Carlyle-backed automotive firm enters insolvency

The private equity firm lost €185m on its investment into German manufacturer Edscha, which declared bankruptcy yesterday. Edscha is a manufacturer of car parts for companies including BMW and Rolls Royce, but a drop in demand has affected the company in the last three months.

US private equity firm The Carlyle Group has lost €185m million on its investment into bankrupt German car parts manufacturer Edscha.

Carlyle would have been willing to further recapitalise the car manufacturer, an industry source told PEO, but the banks and automotive industry were unwilling to negotiate, following a massive drop in demand in the last quarter of 2008. The company performed strongly until last year, and sales grew by 34 percent to €1.1 billion from 2004 to 2007.

Edscha, which manufactures car parts for brands such as BMW and Rolls Royce, listed on the Frankfurt stock exchange in 1999, following a management buyout in 1997 backed by German private equity firm Deutsche Beteiliungs. Carlyle bought the company in 2003 in an approximately €220 million transaction, a bid of €26.50 per share, having seen off competition from rival US fund Bain Capital and Swedish firm Industri Kapita. In 2005 Carlyle recapitalised Edscha with €60 million, and pumped another €20 million into the company in December 2008.

Edscha was established in 1870 and employs 5,800 people at 29 factories across 16 countries. Insolvency was registered for the central offices in Remscheid, three production locations in Hengersberg, Regnsburg and Hauzenberg, as well as 11 other locations in Europe. A total of 4,200 employees are affected, of which 2,300 are in Germany. No insolvency application was filed for the companies in Asia and America.

“Edscha succumbed to the double-barreled effect of an ailing worldwide economy and a suffering automobile industry,” a Carlyle spokesman told the Washington Post.

Last December another Carlyle-backed firm filed for bankruptcy: Hawaiian Telecom Communications, the largest telephone carrier in Hawaii, which was acquired by the firm for €1.6 billion in 2005.

Carlyle ranks first on the PEI 50, a proprietary list of the world's largest private equity firms.