Carlyle Closes Second Distressed Fund
April 7, 2008
The Carlyle Group, the Washington private equity firm, said Monday it has secured $1.35 billion in commitments for its second distressed debt and corporate opportunities fund, marking the newest private equity-backed investment vehicle targeted at the distressed market.
Investors in Carlyle Strategic Partners II fund were not disclosed. The new fund, which Carlyle began raising less than a year ago, will generally make investments of $25 million or more.
Carlyle officials declined to comment on what new investments the fund may have already made. The fund will invest in debt securities, both bank loans and public debt, as well as the public and private equity of financially-distressed companies that operate across a broad industry range. The investment vehicle will typically aim to acquire control positions in the companies in which it invests, while its fund managers will be actively involved in any restructuring processes the fund’s portfolio companies are undergoing.
Brett Wyard, managing director and co-head of Carlyle Strategic Partners, said in a statement that a turbulent economic and capital markets environment along with “excessive leverage on corporate balance sheets creates great opportunities for distressed investing around the globe.”
Wyard joined Carlyle’s Carlyle Strategic Partners group, which focuses on troubled companies, in October 2005 from Los Angeles private equity firm Oaktree Capital Management. Almost one year later in September 2006 the distressed investment unit sold Lebanon, N.J.-based engineered aerospace products maker Stellex Aerostructures to U.K.-based GKN for an undisclosed sum.
The Carlyle fund’s focus mirrors efforts like those of other private equity and financial investment groups that are gearing up to tackle what could be a large wave of restructurings in the coming year.
Monarch Alternative Capital, for instance, completed its spinout from New York private equity house Quadrangle Group in January to begin operating as an independent New York distressed debt firm. One month earlier, New York’s Blackstone Group launched its $1.3 billion debt-oriented investment fund that acquires hung LBO loans and high yield bonds, though it will aim for buying “stressed” rather than distressed or defaulted debt.
According to Standard & Poor’s LSTA Leveraged-Loan Index the distress ratio of leveraged loans increased to 6.9% in January, from 3.2% in December, marking the highest ratio attained in the market since March 2003. Issues in the distressed universe were worth $104.1 billion by the start of last week, a $40 billion jump from January, S&P reported.
In the bond market, meanwhile, the number of distressed bonds increased to 363 issues by Feb. 20, up from 298 at the end of January, according to data from high yield market research firm FridsonVision.
Marking another new investment venture to tackle the troubled securities market New York’s BlackRock and Highfields Capital Management of Boston recently joined together to establish a new company, Private National Mortgage Acceptance, that will acquire and restructure distressed mortgage loans. —Kelly Holman
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