Recent News About The Carlyle Group

Carlyle Group And The Middle East

The Carlyle Group has investors all over the world, including the wealthier sectors of the Arab countries of the middle east.  But only in the last few years has the Carlyle Group invested in the Middle East. 

In September, 2007, the Carlyle Group sold a 7.5% stake to an investment group in Abu Dhabi called the Mubadala Development Company, which is owned by the Dubai government.  Mubadala's offices are in Cairo, Dubai and Istanbul, but this new business deal now makes them shareholders in certain American public utilities.  This is part of a current trend the Carlyle Group is pushing to allow foreign investment in public industries in the United States.  At 7.5%, this share of the Carlyle Group is valued at $1.3 billion.

This move also forms in important business partnership between the Carlyle Group and Abu Dhabi.  The Carlyle Group has stepped up its number of Middle East investments in the last few years.  Carlyle's investment is just part of the growing trend of investment companies putting their money into the Middle East.  They are looking to make money developing the region's energy resources (oil) as well as investing in public state-owned industries which always bring great returns at low risk.  The fact that Middle East investment is a politically sensitive issue, especially considering Carlyle is a major investor in the United States defense industry, has not stopped Carlyle from aggressively investing there.

Middle East money has always been invested in private western industries, but now the Carlyle Group is leading the way to opening up the public sector to American investment.  This is not a news story you're likely to see on the nightly news because it makes lots of people uneasy to know that Middle Eastern countries are investing in the United States.

Here Comes The Taxman

There are 2 bills in Congress currently that, if passed, will take a bite out of Carlyle's profits.  Both aim to change the tax payment structure that is currently in place.  The more serious of the two proposes raising the tax rate on investment returns, which is currently at 15%, to a whopping 35%.  The idea behind the bill is that investment companies, who rake in billions in profits every year, pay a lower percentage of their earnings in tax than the average American worker does.  Why should they be paying so much less?

Members of the Carlyle Group have been appearing before Congress to state their cases, saying that investors are owners rather than employees, face great risks with their investments, and manage their business as an asset.  Comparing their multi-billion a year operation to a small private investor, they say that there is no reason to penalize their investments.

The Carlyle Credit Fund Hits Hard Times

By the end of July, things didn't look so good for the Carlyle Group's public credit fund Carlyle Capital.  It dropped 24% during the month of August 2007, adding to the drop from $843.5 to $642.1 million in the previous month.  The fall in prices is due to the skyrocketing number of mortgage defaults, which have made investors wary of investing in securities that aren't the absolutely highest rated.

Carlyle Capital is a publicly traded fund, but it is backed by the Carlyle Group.  Carlyle has been doing everything it can to keep the fund afloat, lending it $200 million and buying assets in the fund totaling $900 million, and it has received some help from other parties as well.  With the fund's sudden drop in value, it's anybody's guess how much longer the Carlyle Group will be willing to keep it alive.