March 15, 2012 / 10:31 AM / 5 years ago

UPDATE 2-Carlyle reports bumper 2011 profit ahead of IPO

* Distributable earnings $864.4 mln in 2011 vs $342.5 mln in 2010

* To have five independent directors on its board

* Adds 18 underwriters to its IPO

By Greg Roumeliotis

March 15 (Reuters) - Carlyle Group LP, a private equity firm with $147 billion of assets under management that has filed for an IPO, said it returned a record $19 billion to investors in 2011 and reported a 152 percent year-on-year jump in distributable earnings.

In an update to its IPO registration document filed with regulators on Thursday, Carlyle gave earnings figures for full-year 2011, boasting major gains in realized investments thanks to asset sales, as the group exited many of its investments.

In 2011, Carlyle distributed about $19 billion to its fund investors, up from $8 billion in 2010. As of the end of 2011, its buyout, credit and real estate funds collectively had about $22 billion in capital not yet committed - so-called dry powder.

Economic net income, an accounting measure of the firm's profitability that takes into account the mark-to-market valuation of its assets, dropped from $1 billion in 2010 to $833.1 million in 2011 on choppy financial markets.

But stripped of paper profits and losses, 2011 earnings were much stronger. Distributable earnings came in at $864.4 million, more than twice the distributable earnings of $342.5 million in 2010.

Most of that increase was a result of gains in its buyout business, although its capital markets unit also contributed.

The source of distributable earnings in publicly listed private equity firms and those that are about to float has been a focal point of scrutiny for their fund investors who worry that reliance on management fees rather than carried interest - the fund manager's cut of investment profit - may result in them being overcharged and sidelined in favor of common shareholders.

In the case of Carlyle, only 14 percent of its distributable earnings in 2011 came from fee-related earnings, thanks to the asset sales, down from 58 percent in 2010 and 97 percent in 2009.

Blackstone Group LP relied on fees last year for 82 for its dividend payouts, KKR & Co LP for 46 percent and Apollo Global Management LLC reliance for 25 percent.

This volatility in carried interest helps explain Carlyle's decision to issue $500 million of subordinated notes and equity interests to Abu Dhabi state investment firm Mubadala, one of its cornerstone investors, so that it can pay $398.5 million in distributions in 2010.

Carlyle said in the regulatory filing that it had now repaid the balance of that debt.

NEW BOARD OF DIRECTORS

Ahead of its listing, Carlyle said it would bring in seven members to its board of directors, including five independent members, to join the firm's three founders: William Conway, Daniel D'Aniello and David Rubenstein.

These include Travelers Companies Inc Chief Executive Jay Fishman, retired Marriott International Inc Vice Chairman William Shaw and Lawton Fitt, a director of Thomson Reuters Corp, the parent company of Reuters News.

Independent directors will receive a retainer of $175,000, of which $125,000 will be payable in cash and $50,000 payable in the form of an annual deferred restricted share award, as well as $200,000 of deferred restricted shares under the firm's equity incentive plan, Carlyle said.

The fact that Carlyle is registered as a limited partnership means that it does not need to have a majority of independent directors on its board and future shareholders will have limited voting rights, with no annual meeting of shareholders held.

Carlyle also said it would add 18 underwriters to the list of managers of its proposed initial public offering of common units.

The company added Barclays Capital, Goldman Sachs, Morgan Stanley, Deutsche Bank, BoFA Merrill Lynch, UBS and 12 others to its underwriters for the IPO.

J.P. Morgan, Citigroup and Credit Suisse are acting as representatives of the underwriters.

In September last year, the private equity giant had filed with the U.S. Securities and Exchange Commission for an IPO of up to $100 million in a long-awaited move to catch up with rivals Blackstone, KKR and Apollo.

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