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Fitch Rates Carlyle's $500MM Senior Unsecured Notes 'A-'

  Fitch Rates Carlyle's $500MM Senior Unsecured Notes 'A-'

Business Wire

NEW YORK -- January 15, 2013

Fitch Ratings assigns an 'A-' rating to $500 million of ten-year senior
unsecured notes issued by Carlyle Holdings Finance L.L.C., an indirect finance
subsidiary of The Carlyle Group L.P. (Carlyle). These notes are guaranteed on
a joint and several basis by Carlyle Holdings I L.P., Carlyle Holdings II
L.P., Carlyle Holdings III L.P. and Carlyle.

Fitch recently assigned initial 'A-' long-term IDRs to various subsidiaries of
Carlyle with a Stable Rating Outlook. Additional information is available in
the Jan. 4 press release, 'Fitch Assigns Initial 'A-' IDR to the Carlyle
Group; Outlook Stable', available at 'www.fitchratings.com'.

The ratings and Stable Outlook reflect Carlyle's experienced management team,
favorable track record and its strong diversity by asset class, geography,
fund holdings, fund vintages, fund strategies and investors. Ratings are
constrained primarily by Carlyle's higher-than-average leverage, as measured
by debt relative to management fee-related cash flow (FEBITDA). Carlyle's
senior unsecured debt issuance further highlights the leverage differential
between Carlyle and its peers and will be a key rating driver and sensitivity
going forward.

Proceeds from the note issuance are expected to be used, in part, to refinance
revolver borrowings stemming from the recent transaction with NGP Energy
Capital Management and to pay down a portion of the outstanding term loan. The
entire issuance proceeds are not being used to repay existing debt, which
Fitch views negatively.

Though Fitch focuses on FEBITDA for debt servicing purposes, the rating agency
recognizes that it can be augmented by net realized performance fees.
Carlyle's net realized performance fees have been sizeable though variable,
primarily benefiting from the strength and diversity of its corporate private
equity business.

The potential for net realized performance fees enhances Carlyle's overall
credit profile. However, Fitch recognizes that the ability to generate
performance fees is susceptible to difficult market periods. Therefore, Fitch
believes management fee-related earnings are the most reliable source for debt
service.

General rating constraints for the industry include:

--'Key person' risk, which is institutionalized throughout many limited
partnership agreements;

--Reputational risk, which can impact the company's ability to raise future
funds; and

--Legal and regulatory risk, which could affect the alternative asset space.

RATING SENSITIVITY/KEY RATING DRIVERS

The Stable Outlook reflects Fitch's expectation that Carlyle will continue to
increase management fees and fee earning AUM through new funds and potential
acquisitions, produce favorable investment performance, and retain a solid
liquidity profile.

A negative rating action may be warranted if debt increases unless accompanied
by acquisitions or other growth initiatives additive to FEBITDA. Material
changes in senior management, significant declines in investment performance,
and less robust liquidity management could also pressure ratings.

Legislative risk and/or prolonged market disruptions that impact the ability
to fundraise or arrange attractive exit opportunities could result in negative
rating momentum for the industry overall.

Upward momentum in the ratings is limited given high leverage levels.

Established in 1987, Carlyle is one of the leading alternative asset managers
with four business segments including: corporate private equity, real assets,
global market strategies and fund of fund solutions. The Carlyle Group employs
more than 1,300 people in 32 offices across six continents.

Fitch assigns the following rating:

Carlyle Holdings Finance L.L.C.

--Senior unsecured debt 'A-'.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'2013 Outlook: Investment Managers and Alternative Funds' (Oct. 22, 2012);

--'Alternative Asset Managers: An Industry Update' (Nov. 12, 2012);

--'Investment Manager and Alternative Funds Criteria' (Dec. 17, 2012).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

2013 Outlook: Investment Managers and Alternative Funds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=692316

Alternative Asset Managers: An Industry Update (Yield Appetite, Market
Dislocation Offer Opportunities for Continued Growth)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=694772

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696673

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PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Contact:

Fitch Ratings
Primary Analyst
Joseph Scott, +1-212-908-0624
Senior Director
Fitch Ratings, One State Street Plaza, New York, NY 10004
or
Secondary Analyst
Nathan Flanders, +1-212-908-0827
Managing Director
or
Committee Chairperson
Joo-Yung Lee, +1-212-908-0560
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com
 
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