Carlyle Hedge Fund's $400 Million African-Refinery Investment Disappears
10 Novembro 2016 - 9:00PM
Dow Jones News
A Carlyle Group LP hedge fund has lost the $400 million it
invested last year in a Moroccan oil-refinery deal, according to a
securities filing and people familiar with the matter.
The hedge fund, known as Vermillion, was to receive a share of
revenue at the refinery, which ran into financial trouble and was
seized by Moroccan authorities later in 2015, the people said. The
refinery, known as Societe Anonyme Marocaine de l'Industrie du
Raffinage, or Samir, was put into liquidation this year.
In a note in the Washington, D.C., private-equity firm's
quarterly filing last week, Carlyle said it believes $400 million
in petroleum commodities were "misappropriated by third parties
outside the U.S." It didn't identify the soured deal or name the
third parties. The note, which hasn't previously been reported on,
refers to Samir, the people said.
Carlyle has spent $5 million in legal and professional fees
trying to get its money back and expects the matter could lead to
litigation and "significant additional costs or liabilities,"
according to the filing. It has also received a redemption request
from an unnamed investor as a result of the episode, additional
details of which remain murky.
Carlyle expects to join a group similar to creditors committees
that are formed in U.S. chapter 11 cases, the people said. But the
prospects for a recovery of its investment are less clear than they
would be in a U.S. bankruptcy proceeding. Other creditors include
BP PLC and Glencore PLC.
The loss represents the latest misstep in Carlyle's hedge-fund
business, which has suffered declines in commodity and credit
investments and investor withdrawals. Carlyle is pulling back from
the business and plans to focus more on corporate lending.
Co-founder William Conway said on an earnings call last month that
Carlyle is decreasing its "exposure to shorter-term trading
businesses, areas where, frankly, we have not performed well."
Carlyle expects to have about $1 billion of hedge-fund assets by
year-end, down from $14.7 billion as of the third quarter of
2014.
Carlyle and other big private-equity firms moved into hedge
funds to diversify beyond their corporate buyout businesses.
Carlyle's most-recent foray into hedge funds began in 2010. It
bought a majority stake in Claren Road Asset Management, followed
later by deals for Emerging Sovereign Group, or ESG, and
Vermillion. It also purchased a Canadian fund of hedge-funds firm,
Diversified Global Asset Management.
Carlyle has since sold back its stake in ESG to that firm's
founders, closed DGAM and is in the process of winding down
Vermillion, which is now called Carlyle Commodity Management. It is
evaluating options for Claren Road, including selling back its
stake to the firm's founders or shutting the business down, a
person familiar with the matter said.
The two former Morgan Stanley executives who oversaw Carlyle's
push into hedge funds, Mitch Petrick and Jacques Chappuis, have
stepped down from the business. Mr. Petrick remains a senior
adviser to Carlyle and Mr. Chappuis has returned to Morgan
Stanley.
The troubled African commodities deal highlights the risks U.S.
investors face in emerging markets with less familiar
investor-protection laws. Firms focused on credit and commodities
have ventured to Brazil, Greece and other far-flung locales looking
for bargains amid soaring prices for some assets in the U.S. and
other developed markets.
Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com and Juliet
Chung at juliet.chung@wsj.com
(END) Dow Jones Newswires
November 10, 2016 17:45 ET (22:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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