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Carlyle: The Ultimate Exit Plan

Updated from 11:30 a.m. EST following the stock's initial trading.

NEW YORK (TheStreet --Carlyle Group (CG) Priced its IPO at $22.00, below the planned range of $23.00-$25.00 and traded up roughly seven cents after opening. Carlyle Groupis always looking to sell out for a profit when it invests in companies. Now it's embarking on the ultimate exit plan with its own initial public offering.

After 25 years as a private equity company, Carlyle plans to lift the skirt and take itself public. Why? To pay off debt. However, if you dig through the related regulatory filing, you'll see that Carlyle will make money up one side and down the other in this deal.

It isn't uncommon for a company to say it will repay debt with proceeds from a public offering. However, when a company makes so much money and pays its employees so well -- it begs the question -- why is there so much debt? Where did it come from?

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Well it turns out Carlyle took on debt after the debacle of its Carlyle Capital Corp. business going belly up during the financial crisis. This fund invested in mortgage-backed securities and you know how that story turned out.

They also went into debt with Mubadala (the investing arm of Abu Dhabi) so they could pay themselves a sweet dividend of $398.5 million in 2010 before their initial plan to go public in September 2011. The executives reinvested the money back into their funds, but whether you buy a Lamborghini or invest it in a Carlyle fund at the end of the day it's still a big pay day ahead of an offering.

They borrowed $500 million from Mubadala, which they repaid last month by taking on more debt. The firm's founders together earned $413 million last year partly by borrowing money that they now want the public to help them wipe clean.

All in all, Carlyle is drowning in about $1 billion worth of debt. The company, though, doesn't believe this is an excessive amount. Once they complete this offering, Carlyle will be left with a single $500 million term loan. According to the road show, Carlyle expects to be in such good shape after the offering that it will be able to pay out more money to its limited partners than if it stays private.

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So for all the employees that have to invest in the funds -- first offering bonus -- they'll get more once the company is public.

In return for their largesse, Carlyle will pay its new investors 16 cents per share per quarter, which isn't too shabby. But that may be because these alternative asset manager stocks haven't fared too well in the aftermarket.

In the past year, KKR (KKR) is down 25%, Fortress (FIG) is down 39%, and Blackstone (BX) has lost 27%. All three though have yields between 5%-6%. Essentially, these are income stocks, not growth stocks. They pay well since they don't appreciate.

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