Set up in May 2007, the Carlyle Asia Leveraged Finance Unit (CALF) was said by the Washington-based private equity powerhouse to be the first dedicated leveraged finance team among private equity funds in Asia, and was intended to complement the Carlyle Group’s activities in the United States and Europe.
Its sudden closure on Monday led to widespread discussion among bankers in Asia about the reasons for its demise.
Carlyle spokeswoman Dorothy Lee said that the closure was a collective decision between the team and Carlyle.
The decision was made “in light of the current global turmoil and the serious dislocation of the credit capital markets”, Lee said in a brief emailed statement.
Mason, who left JP Morgan to set up the CALF operations in 2007, did not return calls seeking comment.
Bankers at other firms expressed a mixture of surprise and disappointment at the action, but gave different interpretations.
“You’d think you could pick up a lot of assets at or near distressed levels in this market,” said one Hong Kong-based syndication head, expressing his surprise at the closure.
But the same banker added that the area of leveraged finance was seen as carrying greater risk in the current market.
“Anything to do with leverage at the moment has a degree of risk associated with it, not because of interest rates, more to do with business reasons,” he said. “Companies that have been leveraged up might have difficulty in areas such as operating margins or meeting covenants.”
A Singapore-based leveraged finance banker familiar with the group said that the CALF team had strong technical expertise but that Carlyle would only have provided seed funding in order to make hires, get regulatory approvals and establish offices.
He said that the original mission of the fund was to be an institutional investor in primary syndicated loans.
Carlyle’s Lee declined to comment on CALF’s funding.
“It was the first attempt to put a traditional debt fund to work in Asia. It was a continuation of what Carlyle was doing in Europe, but investors for this type of fund are scarce. They ended up looking at mezzanine and secondary debt,” the banker said.
“They were unlucky in their timing,” he said, “and couldn’t raise funds.”
DEALS IN JAPAN, AUSTRALIA
CALF was said by one banking source to have invested in the junior tranches of the 140 billion yen ($1.46 billion) Arysta LifeScience Corp LBO loan in Japan, and the A$2.26 billion ($1.44 billion) Coates Hire Ltd LBO loan in Australia.
Another leveraged finance banker, based in Hong Kong, compared the CALF operations to
However, GSO manages senior debt funds, hedge funds and mezzanine funds focused on leveraged finance, and its Asia unit has a broad mandate to seek returns across asset classes.
As recently as mid-October a source at GSO said the group had not yet put any money to work in Asia. Its operations in the United States and Europe had found better returns investing in comparable assets in their jurisdictions, he said, but added that this was not a cause for concern for the Asia operation.
Besides Mason, the CALF team comprised Ryoko Kondo, a vice president based in Tokyo, David Balint, a director in Sydney, and in Hong Kong vice presidents Neville Chan and Agnes Kong, and associate Nelson Yuan.
Balint was only hired in July from ANZ to focus on the Australian and New Zealand markets.
Carlyle’s leveraged finance group manages more than $14 billion worth of investments globally in 24 funds. (US$=A$1.5686=96.01 yen)
By Stephen Aldred
(Editing by Tony Munroe and Jon Loades-Carter)
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