Carlyle Values Freescale at 15% of Cost

NEW YORK (Reuters) – Private equity firm Carlyle Group is valuing an investment it made in chip maker Freescale Semiconductor [FSLSM.UL] at 85 percent below its cost, a document obtained by Reuters shows.

Formerly Motorola’s semiconductor unit, Freescale was bought by Carlyle, Blackstone Group (BX.N), Permira Funds [PERM.UL] and Texas Pacific Group [TPG.UL] in 2006 in a $17.6 billion deal.

The chip maker is struggling with a high debt load and declining sales, and in February said it was seeking up to $1 billion in new loans from existing lenders. On March 25, it said it received commitments of $956.8 million.

Carlyle Partners IV, a $7.9 billion fund raised in 2005, marked its Freescale investment as having fair value of $113 million at the end of 2008, according to part of a document Carlyle sent to its investors and obtained by Reuters.

That compares with a cost of $754 million at the time of the investment, according to the document.

Carlyle also invested in Freescale in three of its other funds — Carlyle Europe Partners II, Carlyle Japan Partners and Carlyle Asia Partners II, according to its website.

Carlyle declined comment on the document.

Private equity firms are obliged for the first time this year to value their companies as if they were to sell them today, rather than years in the future when they may be sold.

Those that have publicly traded funds, or are themselves listed, report figures to the market. Other private equity firms report numbers direct to their investors.

The fund also values its investment in Allison Transmission, which supplies transmission equipment to commercial and military vehicles, at $586 million, below its cost of $732 million.

An investment in software firm Open Solutions is valued at $90 million, below a cost of $257 million.

But its investment in energy transportation firm Kinder Morgan is being held at $1 billion, above its cost of $808 million.

A source with knowledge of the data said that, including investments which have been sold, the Carlyle Partners IV fund as a whole is valued at above cost.

Carlyle wrote down the value of the investments in the fund by 13.8 percent during the fourth quarter, a separate source who viewed Carlyle’s data had previously told Reuters.

Carlyle recently raised $13.7 billion for its buyout fund Carlyle Partners V. (Editing by Tim Dobbyn)

By Megan Davies