Commitments and Contingencies

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies Capital Commitments

The Company and its unconsolidated affiliates have unfunded commitments totaling $4.3 billion as of June 30, 2024, of

which approximately $3.6 billion is subscribed individually by senior Carlyle professionals, advisors and other professionals. In

addition to these unfunded commitments, the Company may from time to time exercise its right to purchase additional interests

in its investment funds that become available in the ordinary course of their operations.

Under the Carlyle Global Capital Markets platform, certain subsidiaries of the Company may act as an underwriter,

syndicator or placement agent for security offerings and loan originations. The Company earns fees in connection with these

activities and bears the risk of the sale of such securities and placement of such loans, which may be longer dated. As of

June 30, 2024, the Company had no material commitments related to the origination and syndication of loans and securities

under the Carlyle Global Capital Markets platform. In July 2024, a subsidiary of the Company committed to bridge up to

$340 million of debt and equity financing in connection with the acquisition of a private student loan portfolio by investment

vehicles in the Company’s Global Credit segment, which is expected to close in the second half of 2024. The Company expects

to transfer the commitments to third party investors through Carlyle-advised investment vehicles.

Guaranteed Loans 

From time to time, the Company or its subsidiaries may enter into agreements to guarantee certain obligations of the

investment funds related to, for example, credit facilities or equity commitments. Certain consolidated subsidiaries of the

Company are the guarantors of revolving credit facilities for certain funds in the Global Investment Solutions segment. The

guarantee is limited to the lesser of the total amount drawn under the credit facilities or the total of net asset value of the

guarantor subsidiaries plus any uncalled capital of the applicable general partner, and was approximately $6.5 million as of

June 30, 2024. The outstanding balances are secured by uncalled capital commitments from the underlying funds and the

Company believes the likelihood of any material funding under this guarantee to be remote.

Contingent Obligations (Giveback)

A liability for potential repayment of previously received performance allocations of $43.9 million at June 30, 2024 was

shown as accrued giveback obligations in the condensed consolidated balance sheets, representing the giveback obligation that

would need to be paid if the funds were liquidated at their current fair values at June 30, 2024. However, the ultimate giveback

obligation, if any, generally is not paid until the end of a fund’s life or earlier if the giveback becomes fixed and early payment

is agreed upon by the fund’s partners (see Note 2, Summary of Significant Accounting Policies). The Company had $11.5

million of unbilled receivables from former and current employees and senior Carlyle professionals as of June 30, 2024 related

to giveback obligations. Any such receivables are collateralized by investments made by individual senior Carlyle professionals

and employees in Carlyle-sponsored funds. In addition, $149.5 million have been withheld from distributions of carried interest

to senior Carlyle professionals and employees for potential giveback obligations as of June 30, 2024. Such amounts are held on

behalf of the respective current and former Carlyle employees to satisfy any givebacks they may owe and are held by entities

not included in the accompanying condensed consolidated balance sheets. Current and former senior Carlyle professionals and

employees are personally responsible for their giveback obligations. As of June 30, 2024, approximately $20.2 million of the

Company’s accrued giveback obligation is the responsibility of various current and former senior Carlyle professionals and

other former limited partners of the Carlyle Holdings partnerships, and the net accrued giveback obligation attributable to the

Company is $23.7 million.

If, at June 30, 2024, all of the investments held by the Company’s Funds were deemed worthless, a possibility that

management views as remote, the amount of realized and distributed carried interest subject to potential giveback would be

$1.4 billion, on an after-tax basis where applicable, of which approximately $0.6 billion would be the responsibility of current

and former senior Carlyle professionals.

Legal Matters

In the ordinary course of business, the Company is a party to litigation, investigations, inquiries, employment-related

matters, disputes and other potential claims. Certain of these matters are described below. The Company is not currently able to

estimate the reasonably possible amount of loss or range of loss, in excess of amounts accrued, for the matters that have not

been resolved. The Company does not believe it is probable that the outcome of any existing litigation, investigations, disputes

or other potential claims will materially affect the Company or these financial statements in excess of amounts accrued.

