US private equity giant Carlyle is being sued by a Kuwaiti conglomerate which lost $50m in the collapse of the firm’s Carlyle Capital Corp debt fund. According to the Financial Times, the National Industries Group has alleged that Carlyle misrepresented the safety of the fund, which collapsed in March 2008 despite investing primarily in government-backed and AAA-rated mortgage securities.
Carlyle had been marketed to limited partners as a safe fund. It raised $600m from investors and a further $340m when it listed, with a large proportion of the funding raised from Middle Eastern investors.
Carlyle Capital Corp was one of the first casualties of the global financial crisis. Despite the influence held by Carlyle in the US financial sector, it was unable to prevent its 14 “relationship” banks from pulling the plug, despite the fact that the AAA-backing of their assets.
It is thought that Carlyle Capital’s high leverage made it sensitive to small moves in prices, meaning the fund served as an early warning of the financial carnage that was to follow.
First established as a building materials manufacturer, National Industries Group now holds investments and shares in building materials, petrochemicals, oil and gas services, utilities, real estate, infrastructure and financial services.
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