Carlyle Group Files SEC Documents to Go Public

(September 7, 2011) — Private equity giant Carlyle Group has confirmed that it has filed a registration statement with the US Securities and Exchange Commission (SEC) to go public.

The firm, which manages $150 billion in assets, said it has filed the statement with the US regulator for a proposed initial public offering.

According to a statement by the global alternative asset manager, the number of common units to be offered and the price range for the offering have not yet been determined. “Carlyle intends to use the net proceeds from the offering to repay indebtedness and for general corporate purposes, including general operational needs, growth initiatives, acquisitions and strategic investments and to fund capital commitments to, and other investments in and alongside of, its funds,” the statement said.

Meanwhile, the founders, who hold 60% of the company, have confirmed that they have no intention of abandoning Carlyle in the near future.

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The IPO is expected in the first half of 2012. JP Morgan Securities, Citigroup Global Markets and Credit Suisse Securities (USA) — which all have a history of taking private-equity firms public — will serve as joint book-running managers for the offering. Citigroup helped lead the February 2007 IPO of Fortress Investment Group LLC (FIG). JPMorgan, Credit Suisse, and Citigroup all led Apollo Global Management LLC’s share sale in March.

Carlyle’s sale of shares to the public has been anticipated for years. It comes behind the sale of other major private equity rivals the Blackstone Group, Kohlberg Kravis & Roberts, and Apollo Global Management.

In late March, Leon Black’s Apollo Global Management, originally slated for a 2008 initial public offering, finally went public. The firm had sold shares in a private placement in 2007, hoping that it would be the first step toward a New York Stock Exchange (NYSE) listing; however, when markets turned sour in 2008, the public offering was delayed.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

New figures from Mercer show that August was a dismal month for US pension plan funding levels, which could have potential ramifications for 2012 financials.

(September 7, 2011) — Pension plan funding levels in the United States plummeted in August, Mercer has claimed in a report.

The aggregate deficit in pension plans sponsored by S&P 1500 companies increased by $73 billion during August, from a deficit of approximately $305 billion as of July 31, 2011, to $378 billion as of August 31, according to new figures from the consulting firm. This deficit corresponds to an aggregate funded ratio of 79% as of August 31, compared to a funded ratio of 83% at July 31, 2011 and 81% at December 31, 2010.

“August was a wild ride” said Jonathan Barry, a partner with Mercer’s Retirement Risk and Finance Group, in a statement. “We saw funded status plummet on August 8 due to the sharp fall in equity markets and declining Treasury yields, and a lot of ups and downs over the subsequent weeks. A small rally in equities in the last week of August, combined with widening credit spreads on corporate debt, provide some recovery from the early losses, but overall, the outcome was still bad news for pension plans.”

According to the firm, the drop in funded status was fueled by a 5.4% drop in equities and a fall in yields on high quality corporate bonds during the month.

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Nevertheless, Mercer noted that the lackluster news was not unexpected. “For the typical pension plan invested 60% in equities and 40% in aggregate fixed income, the monthly volatility of funded status is between 3% and 4%. The decline in August shouldn’t be seen as an outlier and there is the potential for even more volatility prior to the end of the year,” commented Kevin Armant, a principal in Mercer’s Financial Strategy Group.

A recent analysis by Credit Suisse paints a similarly negative picture. The analysis showed a combined $400 billion pension deficit for S&P 500 companies.

The 326 companies within the S&P 500 that have defined benefit pension plans face a total of $388 billion in pension deficits, according to an analysis from the bulge-bracket bank – a number equal to a 77% funding ratio on average. This compares with a $326 billion deficit and 79% funding levels at the end of 2008. This bleak picture is likely the result of low interest rates – which directly influence corporate pension liability calculation under the Pension Protection Act of 2006 – and meager equity markets. “If you think about the typical corporate pension plan, they are continuing to take two big bets: they are betting on interest rates and they are betting on the equity market – and they hope that both go up,” David Zion, head of accounting research for Credit Suisse, told the Financial Times.

Credit Suisse estimates in its report that each 25 basis-point decline in interest rates increases pension liabilities at S&P 500 companies by upwards of $45 billion. With interest rates at all-time lows – having dropped 50 basis points this year – pensions have been caught in a perfect storm of falling assets and rising liabilities.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742