Carlyle Misses Estimates, Announces $200M Stock Buyback

Feb 10 2016 | 7:47pm ET

By Koh Gui Qing (Reuters) - Private equity firm Carlyle Group unveiled a $200 million share buyback plan on Wednesday as it posted weaker-than-expected fourth-quarter earnings amid turbulent financial markets. 

Even as choppy markets weighed on the performance of Carlyle's funds, the company accelerated its pace of new investment between October and December and spent $4 billion in the period, the second-highest on record for the firm.

"In market downturns such as this one, we've made some of our best investments," said David Rubenstein, co-chief executive officer at Carlyle.

Carlyle's economic net income (ENI) before taxes, which accounts for unrealized gains or losses, was $73 million in the fourth quarter, less than half of the $181 million earned a year ago. A $50 million reserve charge set aside for ongoing litigation and contingencies was a further drag on earnings.

That translated into post-tax income of 24 cents a share, missing analysts' forecast for earnings of 30.8 cents.

It has been a difficult few months for the U.S. leveraged buyout sector, and Carlyle is the latest private equity firm to show its earnings have suffered in a tough environment.

The market for high-yield bonds and loans, the lifeblood of buyout deals, has almost ground to a halt as banks struggle to sell them. Banks also are lending fewer of the riskiest junk-rated loans that fund buyouts, further tightening financing conditions.

It was against this backdrop that Carlyle renegotiated the terms of its buyout of data storage business Veritas from antivirus software maker Symantec in January by reducing its purchase price to $7.4 billion, from the original $8 billion.

Underlining challenging conditions, Carlyle's performance fees sunk 40 percent to $197.2 million, compared with $329.8 million a year ago. Carlyle collects performance fees from its investors when it generates returns above an agreed level and includes unrealized gains and losses.

As a result, Carlyle also generated less cash in the quarter. Distributable earnings more than halved to $145.1 million from a year ago, or 38 cents per share.

Carlyle, which managed about $183 billion at the end of 2015, including $58 billion that has yet to be deployed for deals, said it planned to buy back its shares from the public gradually over time.

The $200 million share buyback plan would account for over a fifth of Carlyle's free-float shares.

Carlyle's stock has been the worst performer among its peers and is down over a quarter this year. It closed up 1.45% on Wednesday after surging more than 6% in early trading.


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...