The Authentix Matter

Authentix, Inc. (“Authentix”) was a majority-owned portfolio company in one of the Company’s investment funds,

Carlyle U.S. Growth Fund III, L.P. (“CGF III”). When Authentix was owned by CGF III, two of the Company’s employees

served on Authentix’s board of directors. After a lengthy sale process, Authentix was sold for an aggregate sale price of

$87.5 million. On August 7, 2020, certain of the former minority shareholders in Authentix filed suit in Delaware Chancery

Court, alleging that the Authentix board of directors, CGF III, and the Company breached various fiduciary duties by agreeing

to a sale of Authentix at an inopportune time and at a price that was too low. Plaintiffs seek damages for their percentage

ownership share of the hypothetical extra gain they allege could have been realized on the sale. Plaintiffs also seek

disgorgement of any profits received by the Company stemming from the sale. A trial before the Delaware Court of Chancery

was completed in early February 2024. A decision from the court is expected later this year, following post-trial briefing. The

former directors of Authentix are covered by indemnification from Authentix and an Authentix insurance policy. The

defendants expect to continue to contest the claims vigorously.

The Tax Receivable Agreement Matter

The Company came into existence on January 1, 2020, when its predecessor, The Carlyle Group, L.P. (the “PTP”),

converted from a partnership into a corporation (the “Conversion”). On July 29, 2022, an alleged stockholder of the Company,

the City of Pittsburgh Comprehensive Municipal Trust Fund (the “Plaintiff”), filed suit in the Delaware Court of Chancery,

alleging a direct claim against the Company for breach of its certificate of incorporation and a derivative claim on behalf of the

Company against certain current and former officers and directors of the Company. Plaintiff challenges the receipt, by certain

officers of the PTP and certain directors of the general partner of the PTP, of a right to cash payments associated with the

elimination of a tax receivable agreement in connection with the Conversion. Plaintiff is seeking monetary damages, restitution,

and an injunction preventing the Company from making any future cash payments for the elimination of the tax receivable

agreement in connection with the Conversion. By virtue of the derivative nature of the primary claims (i.e., that the claims are

aimed primarily at certain officers and directors), it is unlikely that the Company itself will pay material damage awards based

on the Plaintiff’s claims, although the Company is expected to incur legal defense fees to the extent not covered by insurance.

The Delaware Court issued a ruling on the defendant’s motion to dismiss on April 24, 2024, dismissing some of the Plaintiff’s

claims but allowing most of the claims to proceed to discovery and possibly to trial. The Company intends to contest the direct

claims vigorously, and the officer and director defendants intend to continue contesting the claims vigorously.

SEC Investigation

As part of a sweep investigation of financial services and investment advisory firms, in October 2022, the Company

received from the SEC a request for information related to the preservation of certain types of electronic business

communications (e.g., text messages and messages on WhatsApp, WeChat, and similar applications) as part of the Company’s

books and records. The Company has cooperated with the investigation and has engaged in discussions with the Enforcement

Division about potential resolution. The Company has accrued an estimated liability for this matter in the six months ended

June 30, 2024.

The Company currently is and expects to continue to be, from time to time, subject to examinations, formal and informal

inquiries and investigations by various U.S. and non-U.S. governmental and regulatory agencies, including but not limited to,

the SEC, Department of Justice, state attorneys general, FINRA, National Futures Association and the U.K. Financial Conduct

Authority. The Company routinely cooperates with such examinations, inquiries and investigations, and they may result in the

commencement of civil, criminal, or administrative or other proceedings against the Company or its personnel.

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings and employment-

related matters, and some of the matters discussed above involve claims for potentially large and/or indeterminate amounts of

damages. Based on information known by management, management does not believe that as of the date of this filing the final

resolutions of the matters above will have a material effect upon the Company’s condensed consolidated financial statements.

However, given the potentially large and/or indeterminate amounts of damages sought in certain of these matters and the

inherent unpredictability of investigations and litigations, it is possible that an adverse outcome in certain matters could, from

time to time, have a material effect on the Company’s financial results in any particular period.

