cuts Mortgage Fund IPO After Subprime Slump (Update3)
By Edward Evans
June 28 (Bloomberg) -- Carlyle Group, the private-equity firm that oversees $59 billion of investments, cut the initial public offering of a mortgage bond fund as the fallout spreads from a slump in U.S. real estate.
Carlyle trimmed the offering by 25 percent to $300 million from $400 million, and reduced the price of the shares to $19 from a range of $20 to $22, Carlyle Capital Corp. Chief Executive Officer John Stomber said in an interview today. The fund will mainly invest in AAA rated residential mortgage-backed securities. It also targets loans, junk bonds and collateralized debt obligations.
Increasing mortgage defaults by borrowers with poor credit histories is causing investors to cut back on riskier assets. Cambridge Place Investment Management LLP said today it will close the $908 million Caliber Global Investment Ltd. fund after losses on U.S. subprime debt. Earlier this week, Bear Stearns Cos. offered $1.6 billion to bail out one of its hedge funds. At least eight companies abandoned bond sales this week.
``The amount of headwinds in the market right now'' led Washington-based Carlyle to reduce the offering, Stomber said. The company filed new documents with the securities regulator in Amsterdam, where the fund will be listed, he said. ``Our dividend targets remain intact and are unaffected,'' he said.
Carlyle had sought to raise as much as $415 million in the IPO of Carlyle Capital. The cash will be added to a private $590 million pool raised last year. The firm planned to use loans to buy assets worth as much $17.3 billion, according to the fund's prospectus. More than 95 percent was to be invested in assets rated AAA by Standard & Poor's, the document shows.
Subprime Defaults
New York-based Bear Stearns's funds speculated in CDOs, which are securities backed by bonds, loans, derivatives and other CDOs. In March and April, the securities were hurt by a surge in defaults on subprime loans made to borrowers with poor credit or heavy debt loads.
``Carlyle's fund looked very similar to the Bear Stearns hedge fund,'' said Toby Nangle, who helps manage $45 billion in assets at Baring Investment Services in London. ``They were unlucky with the timing.''
Queen's Walk Investment Ltd., a fund managed by London-based hedge fund manager Cheyne Capital Management Ltd., said June 25 it had a $91 million loss in the year to March 31 in part because of subprime debt.
Blackstone IPO
Carlyle hired Stomber from Cerberus Capital Management LP last year to start the mortgage fund. Carlyle is trying to follow Kohlberg Kravis Roberts & Co. and Apollo Management LP in selling shares in funds listed in Amsterdam. Shares of Blackstone Group LP, manager of the world's second-biggest buyout fund, are trading below the price set in their IPO in New York on June 22.
Citigroup Inc., JPMorgan Chase & Co., Bear Stearns, Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Deutsche Bank AG are managing the sale for Carlyle.
Carlyle is considering a separate IPO of the private-equity firm as a whole, Dow Jones Newswires reported yesterday, citing Jason Lee, the firm's head of Asia real estate.
Separately, Carlyle teamed up with Onex Corp. today to buy General Motors Corp.'s Allison Transmission unit for $5.6 billion. Onex is Canada's biggest buyout firm. |
