Carlyle closes CLO fund on $450m

The global buyout firm has closed one loan fund while reportedly fundraising for another, as it looks to capitalise on credit market turmoil.

The Carlyle Group has closed its 10th collateralised loan obligation fund on $450 million (€284 million). The private equity giant’s leveraged finance team utilised a traditional CLO structure for the vehicle which includes AAA, AA and BBB rated liabilities. JPMorgan structured the fund and served as the placement agent.

“[The fund] enables us to buy senior secured bank loans at attractive prices and finance them with 12-year debt with no mark-to-market pricing triggers,” said Carlyle managing director Michael Zupon in a statement.

The credit vehicle has closed amid media reports that Carlyle is also in the process of raising a $500 million CLO structured by global investment bank Deutsche Bank. That CLO will buy high-risk, high yield debt being sold at discounted prices as banks struggle to unload a backlog of leveraged loans, according to a Bloomberg report.

Carlyle currently has $10.3 billion in leveraged finance assets. Its US leveraged finance group manages seven CLOs, a synthetic CLO and a credit opportunity fund totaling $4.4 billion. The remaining leveraged finance assets are dispersed among 13 funds managed by Carlyle’s mezzanine, distressed investment and European leveraged finance groups.

One of Carlyle’s other specialty credit vehicles, the Euronext-listed Carlyle Capital, was recently liquidated after defaulting on some $16.6 billion. At the time of its liquidation, Carlyle Capital invested exclusively in US government agency AAA-rated residential mortgage-backed securities. It had previously divested itself of all other securities which were perceived as “risky” in a $900 million fire sale last August.

The firm’s US leveraged finance group closed its previous CLO on $400 million on 19 April 2007. Between April 2006 and April 2007, the group closed three CLOs with $1.2 billion in total assets.

Distressed credit fund Carlyle Strategic Partners II closed on $1.35 billion earlier this month. That fund is investing in distressed and corporate opportunities throughout the capital structure including bank loans, public debt and public and private equity.

Carlyle has $81.1 billion under management across 60 funds and is currently raising five additional funds, according to the Probitas Partners 2008 Private Equity Deskbook. Its fourth energy fund in affiliation with Riverstone Holdings is targeting $6 billion; Carlyle Asia Partners III is targeting $2 billion; Carlyle Middle Eastern Fund is targeting $1 billion; Carlyle Mezzanine Fund II is targeting $600 million; and Carlyle Europe Technology Fund will be targeting a yet to be determined amount.