Still on a roll in the world of CLO issuance, private equity firm The Carlyle Group announced the close of its ninth U.S. high yield fund last week Carlyle High Yield Partners IX (CHYP IX).

"This fund was very well received," said Linda Pace, Carlyle managing director and leveraged loan portfolio manager. "Both the equity and the debt tranches were oversubscribed. We were able to increase the size of the fund from the planned $400 million to $500 million."

Structured as a traditional CDO, a minimum 90 percent of the $550 million fund will be used to invest in first lien bank loans. The remaining 10 percent will be put into high yield bonds and second lien loans.

Having already taken significant advantage of the strong pace of the leveraged finance market in the U.S., Carlyle intends to keep up the momentum in its CLO business.

"What we find attractive about the market right now, from an asset standpoint, is that there is a lot of supply," Pace said. "The loan market has been growing steadily and it is offering us the ability to see a lot of assets and remain selective, thereby giving us the chance to invest our funds rapidly and prudently. On the liability side, the cost of the debt has been at a record low. We had great execution on the liabilities which helps position this fund well right out of the gate."

"The continued high level of M&A activity has generated a robust new issue market for leveraged loans and high yield bonds," Michael Zupon, managing director and head of Carlyle's leveraged finance group, said in a company release. "We believe this trend creates unique investment opportunities that will allow us to maximize results for our investors. Our leveraged finance platform is strategically positioned to capitalize on opportunities presented by the current environment."

Carlyle's leveraged finance group plans to capitalize on opportunities in leveraged loans and high yield bonds, mezzanine securities, distressed assets and special situation investments, Zupon noted.

Robust issuance ahead

Going forward, Carlyle will continue to build upon its experience and expertise in managing leveraged loans and high yield bonds with a goal to achieving attractive returns and low defaults.

"Our ability to source collateral gives us an edge in a competitive landscape," Pace said in a release.

The latest transaction is Carlyle's second CDO this year and its ninth CDO since the group's formation. Pace is optimistic about issuance going forward, and even if the company does not close another CLO this year, nonetheless it will look to take advantage of its seven-year track record in order to maintain a steady rate of issuance if market conditions permit, she said.

Carlyle's leveraged finance group now manages $7.3 billion in assets. The mutlifacted group consists of U.S. high yield, which manages CDOs; Carlyle Credit Partners, a credit opportunity fund; U.S. mezzanine

that manages Carlyle Mezzanine Partners, a middle-market direct lending fund; and, U.S. distressed that manages Carlyle Strategic Partners, a control-oriented distressed investment fund. Carlyle Europe leveraged finance manages two CDOs in Europe as well as a credit opportunity fund, Carlyle Europe Credit Partners.

The Carlyle Group is a global private equity firm with $44.3 billion under management. Carlyle invests in buyouts, venture and growth capital, real estate and leveraged finance in Asia, Europe and North America. Since 1987, the firm has invested $22.4 billion of equity in 528 transactions, focusing on sectors including aerospace and defense, automotive and transportation, consumer and retail, energy and power, health care, industrial, technology and business services and telecommunications and media.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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