UPDATE 2-Carlyle and Warburg Pincus to buy credit rating agency DBRS

Mon Dec 22, 2014 12:40pm EST
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(Adds strategic outlook, financing bank)

By Mike Stone

Dec 22 (Reuters) - Carlyle Group LP and Warburg Pincus LLC said they would buy DBRS Ltd, the world's fourth-largest credit rating agency, in partnership with a consortium of Canadian investors including the firm's founder.

Reuters reported earlier this month a private equity consortium of Carlyle and Warburg Pincus was in advanced talks to buy Toronto-based DBRS for more than $500 million.

The deal is the second in the credit rating industry this month, after U.S. publisher Hearst Corp said it would raise its stake in Fitch to 80 percent from 50 percent in a deal valued at about $2 billion.

Carlyle will fund the deal through its unit Carlyle Global Financial Services Partners II, while Warburg Pincus' investment will come from Warburg Pincus Private Equity XI, L.P.

DBRS founder and controlling shareholder Walter Schroeder will remain an important investor, the companies said in a statement on Monday.

The agency rates debt of companies, local authorities and countries, as well as structured finance products such as commercial mortgage-backed securities.

Carlyle and Warburg see DBRS as a market leader in Canada, and believe the company's international growth will come from the increased use of structured financial products, a person familiar with the deal, who provided a briefing on condition of anonymity, said. DBRS is a niche player in rating structured products such as commercial mortgage-backed securities.   Continued...