The Company accrues an estimated loss contingency liability when it is probable that such a liability has been incurred

and the amount of the loss can be reasonably estimated. As of June 30, 2024, the Company had recorded liabilities aggregating

to approximately $70 million for litigation-related contingencies, regulatory examinations and inquiries, and other matters. The

Company evaluates its outstanding legal and regulatory proceedings and other matters each quarter to assess its loss

contingency accruals, and makes adjustments in such accruals, upward or downward, as appropriate, based on management’s

best judgment after consultation with counsel. There is no assurance that the Company’s accruals for loss contingencies will not

need to be adjusted in the future or that, in light of the uncertainties involved in such matters, the ultimate resolution of these

matters will not significantly exceed the accruals that the Company has recorded.

Indemnifications

In the normal course of business, the Company and its subsidiaries enter into contracts that contain a variety of

representations and warranties and provide general indemnifications. The Company’s maximum exposure under these

arrangements is unknown as this would involve future claims that may be made against the Company that have not yet

occurred. However, based on experience, the Company believes the risk of material loss to be remote.

In connection with the sale of the Company’s interest in its local Brazilian management entity in August 2021, the

Company provided a guarantee to the acquiring company of up to BRL 100.0 million ($18.0 million as of June 30, 2024) for

liabilities arising from tax-related indemnifications. This guarantee, which will expire in August 2027, would only come into

effect after all alternative remedies have been exhausted. The Company believes the likelihood of any material funding under

this guarantee to be remote.

Risks and Uncertainties

Carlyle’s funds seek investment opportunities that offer the possibility of attaining substantial capital appreciation.

Certain events particular to each industry in which the underlying investees conduct their operations, as well as general

economic, political, regulatory, and public health conditions, may have a significant negative impact on the Company’s

investments and profitability. The funds managed by the Company may also experience a slowdown in the deployment of

capital, which could adversely affect the Company’s ability to raise capital for new or successor funds and could also impact the

management fees the Company earns on its carry funds and managed accounts, and/or result in the impairment of intangible

assets and/or goodwill the case of the Company’s acquired businesses. Such events are beyond the Company’s control, and the

likelihood that they may occur and the effect on the Company cannot be predicted.

Furthermore, certain of the funds’ investments are made in private companies and there are generally no public markets

for the underlying securities at the current time. The funds’ ability to liquidate their publicly-traded investments are often

subject to limitations, including discounts that may be required to be taken on quoted prices due to the number of shares being

sold. The funds’ ability to liquidate their investments and realize value is subject to significant limitations and uncertainties,

including among others currency fluctuations and natural disasters.

The Company and the funds make investments outside of the United States. Investments outside the United States may be

subject to less developed bankruptcy, corporate, partnership and other laws (which may have the effect of disregarding or

otherwise circumventing the limited liability structures potentially causing the actions or liabilities of one fund or a portfolio

company to adversely impact the Company or an unrelated fund or portfolio company). Non-U.S. investments are subject to the

same risks associated with the Company’s U.S. investments as well as additional risks, such as fluctuations in foreign currency

exchange rates, unexpected changes in regulatory requirements, heightened risk of political and economic instability,

difficulties in managing non-U.S. investments, potentially adverse tax consequences and the burden of complying with a wide

variety of foreign laws.

Furthermore, Carlyle is exposed to economic risk concentrations related to certain large investments as well as

concentrations of investments in certain industries and geographies.

Additionally, the Company encounters credit risk. Credit risk is the risk of default by a counterparty in the Company’s

investments in debt securities, loans, leases and derivatives that result from a borrower’s, lessee’s or derivative counterparty’s

inability or unwillingness to make required or expected payments. The Company is subject to credit risk should a financial

institution be unable to fulfill its obligations.

The Company considers cash, cash equivalents, securities, receivables, principal equity method investments, accounts

payable, accrued expenses, other liabilities, loans, senior notes, assets and liabilities of Consolidated Funds and contingent and

other consideration for acquisitions to be its financial instruments. Except for the senior notes, subordinated notes and

compensatory contingent and other consideration for acquisitions, the carrying amounts reported in the condensed consolidated

balance sheets for these financial instruments equal or closely approximate their fair values. The fair value of the senior and

subordinated notes is disclosed in Note 6, Borrowings.