News & Analysis

Carlyle calls 2008 ‘humbling’, remains upbeat

In its annual report, the mega-buyout firm frankly addressed setbacks it suffered last year, including the liquidation of Blue Wave and Carlyle Capital, but stressed it is poised to take advantage of current opportunities.

-

The Carlyle Group, the third largest private equity firm in the world according to the PEI 300, has said it was humbled by the fallout it suffered from the financial meltdown.

“The year 2008 was a humbling experience for us and most of the financial services industry,” Carlyle said in its annual report. “After several spectacular years of unprecedented growth, product innovation, geographic expansion, capital deployment and investment gains, our world changed dramatically.”

Several of the firm’s portfolio companies slid into bankruptcy, including Edscha, a German auto-parts maker, SemGroup, a midstream oil and gas logistics and marketing company and Hawaiian Telecom, a telecom provider in Hawaii, according to the report.

In March 2008, the firm placed into liquidation Carlyle Capital Corporation, which invested primarily in AAA mortgage-related securities issued by government-backed agencies.  And last July, Carlyle commenced liquidation of its hedge fund, Carlyle Blue Wave.

The firm also cut staff across various parts of the firm, including closing several offices like its Silicon Valley office, which had been opened for less than a year. Carlyle also suspended two investment initiatives – a Central and Eastern Europe fund and an Asia Leveraged Finance Fund.

Still, Carlyle remains upbeat. The firm drew down credit lines early to increase its liquidity, cut costs and restructured portfolio companies. “Our cash reserves put us in excellent shape as the situation worsened,” the letters said.

Last year, Carlyle was able to exit several investments, including Kuhlman Electric, a manufacturer of electric transformers, for 9.3 times invested equity after holding it for nearly nine years and Transics International, a Belgium-based provider of fleet management solutions, for 4.2 times invested equity.

“We believe that our global portfolio is in relatively good shape,” Carlyle said. “We believe that we are positioned to create and take advantage of the extraordinary investment opportunities that troubled times historically bring.”