Friday, March 10, 2006

Carlyle Group gets ready to do it in the road.

Carlyle Group to raise $1 billion U.S. infrastructure fund

Mar 10, 2006

By Henry Teitelbaum and Nicole Lee


LONDON (MarketWatch) -- The Carlyle Group (CAY.XX) is raising a $1 billion U.S.-focused infrastructure fund, people familiar with the matter told Dow Jones Newswires Thursday.
The Washington, D.C.-based group is the first buyout house to create a fund of this size focused on U.S. infrastructure, such as rail, airports, water assets, schools, hospitals and public-private partnership projects.

The fund reflects the strong demand from institutional investors, particularly pension funds, for assets that offer long-term, stable returns to cover their liabilities.

"There is a growing demand from institutional investors to look at other investment classes, including infrastructure, because of the long-life nature and low-risk profile of infrastructure assets," said Robert W. Dove, a former senior vice president of Bechtel Group Inc. (BTL.XX).
Dove and Barry P. Gold, a former managing director and co-head of global structured finance at Citigroup Inc. (C), will head the fund.

"There is demand for increased funding from the private sector in public infrastructure assets, because of government privatizations, new build, or public-private partnerships," Gold told Dow Jones Newswires in an interview.

Carlyle joins several major banks in raising billion-dollar infrastructure funds: U.S.-based Goldman Sachs Group Inc. (GS) is raising a global fund, while Netherlands-based ABN Amro Holding NV (ABN) is raising a global fund with a focus on Europe.

The U.S. is attractive for infrastructure investment because the country needs an estimated $1.6 trillion in the next five years to replace and expand its aging roads, rail lines and other infrastructure, according to the American Society of Civil Engineers.

Legislation enacted by U.S. states since 1995 allowing private companies to take over the financing, construction and operation of public infrastructure also has encouraged investment. More than 20 U.S. states now have such legislation in place.

Public-private partnerships are currently underway in Texas, California and Illinois. In 2004, for example, Australia's Macquarie Infrastructure Group (MIG.AU) and Spain's Cintra S.A. de C.V. (AMEXICO.MX) paid a record-setting $1.83 billion in cash to win a 99-year concession from the City of Chicago for operating the 7.8-mile Chicago Skyway toll road.

Carlyle's new infrastructure fund reflects its push into new areas of investment - the firm is also raising a fund that will invest in renewable energy infrastructure.

Carlyle's new team of eight infrastructure investment professionals, who will start Monday, will be based in New York and Washington, a person familiar with the matter said.

Dove has operational and financing experience in infrastructure, and served as a board member of U.K.-based Tube Lines, one of two companies responsible for the maintenance and upgrade of London's underground network of subway trains and tracks.

Gold led the financing of several major infrastructure projects, such as Chicago Skyway and Highway 407 in Toronto, Canada, among others.

A spokeswoman for The Carlyle Group declined to comment on the new fund.
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