Carlyle Posts Loss of $58.9 Million as Buyout Values Fall

Carlyle Posts Loss of $58.9 Million as Buyout Values Decline
David Rubenstein, co-founder of Carlyle Group, speaks during the AVCJ Private Equity & Venture Forum in Hong Kong. Photographer: Thomas Lee/Bloomberg

Carlyle Group LP, the Washington-based investment firm that went public in May, posted a loss in the second quarter as the value of its private-equity holdings declined.

The shortfall, excluding some costs related to its initial public offering, was $58.9 million compared with a profit of $236.8 million a year earlier, Carlyle said today in a statement. Carlyle had a loss of 19 cents a share after taxes, missing the average estimate for a 4 cent loss by nine analysts in a Bloomberg survey.

Carlyle, the world’s second-biggest private-equity manager, is expanding beyond buyouts in a volatile global economy that has quelled deal-making and managers’ ability to reap profits by selling companies. Private-equity rivals Blackstone Group LP and Apollo Global Management LLC also reported lower second-quarter profit as market swings hurt the value of their holdings and hampered their ability to sell or take their companies public.

“Realization activity was relatively muted, driven by uncertain capital market conditions,” Roger Freeman, a Barclays Plc analyst, wrote in a July 24 note to clients about the so-called alternative asset managers. “Fundraising continues to be strong across the group, driven by credit, infrastructure and natural-resources funds.”

Shares Fall

Carlyle fell 1.7 percent to $24.05 at 9:40 a.m. in New York. The founders took the firm public on May 2 at $22 per share, raising $671 million and gaining a listing on the Nasdaq Stock Market.

Carlyle had distributable earnings, a measure of profitability, of $116.7 million, or 32 cents a share in the second quarter, compared with $89.3 million a year earlier. The firm said it would pay a quarterly distribution of 11 cents a share to public investors.

Carlyle, like other private-equity firms, reports profit that doesn’t comply with generally accepted accounting principles. On a GAAP basis, the firm had a second-quarter net loss of $10.3 million, or 26 cents per share.

The value of Carlyle’s corporate private-equity funds dropped 2 percent during the second quarter, according to the statement. The value of all of Carlyle’s so-called carry funds also fell 2 percent.

Carlyle, which oversees 94 funds and 63 funds-of-funds, has been among the most active buyers. In the past month, Carlyle announced deals to buy a unit from United Technologies Corp. as well as Service King Collision Repair Centers, a chain of auto body shops.

‘Uncertain Times’

The firm invested $1.4 billion during the second quarter and agreed to invest at least $1.6 billion in new deals since the beginning of July, William Conway, Carlyle’s co-chief executive officer, said in the statement.

“We have made some of our best investments during uncertain times,” Conway said.

Carlyle had realized proceeds in the second quarter of $3 billion, according to the statement. Carlyle raised $3.9 billion in new funds during the period and its total assets under management were $156.2 billion, down from $159.2 billion at the end of March.

Founded in 1987 by Conway, Daniel D’Aniello and David Rubenstein, Carlyle has expanded beyond corporate buyouts in recent years. Its Carlyle Global Market Strategies business, managed by Mitch Petrick, invests in debt and public equities

Private-equity firms pool investor money to buy companies, using mostly debt, with the intention of selling them or taking them public later for a profit. They typically charge an annual management fee of 1.5 percent to 2 percent of committed funds and keep 15 to 20 percent of profit from investments.

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