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.

Carlyle senior executives will benefit from this hefty payout as well, because many own shares of the company as well as investments in the funds. In other words, they can afford to be generous. Make that offering bonus number two.

Carlyle is also paying itself back $19 million in expenses to go public. Most companies that disclose how much they spend on offering expenses spend between $1-3 million. This goes to lawyers, filing fees and the bankers. But $19 million? To themselves? That makes this the third offering bonus.

Initially Carlyle said its executives wouldn't be selling stock on the offering. Which sounds like it's really supporting the company, but as you see, they are already raking in money in so many ways that they don't need to sell their stock.

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The shares are expected to price within a range of $23 to $25 each on May 2. At the midpoint of the range, the deal would value Carlyle at $7.6 billion, the equivalent of nearly eight Instagrams.

New investors may be drawn to the big riches of the owners or the high-profile deals like bringing Dunkin' Brands ( DNKN) public. But they are really just helping the owners enrich themselves to the tune of millions, while earning 64 cents per share a year in dividends.

-- Written by Debra Borchardt in New York.

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