(Bloomberg) -- As private equity firms take longer to sell off companies they've bought, pay back investors in their funds, and raise money for new vehicles, Carlyle Group Inc. is turning to a unique solution: a multibillion-dollar structured financing.
The transaction, known internally as "Project Potomac," would seed a new buyout fund, Carlyle Partners IX, according to people with knowledge of the matter. It would also pay back money to some investors in the firm's older private equity funds, said the people, asking not to be named discussing non-public information.
The size and structure of the transaction are still being ironed out, said the people, but the financing could be bigger than any similar product on record. It would mark one of the clearest signs yet of private equity's growing use of creative debt structures to pay back fund investors as asset managers work their way through a multi-year dealmaking slump.
A representative for Washington-based Carlyle declined to comment. In a shareholder update last month Co-President John Redett said that the firm is "returning more capital to our investors than the industry," noting $18 billion returned last year and $7.5 billion of exits signed or closed in the first two months of 2026.
The financing would be set up with a combination of senior debt, preferred shares, and common equity, with Carlyle retaining a significant minority stake in the latter on its books, the people said. Investors in older funds will transfer their holdings into a new vehicle that provides them with equity and some cash, and which would in turn invest in the new buyout fund, they added.
Project Potomac is structured similarly to a collateralized fund obligation, a type of securitization that gained traction last year.
In these transactions, money managers bundle stakes in two or more of their funds into a special purpose vehicle, and use the combined holdings as collateral to issue debt and equity. Pooling the funds allows managers to borrow more cheaply than taking out debt against a single fund or portfolio company, while generating cash to make new investments, launch additional funds or return capital to limited partners.
Yet the Carlyle deal also has unusual features. It isn't rated by a credit grading firm, the people said, a requirement often needed to attract investments from insurance companies. Still, that could give it more flexibility around the timing of cash distributions, they added. Collateralized fund obligations also typically don't sell large amounts of preferred shares.
AlpInvest, Carlyle's secondaries platform, is structuring the transaction, some of the people familiar with the matter said.
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Carlyle recently disclosed plans to raise at least $200 billion of capital by 2028. That includes at least $90 billion for its credit business, $50 billion for global private equity and at least $60 billion for AlpInvest. The firm hasn't started fundraising for Carlyle Partners IX.
Redett said late last year that the seventh iteration of its flagship fund was "not our best work of art," though its performance has improved more recently with 70% of invested capital distributed back to investors.
Carlyle's eighth flagship fund is performing well, Redett said during the firm's shareholder update last month, with 80% of its capital committed and invested.
Project Potomac will hold stakes in both funds, the people said.
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