Carlyle Group isn’t standing still. Moving on from the “biggest embarrassment in its 20-year history” as the WSJ says, the private equity house has just closed a $1.35bn fund to capitalise on other firms’ financial embarrassments.
Carlyle Strategic Partners II is a new distressed debt fund. Massive leverage “isn’t part of its plan”. Reports the Journal:
The new fund, Carlyle Strategic Partners II, will do everything from investing in publicly traded bonds and bank loans to purchasing ailing companies outright. It is the first Carlyle vehicle to close since the collapse of Carlyle Capital Corp., a fund also managed by Carlyle Group.
Distressed debt funds are, perhaps predictably, becoming de rigueur in credit circles and may only in the next few months really come into their own. At least, if all this talk of ABS bottom lines in the wake of UBS’ latest writedown is anything to go by.
The Carlyle fund – run by Brett Wyard and Ray Whiteman – will join Bain Capital’s Sankaty Advisors, Thomas H. Lee Partners’ THL Credit Group, and TPG’s TPG Credit Management in the distressed debt stakes.
And while new deal volumes for complex debt instruments might be all but non-existant. There’s still decent paper to be had. Witness: all those folks buying up debt in the expectation of technical default – when the true value of cheap AAA tranches really comes into its own.
There’s money in distressed debt.
Caveat Emptor, of course. Peloton established its infamous losing bets on the same premise. It’s a tricky business, calling a bottom to a structured finance crash.