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Carlyle Buys Churchill Financial to Expand Lending Before IPO

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.

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