Carlyle vs. Carlyle, damages might differ from said exposure

12 03 2008

Carlyle vs. Carlyle, damages might differ from said exposure

Posted by: in Financials and Analyticals

Filed under: Financials and analyticals, The Carlyle Group, Investments

The Carlyle Group is apparently downplaying reports of current losses tied to loans. The private equity giant issued a statement on Tuesday to outline its exposure to Carlyle Capital Corporation.

Reuters also has a piece describing the situation. In the report, The Carlyle Group said that the $150 million credit line to affiliate Carlyle Capital Corporation will have a limited impact on The Carlyle Group and its affiliates.

Carlyle Capital is a legally independent entity from The Carlyle Group, and as such it would technically have limited real damages to the parent even if it trades residential mortgage-backed securities. Having this corporate structure with different entities is the same reason that motion picture studios keep individual entities for each movie, and it is the reason that conglomerates keep entities separated from each other. This keeps the issues inside one operation from ever toppling the whole group.

One note was one of the Carlyle Group’s investment funds or portfolios hold Carlyle Capital shares. Carlyle stated that the The Carlyle Group is working tirelessly with Carlyle Capital Corp to “assist it in its efforts to maximize value for all interested parties.”

Unless they have figured out a way to start making firms give real bids on loans, they can try to assist all they want. It’s just going to take some time and some pain for this to work itself through the system. The pain isn’t yet over. I have shown how vulture filings are starting to crop up. Maybe that is the solution.

There’s one issue that may be more pressing than any real monetary losses, and that is the “image fallout” that Carlyle would take.