According to a Bloomberg report, Carlyle partners are reaching into their wallets to bail out one of the private-equity firm’s first investments in Brazil.
Senior Carlyle professionals have injected $66.9 million and their firm has poured another $21.1 million into Urbplan Desenvolvimento Urbano SA, a real-estate developer that’s been hit with hundreds of lawsuits, in part for failing to complete home sites across Brazil, according to court and regulatory filings. Urbplan needs as much as $200 million to carry out Carlyle’s turnaround plan after an overly ambitious expansion left it with $305 million of high-cost debt.
Carlyle’s misadventure in Brazilian real-estate highlights a risk of doing business in the country almost seven years after the firm’s co-founder David Rubenstein said it would be a “huge” private-equity market. Buyout shops seldom use their own cash, let alone that of their partners to rescue investments. For Washington-based Carlyle that move may be necessary to protect its reputation and growing holdings in a country where courts increasingly hold directors and shareholders personally responsible for claims against their companies.
Urbplan started out as a family-owned real estate company in Sao Paulo that focused on middle- and low-income housing as well as first-time homebuyers. But construction became paralyzed and some customers stopped making payments on their lots, said Mirian Abe, an analyst in the Sao Paulo office of Fitch Ratings. As of November, 26 percent of customer receivables that Urbplan had packaged into securities were more than 90 days overdue, while some 17 percent were more than 180 days late, Fitch said.