The Carlyle Group, a PE firm, has agreed to buy a 55% stake in Claren Road. Financial terms weren’t announced but Claren Road will get cash, ownership interest in Carlyle and performance-based contingent payments. Claren, a long-short credit hedge fund with $4.5 billion AUM, will reinvest nearly all of the cash proceeds back into Claren Road funds. Citigroup, which seeded Claren Road in 2006, and Goldman Sachs Petershill Fund, which bought a minority stake in 2008, are both selling as part of the deal. The transaction is expected to close by year end.
Global alternative asset manager The Carlyle Group and hedge fund Claren Road Asset Management today announced that Carlyle has agreed to purchase a 55 percent stake in Claren Road, a long-short credit hedge fund with $4.5 billion in assets under management, in exchange for cash, an ownership interest in Carlyle and performance-based contingent payments. Claren Road founders will reinvest substantially all of the initial cash proceeds from the transaction back into Claren Road funds. Terms of the transaction, which is expected to close by year end, were not disclosed.
Mitch Petrick, Managing Director and head of Carlyle’s Global Credit Alternatives business, said, “Claren Road has a track record of consistent, low-volatility, uncorrelated performance across varying market conditions during the last five years. This new partnership is an important addition to our expanding stable of credit product offerings. Claren Road’s long-short approach to investing in the credit markets globally is consistent with Carlyle’s views on the optimal strategy to exploit investment opportunities in credit over the long term.”
Brian Riano, Claren Road Chief Executive Officer and Co-founder, commented, “We believe this partnership will benefit our investors, strengthen Claren Road and position us well for the future. We have an ability to recognize and identify under- and over-valued securities in the credit markets through fundamental research, combined with a broad understanding of pricing, technicals and liquidity. This partnership should benefit Claren Road by accessing Carlyle’s global network and industry expertise as well as its strong regulatory, compliance, legal and investor services capabilities.”
William E. Conway, Jr., Carlyle Co-founder and Managing Director, said, “Carlyle has significant scale in our corporate private equity and real estate businesses, as well as a clear leadership position in emerging markets. This investment further expands our credit platform under Mitch Petrick’s leadership and adds to the variety of investment options by strategy and region for our investors.”
Citigroup, which seeded Claren Road in 2006, and the Goldman Sachs Petershill Fund, which bought a minority stake in Claren Road in 2008, will both monetize their economic interests in Claren Road as a part of this transaction. Brian Riano noted, “We thank Citigroup and the Goldman Sachs Petershill Fund for being vital partners of our firm over the past few years.”
Claren Road was established in 2005 by four former senior members of Citigroup’s Credit Trading Department – Brian Riano, John Eckerson, Sean Fahey and Albert Marino – who will continue to manage the day-to-day operations (including all investment decisions) and, together with Carlyle, affect broader strategic decisions.
Carlyle’s global credit alternatives business comprises an array of structured credit, mezzanine and distressed products – 34 funds with $14.7 billion in assets managed by 54 investment professionals in New York and London as of September 30, 2010.
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About The Carlyle Group
The Carlyle Group is a global alternative asset manager with $97.7 billion of assets under management committed to 78 funds as of September 30, 2010. Carlyle invests across three asset classes – private equity, real estate and credit alternatives – in Africa, Asia, Australia, Europe, North America and South America focusing on aerospace & defense, automotive & transportation, consumer & retail, energy & power, financial services, healthcare, industrial, infrastructure, technology & business services and telecommunications & media. Since 1987, the firm has invested $64.7 billion of equity in 1015 transactions. The Carlyle Group employs more than 900 people in 19 countries. As of June 30, 2009, in the aggregate, Carlyle portfolio companies have more than $84 billion in revenue and employ more than 398,000 people around the world. Web: www.carlyle.com; Case Studies: www.carlylegroupcreatesvalue.com; Video: www.youtube.com/OneCarlyle
About Claren Road Asset Management
Claren Road Asset Management, LLC is a long/short credit manager founded in 2005 by senior members of Citigroup’s Credit Trading Department. The Investment Manager primarily manages two funds comprising approximately $4.5 billion of assets under management. Claren Road employs 48 people with offices in New York, London and Hong Kong.