TEXT-Fitch assigns Carlyle Group initial 'A-' IDR

Fri Jan 4, 2013 4:05pm EST

Jan 4 - Fitch Ratings has assigned initial long-term Issuer Default Ratings
(IDRs) of 'A-' and senior unsecured debt ratings of 'A-' to various subsidiaries
of The Carlyle Group L.P. (Carlyle). A complete list of subsidiaries is
at the end of this rating action commentary. The Rating Outlook is Stable.

The ratings and Stable Outlook are underpinned by Carlyle's favorable
performance track record and its strong diversity by asset class, geography,
fund holdings, fund vintages, fund strategies and investors. Carlyle's
experienced management team and extensive organization across investment
management areas and back office functions are additional rating positives.

The ratings are constrained primarily by Carlyle's leverage, as measured by debt
relative to management fee-related cash flow (FEBITDA), which is
higher-than-average among major rated peers. At end 3Q12, debt/FEBITDA stood at
2.6x based on annualized YTD results versus an average of 2.1x for rated peers.

Carlyle's corporate private equity business is a key competitive strength.
Carlyle has more diversity than peers in terms of number of funds, portfolio
companies, industries, geographic markets and limited partner investors. Carlyle
currently has a sizeable amount of uncalled capital or 'dry powder' to take
advantage of market opportunities. The company remains active in new fund
raising and further diversifying its already strong franchise.

Carlyle's continued expansion into other businesses has improved its diversity
in recent years but potentially adds acquisition and integration-related risks.
To date, Carlyle has successfully integrated numerous acquisitions and appears
to have appropriate management expertise and operational infrastructure to
assimilate new businesses into the group. Acquisitions have included CLO
management contracts, mid-sized hedge funds, a fund of funds manager, a middle
market lending platform and a group specializing in power projects.

In December 2012, Carlyle announced the acquisition of a 47.5% revenue interest
in NGP Energy Capital Management, an energy focused fund manager with $12
billion in AUM as of Sept. 30, 2012 and a favorable performance track record in
its major funds. This acquisition gives Carlyle additional scale to compete in
the energy space.

The NGP deal is expected by management to generate an additional $50m
immediately in annual fee revenues with the potential for additional revenues
and incentive fees. Initial cash consideration totaled $384 million along with
$40 million in Carlyle units. Given the large cash component of the NGP
acquisition, there is the possibility that leverage could rise in the near term.
However, NGP is anticipated to generate a considerable amount of incremental
FEBITDA in 2013.

For debt service purposes, Fitch focuses on FEBITDA but recognizes that it can
be augmented by the generation of net realized performance fees. In the case of
Carlyle, net realized performance fees have been sizeable though variable,
primarily benefiting from the strength and diversity of its corporate private
equity business. The potential for net realized performance fees in future
periods enhances Carlyle's overall credit profile. However, Fitch recognizes
that the ability to generate performance fees is susceptible to difficult market
periods (such as the recent financial crisis) and therefore believes management
fee-related earnings are the most reliable source for debt service.

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.

RATING DRIVERS AND SENSITIVITIES

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.

Negative rating action could be driven by increases in debt unless accompanied
by accretive acquisitions or other growth initiatives that add to FEBITDA.
Material changes in senior management, significant declines in investment
performance, and less robust liquidity management could 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 at least in the short run, but
positive rating momentum could emerge over time if Carlyle reduces leverage to
levels more in line with peer norms, while maintaining its size, diversity and
high proportion of stable management fees.

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 has assigned the following initial ratings with a Stable Outlook:

Carlyle Investment Management L.L.C.
--Long-term IDR 'A-';
--Senior Unsecured Debt 'A-'.

TC Group Investment Holdings, L.P.
--Long-term IDR 'A-';
--Senior Unsecured Debt 'A-'.

TC Group Cayman Investment Holdings, L.P.
--Long-term IDR 'A-';
--Senior Unsecured Debt 'A-'.

TC Group Cayman, L.P.
--Long-term IDR 'A-';
--Senior Unsecured Debt 'A-'.

TC Group, L.L.C.
--Long-term IDR 'A-'.

Carlyle Holdings I L.P.
--Long-term IDR 'A-'.

Carlyle Holdings II L.P.
--Long-term IDR 'A-'.

Carlyle Holdings III L.P.
--Long-term IDR 'A-'.


Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'2013 Outlook: Investment Managers and Alternative Funds' (Oct. 22, 2012);
--'Alternative Asset Managers: An Industry Update' (Nov. 12, 2012);
--'Investment Manager and Alternative Funds Criteria' (Dec. 17, 2012).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
2013 Outlook: Investment Managers and Alternative Funds
Alternative Asset Managers: An Industry Update (Yield Appetite, Market
Dislocation Offer Opportunities for Continued Growth)
Investment Manager and Alternative Funds Criteria
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