UPDATE 2-Carlyle sees great opportunity to invest in banks

(Recasts lead, adds quotes on financial assets in paragraphs 12-13, 15-end)

By Megan Davies

DUBAI, Oct 15 (Reuters) - Carlyle Group [CYL.UL] co-founder David Rubenstein said on Wednesday that he saw great opportunity to invest in financial assets affected by the credit crunch, and said the U.S. government's actions could help free up availability of leveraged buyout debt in the coming months.

Private equity firms have been hammered by the lack of availability of financing for leveraged buyout deals and have largely been waiting on the sidelines for debt markets to return to some normality.

Governments around the world have been trying to restore confidence in the battered banking system and markets. The United States said on Tuesday it was injecting $250 billion into U.S. banks to keep fear from swamping the U.S. economy.

Rubenstein said on the sidelines of the Super Return private equity conference in Dubai that the U.S. government's actions to boost liquidity in the system could have the affect of freeing up leveraged buyout debt, but stressed it was too early to really know the impact.

"My guess is the system will probably free up and within a few months you'll begin to see buyout debt more readily available than it has been in the last nine months or so," he said.

Washington, D.C.-based Carlyle is one of the world's largest private equity firms with more than $89.3 billion under management and investments in companies such as fast food chain Dunkin' Donuts, semiconductor firm Freescale Semiconductor and pharmacy chain Alliance Boots, its website showed.

The financial crisis and hard knocks to the economy has put stress on some of Carlyle's portfolio companies, Rubenstein said.

He said Carlyle had gone through every company in its portfolio to make sure they had adequate credit lines and were prepared for a slowdown.

"I wouldn't trade my portfolio for anyone else's," Rubenstein said. "I'm very happy with our position. Some companies are stressed but generally I think we're in very good shape."

Rubenstein said the United States has probably been in recession for a couple of months and predicted it could come out of recession by the second quarter of next year.

BANKS ATTRACTIVE

Rubenstein said the financial services sector was a very attractive investment opportunity right now.

He said financial institutions like banks and insurance companies seeking to sell assets are probably going to sell them at distressed prices.