Carlyle Buys Churchill Financial to Expand Lending Before Public Offering

Carlyle Group, the private-equity firm planning to go public next year, bought Churchill Financial LLC to expand its lending business. Terms weren’t disclosed.

Churchill Financial, based in New York, has funded more than $1 billion in loans to midsize companies in the past 18 months and manages a $1.25 billion collateralized-loan obligation, the companies said today in a statement. In a departure for Carlyle, which in the past has mostly acquired CLO assets, the deal will add 13 investment professionals and serve as the base for a new strategy at the Washington-based firm.

The acquisition is part of a larger plan by Carlyle to fill the void left by banks that have reduced lending to middle- market companies, said Mitch Petrick, who heads the firm’s global market strategies unit.

“We believe there is a long-term secular opportunity within this underserved segment of the lending market,” Petrick said in a telephone interview. “Carlyle can now provide comprehensive financing solutions to the middle market.”

Churchill was sold by Olympus Partners, a private-equity firm that has owned the company since May 2010. Churchill Financial Group, a company owned by Olympus Partners, will retain the equity portion of the CLO added by Carlyle.

Carlyle, which has gathered $153 billion in assets since its founding in 1987, is planning the largest IPO by a private- equity manager since Blackstone raised $4.75 billion in 2007. It’s expanding into areas of asset management that have steadier earnings than its core buyout business in an effort to attract a higher valuation when it goes public.

Deals Done

Petrick last year negotiated Carlyle’s acquisition of a majority stake in Claren Road Asset Management LLC, a $4.5 billion long-short hedge fund focused on liquid credit assets. In June, the firm took a 55 percent stake in Emerging Sovereign Group LLC, which oversees $1.6 billion in hedge-fund assets.

Petrick’s $22 billion unit also oversees mezzanine loans to energy companies, structured credit and emerging-market equity strategies. Ken Kencel, who leads the Churchill Financial team, was named a Carlyle managing director, reporting to Petrick.

CLOs pool high-yield, high-risk loans and slice them into securities of varying risk and return. Carlyle bought a $500 million CLO in August from Wells Fargo & Co.’s Foothill Group Inc. unit. The Churchill CLO is focused on senior loans to middle-market companies.

To contact the reporter on this story: Cristina Alesci in New York at calesci2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.