Carlyle Group, the Washington-based private equity firm, is in talks to buy Highland Capital Management’s unit that manages $3 billion in collateralized loan obligations in Europe, according to two people with knowledge of the matter.
The companies haven’t come to an agreement and may not reach a deal, said the people, who declined to be identified because the sale isn’t public. Highland first put the portfolio, which includes five CLOs, up for sale earlier this year.
Carlyle is joining buyout firms such as Blackstone Group in leading an expansion into the European CLO market by purchasing existing investments as the ability to raise new funds remains challenging. There have been $11 billion of CLOs backed by widely syndicated loans issued in the U.S. this year, while only one €858 million ($1.1 billion) fund was raised in Europe, according to data compiled by Bloomberg.
Carlyle has been buying loan funds in the U.S. Last month it said it bought Churchill Financial to increase its lending business.
Earlier this year Carlyle acquired a $500 million CLO from Wells Fargo’s Foothill Group Inc. unit. It previously bought CLOs overseen by Mizuho Alternative Investments’ U.S. loan management business Mountain Capital Advisors and purchased loans and other credits from Stanfield Capital Partners, Bloomberg data show.
CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.
Natixis is advising Dallas-based Highland on the sale. Stefan Prelog, an outside spokesman for Highland, and Randall Whitestone, a Carlyle spokesman, declined to comment.
GSO Capital Partners, the debt unit of Blackstone, became the largest manager of CLOs in Europe after acquiring Dublin-based Harbourmaster Capital Management in early October, tripling its European loans under management to €11.5 billion.
Highland would join Aladdin Capital Holdings and Resource America Inc., in selling their European CLOs as many U.S. investors exit the European market.
Pramerica Investment Management Ltd., Prudential Fixed Income’s U.K.-based asset management business, took over a CLO managed by an Aladdin Capital subsidiary, according to a Jan. 10 news release. Resource America said its subsidiary Resource Europe Management, sold a CLO to an affiliate of Intermediate Capital Group, according to a Dec. 22 news release. New York-based investment manager Octagon Credit Investors also sold its European CLO this year.