Carlyle profit falls 11 pct on fewer asset sales

Reuters

* ENI per adjusted share 51 cents vs Street view 60 cents

* Distributable earnings $105 mln vs $207 mln a year ago

* On track for best fundraising year since financial crisis

By Greg Roumeliotis

Nov 6 (Reuters) - Carlyle Group LP posted an 11percent drop in third-quarter profit on Wednesday as asset salesgenerated less cash for shareholders than in any other quartersince the alternative asset manager went public.

While Carlyle's fund portfolio appreciated 4 percent in thequarter, compared with 3 percent a year earlier, it did not takeadvantage of favorable capital markets to exit investments tothe extent some of its peers such as Blackstone Group LP did.

"We have a public portfolio of about $16 billion. This is apretty good time to be exiting. That does not mean that we willdo secondary sales in any of those companies this quarter, butif the time and price is right I think we will," Carlyleco-Chief Executive William Conway told analysts on a conferencecall.

Economic net income (ENI), an earnings measure comprisingcash and paper profits or losses based on how funds have beenmarked to market, declined to $195 million in the third quarterfrom $219 million a year earlier.

This translated into post-tax ENI per adjusted share of 51cents, well below the average forecast of analysts in a ThomsonReuters poll of 60 cents.

Carlyle shares were up 1.1 percent at $30.47 in morningtrading in New York. They are up 15.8 percent for the year todate, versus a 23.6 percent rise in the S&P 500 Index, a75.2 percent rise for Blackstone, and a 51 percent rise for KKR& Co LP.

Carlyle's pre-tax distributable earnings, which show howmuch cash is available to pay dividends, were $105 million, thelowest total for any quarter since the company went public inMay 2012, as Carlyle monetized less of its assets. Theyear-earlier figure was $207 million.

Carlyle said it had additional portfolio companies in thepipeline which it expects to go public over the next twoquarters, generating more performance fees for itself.

Carlyle is also waiting for its $1.39 billion sale ofaerospace communications company Arinc Inc to Rockwell CollinsInc to be completed either this quarter or early nextyear, which will boost its profits.

In addition, three more funds - Carlyle Europe Partners III,Carlyle Asia Partners III and Carlyle Realty Partners V - areclose to exceeding the returns hurdle agreed with theirinvestors and being able to accrue carried interest, the firm's20 percent slice of investment profits, Conway said.

Among Carlyle's asset sales in the third quarter were itsremaining stakes in wealth manager Boston Private FinancialHoldings Inc and financial software company SS&CTechnologies Holdings Inc, as well as secondary sharesales at Allison Transmission Holdings Inc and WescoAircraft Holdings Inc.

STRONG FUNDRAISING

Carlyle said it was on track for what will be by far itsstrongest fundraising year since 2007 and the second-bestfundraising year in its history.

Total assets under management were $185 billion at the endof September, up from $180.4 billion at the end of June. Carlylesaid it raised $6.5 billion in new capital from investors duringthe third quarter.

It said its latest flagship U.S. buyout fund, CarlylePartners VI, was oversubscribed and would reach at least $12.9billion when it completes fundraising in the next few weeks,exceeding its $10 billion target.

Private equity firms have found it more difficult to sourcedeals in the United States this year due to a rally in thecapital markets fueling high price expectations in the minds ofmany sellers of companies.

"I'm not worried about investing over the period of the U.S.fund. Finding the right assets at the right prices is tough, butthis business is always tough," said Conway, who founded Carlylein 1987 together with David Rubenstein and Daniel D'Aniello.

Fee-related earnings were $40 million in the third quarter,down $6 million from a year earlier due to higher fundraisingcosts and other expenses, Carlyle said.

The firm said it had $51.1 billion of available capital fordeals, or so-called "dry powder," at the end of the quarter,including $22.8 billion in private equity and $9.1 billion inenergy and real estate

Carlyle declared a third-quarter dividend of 16 cents pershare, in line with its dividend policy, which calls for 75percent to 85 percent of its annual post-tax distributableearnings to be passed on to unitholders as true-up dividend atthe end of the year.

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