November 13, 2008 / 7:37 AM / 11 years ago

Best deals are in debt, and Asia, Carlyle says

HONG KONG (Reuters) - Carlyle Group CYL.UL co-founder David Rubenstein said on Thursday the two best places to invest in right now are in debt markets and Asia, specifically China, thanks to its continued economic growth.

With debt consistently traded at 60 cents on the dollar, companies should buy it back, holding it until the turmoil clears and selling it later for a premium. Banks are even allowing debt buyers to borrow money from them for these purchases.

“When history is recorded, the single best deals done in this environment will probably be deals done about near the bottom for the debt of one’s own company,” he said at the Asian Venture Capital Journal conference in Hong Kong.

Private equity firms were doing a lot of this right now, he said. As a result, the term “private equity” may soon switch to “private credit,” as more buyout firms prepare to purchase the cheap debt of companies they have studied in the past.

Rubenstein said another great investment area right now was Asia, because the economic growth was far better than other economies across the globe.

“While growth will be down in Asia, it will not be negative,” the private equity executive said. “Asia has been more resilient to the downturn. China itself will be the single most attractive place to invest.”

Still another place he suggested to put money into was shares of U.S. financial services companies and their assets.

“That will turn out to be the best thing you can do with your money in the United States,” he said.

Some of the companies private equity deals took private after 2006 may be able to survive because of their debt arrangements, but he said he was not sure they could survive a severe downturn.

The financial climate had changed rapidly, he said, and those private equity firms that didn’t adapt would struggle.

“Those funds that do not recognize they have to change their traditional private equity model will not survive,” he said. “If we say we have to do things differently, those firms will prosper and survive. I think we have to recognize that — those that change their business technique and business model will prosper.” 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.

Carlyle has not been immune to the credit crunch.

Its affiliate Carlyle Capital Corp went bankrupt in March and liquidated its assets as it could not meet margin calls from its lenders. The company mainly invested in mortgage-backed assets.

Editing by Anne Marie Roantree

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