December 22, 2014 / 12:57 PM / 3 years ago

Carlyle and Warburg Pincus to buy credit rating agency DBRS

(Reuters) - Carlyle Group LP (CG.O) 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.

Passersby walk in front of video monitors announcing the Carlyle Group's listing on the NASDAQ market site in New York's Times Square after the opening bell for trading, May 3, 2012. REUTERS/Keith Bedford

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.

DBRS has a 2 percent share of the ratings market that is dominated by McGraw Hill Financial Inc-owned MHFI.N Standard & Poor’s Financial Services LLC, Moody’s Corp (MCO.N) and Fitch Ratings Inc.

Terms of the deal, expected to close in the first quarter of 2015, were not disclosed.

DBRS was advised by Perella Weinberg Partners and CIBC World Markets Inc advised Carlyle Group and Warburg Pincus. Credit Suisse AG MLPN.P is providing financing for the transaction.

Additional reporting by Neha Dimri in Bengaluru; Editing by Saumyadeb Chakrabarty, Joyjeet Das and Phil Berlowitz

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