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TEXT - Fitch rates Carlyle Holdings Finance LLC
January 15, 2013 / 9:32 PM / in 5 years

TEXT - Fitch rates Carlyle Holdings Finance LLC

Jan 15 - Fitch Ratings assigns an 'A-' rating to $500 million of ten-year
senior unsecured notes issued by Carlyle Holdings Finance L.L.C., an indirect
finance subsidiary of The Carlyle Group L.P. (Carlyle). 
    These notes are guaranteed on a joint and several basis by Carlyle Holdings
I L.P., Carlyle Holdings II L.P., Carlyle Holdings III L.P. and Carlyle.

Fitch recently assigned initial 'A-' long-term IDRs  to various subsidiaries of 
Carlyle with a Stable Rating Outlook. Additional information is available in the
Jan. 4 press release, 'Fitch Assigns Initial 'A-' IDR to the Carlyle Group; 
Outlook Stable', available at ''. 

The ratings and Stable Outlook reflect Carlyle's experienced management team, 
favorable track record and its strong diversity by asset class, geography, fund 
holdings, fund vintages, fund strategies and investors. Ratings are constrained 
primarily by Carlyle's higher-than-average leverage, as measured by debt 
relative to management fee-related cash flow (FEBITDA). Carlyle's senior 
unsecured debt issuance further highlights the leverage differential between 
Carlyle and its peers and will be a key rating driver and sensitivity going 

Proceeds from the note issuance are expected to be used, in part, to refinance 
revolver borrowings stemming from the recent transaction with NGP Energy Capital
Management and to pay down a portion of the outstanding term loan. The entire 
issuance proceeds are not being used to repay existing debt, which Fitch views 

Though Fitch focuses on FEBITDA for debt servicing purposes, the rating agency 
recognizes that it can be augmented by net realized performance fees. Carlyle's 
net realized performance fees have been sizeable though variable, primarily 
benefiting from the strength and diversity of its corporate private equity 

The potential for net realized performance fees enhances Carlyle's overall 
credit profile. However, Fitch recognizes that the ability to generate 
performance fees is susceptible to difficult market periods. Therefore, Fitch 
believes management fee-related earnings are the most reliable source for debt 

General rating constraints for the industry include:

--'Key person' risk, which is institutionalized throughout many limited 
partnership agreements;

--Reputational risk, which can impact the company's ability to raise future 
funds; and

--Legal and regulatory risk, which could affect the alternative asset space.


The Stable Outlook reflects Fitch's expectation that Carlyle will continue to 
increase management fees and fee earning AUM through new funds and potential 
acquisitions, produce favorable investment performance, and retain a solid 
liquidity profile. 

A negative rating action may be warranted if debt increases unless accompanied 
by acquisitions or other growth initiatives additive to FEBITDA. Material 
changes in senior management, significant declines in investment performance, 
and less robust liquidity management could also pressure ratings. 

Legislative risk and/or prolonged market disruptions that impact the ability to 
fundraise or arrange attractive exit opportunities could result in negative 
rating momentum for the industry overall. 

Upward momentum in the ratings is limited given high leverage levels.

Established in 1987, Carlyle is one of the leading alternative asset managers 
with four business segments including: corporate private equity, real assets, 
global market strategies and fund of fund solutions. The Carlyle Group employs 
more than 1,300 people in 32 offices across six continents. 

Fitch assigns the following rating: 

Carlyle Holdings Finance L.L.C.

--Senior unsecured debt 'A-'.

Our Standards:The Thomson Reuters Trust Principles.
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