Carlyle boosts its CLO portfolio

Carlyle is acquiring $5.1bn in collateralised loan obligations for an undisclosed amount.

The Carlyle Group has agreed to buy management contracts on $5.1 billion in collateralised loan obligations and other credit assets from fixed income manager Stanfield Capital Partners.

The deal, if given final approval by investors, would boost Carlyle’s credit business from $13 billion in assets to $18.1 billion. The transaction is expected to close in the third quarter of 2010.  The firm did not disclose financial details of the transaction.

“Scale is critical to the CLO business. With this purchase, Carlyle would become one of the world’s largest structured credit managers and an industry consolidator,” Carlyle’s head of credit strategies, Michael Petrick, said in a statement.

The deal consists of $4.2 billion in CLOs, and $950 million of managed account assets, all of which are invested primarily in non-investment grade corporate loans.

CLOs are loans made by banks to finance transactions that are bundled together and traded as securities. CLOs helped fuel the buyout boom in the middle of the decade, as banks were able to finance deals, and transfer the debt from their balance sheets to scattered CLO investors.

Carlyle has been in the process of expanding its credit strategies programme this year, and its first step was to centralise its various debt teams under the new role of global head of credit alternatives and capital markets. The firm hired Petrick, a Morgan Stanley veteran, to run the team, which includes credit, mezzanine and distressed debt.

Carlyle has 24 credit-related funds with $13 billion in assets managed by 57 people.