Carlyle Delays European Listing [WSJ]
By MARGOT PATRICK
June 28, 2007 11:01 a.m.
U.S. private equity firm The Carlyle Group, which Thursday postponed plans to list a company that invests in residential mortgage-backed securities and corporate loans, said it will proceed with the listing, likely next week, with revised terms.
A Carlyle spokeswoman said the delay of Carlyle Capital Corp. Ltd.'s listing came about because of the filing earlier Thursday of a supplement to its offering memorandum, which requires regulatory approval.
The spokeswoman declined to say whether the supplement would affect pricing or whether the listing's delay had anything to do with current conditions in credit markets.
According to an earlier announcement, Carlyle Capital Corp. aims to raise about $400 million on Euronext Amsterdam from shares priced between $20 and $22. Along with about $622 million in capital that came from a private fund-raising earlier this year and subsequent investment gains, the new company is set to start with around $1 billion.
Its investment assets will be much larger, though, at around $29 billion, once the offer proceeds are fully invested.
Investors have become increasingly concerned about widespread contagion in credit markets after the implosion this month of two hedge funds run by Bear Stearns Cos. At least three large corporate bond borrowers have delayed pricing deals this week, citing market conditions. (See related story)
The troubles at the Bear Stearns funds have also cast a negative light on the practice of using borrowed money to enhance returns on securities backed by pools of loans or other forms of debt.
According to the company's prospectus, Carlyle Capital Corp. uses leverage of as much as 51 times to amplify returns on some of the assets already in its portfolio. Overall leverage on its existing $622 million portfolio is nearly 28 times, for total investment assets of $17.3 billion.
The portfolio consists of residential mortgage-backed securities, or RMBS; U.S. and European bank loans, high-yield bonds, collateralized debt obligations and collateralized loan obligations; mezzanine debt; distressed debt; and a liquidity cushion of more than 20%.
Once leverage is applied, 95% of the portfolio is in triple-A-rated RMBS from U.S. agency issuers Freddie Mac and Fannie Mae and the liquidity cushion drops to 1%.
The company doesn't hold any securities backed by subprime mortgages.
The news came as a similar listed company, Caliber Global Investment Ltd., said it will return cash to shareholders after suffering losses from securities backed by U.S. subprime mortgages. Caliber Global Investment said it is proposing to return its investment capital to shareholders following a strategic review.
The company, managed by London-based hedge fund operator Cambridge Place Investment Management LLP, last month took a $15.1 million impairment charge and canceled its dividend after poor performance on securities backed by U.S. subprime loans. |
