The Carlyle Group L.P. and subsidiaries

The stable outlook on The Carlyle Group L.P. incorporates S&P Global Ratings' view that fee-earning assets under management (FEAUM) and EBITDA grew considerably in 2018. We expect EBITDA to increase more modestly, in the low single digits, for 2019 and 2020. While leverage recently rose due to Carlyle's debt-funded preferred redemption, we consider this temporary. We expect Carlyle to begin to grow retained earnings longer term, following its conversion to a C corporation, due to a lower and fixed dividend. As a result, we expect leverage to return to closer to 2.0x over the next 12-15 months. If Carlyle's FEAUM declines substantially, in contrast with our base-case forecast for 2019 and 2020; if the company experiences lagging investment performance; if

...Realization activity slowed in 2019, though we expect realization activity to grow as Carlyle's funds mature. Management has said that this is largely timing related and that realized performance fees could pick back up in the second half of 2020, once its funds become more mature. Carlyle had $1.8 billion in net accrued performance revenues as of Sept. 30, 2019, representing notable potential earnings, once realizations begin to increase. The company also ended third-quarter 2019 with $7.6 billion of capital not yet earning fees, as well as $73 billion of dry powder. We expect an increase in management fees in 2020 and beyond as capital is invested. Leverage rose recently as the company issued debt to redeem its preferred stock.Carlyle's maintenance of leverage closer to 2x is a key support to our favorable peer comparison of the company relative to other asset managers with similar satisfactory business profiles. Carlyle plans to convert to a corporation from a partnership; the expected...

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