Carlyle Sees Profit in Distressed Bank Securities
Monday, February 16, 2009
District-based Carlyle Group, a giant private-equity firm, has raised around $1 billion and hopes to add $2 billion more for investments in financial institutions that come up for sale under President Obama's economic rescue plan, according to people familiar with the company's plans.
The buyout firm will use the money to help with the recapitalization of banks whose balance sheets have been rocked by toxic mortgage assets and are in need of cash, said the sources, who spoke on condition of anonymity because they are not authorized to speak publicly. The financial crisis has crippled institutions big and small.
Seeking to jump-start the economy, Treasury Secretary Timothy F. Geithner last week said he will seek private-sector help for the banks, offering loans at favorable rates and putting up government backing to reduce the risks to investors like Carlyle.
With $40 billion in cash on the sidelines waiting for the right play, Carlyle could find many profitable deals in the financial sector.
Two of the firm's co-founders, William E. Conway Jr. and David M. Rubenstein, have been saying for months that there is a role for private equity in the bank bailout and that there's money to be made.
"Private equity has a lot of experience buying assets at distressed prices, and we expect to see a lot of attractively priced assets," Rubenstein said in a September interview. "It's likely that private equity will be a big investor in this area. It's good that private-equity firms are in good shape and have the resources to buy some of these assets and help the system."
Carlyle has been looking for the right price. It made a relatively small deal in July, taking a stake in Boston Private Financial Holdings, but insiders have been saying it is looking to increase the size and frequency of its investments in the financial sector. Carlyle's Asia Buyout Fund is looking closely at financial-sector opportunities in that region, according to a source at the firm.
One of Carlyle's targets may be BankUnited Financial Corp., a troubled Florida bank with $14 billion in assets. The Financial Times reported last week that Carlyle and turnaround specialist Wilbur Ross were negotiating a joint bid to buy the bank.
Carlyle spokesman Chris Ullman declined to comment.
Carlyle has been building a financial services team over the last two years, headed by Olivier Sarkozy, whom the firm hired last year from UBS. Sarkozy is the half brother of French President Nicolas Sarkozy.