Carlyle Puts Off Sale of Cable Company

An Insight Communications worker inspects a satellite dish in Springfield, Ill. Carlyle pulled Insight off the market after about two months.
An Insight Communications worker inspects a satellite dish in Springfield, Ill. Carlyle pulled Insight off the market after about two months. (By Seth Perlman -- Associated Press)
By Thomas Heath
Washington Post Staff Writer
Wednesday, September 12, 2007

The Carlyle Group has indefinitely postponed the sale of a cable communications company because bidders did not meet the District private-equity firm's price, sources said yesterday.

Carlyle pulled Insight Communications off the market after bidders that included Time Warner Cable had difficulty getting enough bank financing, according to the sources, who spoke on condition of anonymity because none of the parties in the negotiations has released any public statements.

The failure of Carlyle to attract a sufficient offer for Insight is the latest credit-market-related setback for the private-equity giant, which is hosting its annual investors' meeting this week in the District. Carlyle has about $76 billion under management.

Carlyle spokesman Christopher W. Ullman declined to comment on Insight. A spokesman for Time Warner Cable also declined to comment.

Insight, which Carlyle purchased in 2005 for about $2.1 billion, had been for sale for about two months and is believed by some analysts to turn a healthy profit. Insight, which was founded in 1985, has more than 600,000 subscribers in Kentucky, Indiana, Ohio, Illinois and New York.

Robin Flynn, a senior analyst with financial research firm SNL Kagan, said several cable companies and private-equity firms were considered to be in the running for Insight, including Wide Open West, a cable firm that operates in Illinois, Michigan and Ohio. Flynn said bidders were also thought to include Providence Equity Partners, Spectrum Equity Investors and the Blackstone Group.

Bids for Insight were due Aug. 15, Flynn said. She estimated the company's value at $2.5 billion. But Flynn said there were signs last month that the credit markets were making it difficult for a deal to go through.

Carlyle could have gone through with a profitable sale but decided to wait for market conditions to improve so it could get a better price, sources said.

"It really was the financing market," Flynn said, adding that one bank withdrew a loan package connected to Insight earlier this summer. "It started to become apparent back in August that the deal may not happen."

In another recent blow, Carlyle made available $200 million in loans to shore up Carlyle Capital, a European affiliate that has been squeezed by the credit-market turmoil.

Carlyle Capital, which was launched this summer and trades on the Euronext exchange, is based on the island of Guernsey in the English Channel, which has lower corporate taxes and less regulation than Britain does. The unit uses borrowed money to invest in AAA-rated mortgage-backed securities.

Those holdings have been battered by the recent mortgage-market upheaval, and the subsidiary has been forced to sell assets to keep up with margin calls from its creditors. The subsidiary's difficulties presented a sufficient risk to the parent firm's brand that the Carlyle Group stepped in twice with loans.

Defaults in the high-risk mortgage sector have reduced confidence in other areas of the capital markets, making it difficult for banks to find investors for the money they lend to private-equity firms to fund big deals.

Richard X. Bove, a financial strategist with Punk Ziegel, said the turmoil in the credit markets has made it "virtually impossible at the moment to sell new deals."

But even in a challenging market, Carlyle can still raise billions of dollars from its investors. This past week it announced that it finished raising a total of $10 billion for two new funds: one focused on U.S. real estate and another on buyouts in Europe.

Staff researcher Richard Drezen contributed to this report.


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