WAIR Wesco Aircraft Holdings Inc

Alternatives asset manager Carlyle Group was granted two extra years to exit the remaining holdings in a $7.8 billion boom-era buyout fund it raised in 2005, said people familiar with the matter.

As Carlyle Partners IV LP neared a Dec. 23 deadline to liquidate its holdings, Carlyle asked for and received investors' consent to extend the fund's life. The firm now has more time to sell down publicly listed shares in the portfolio's last two investments, chip maker NXP Semiconductors NV and aerospace supplier Wesco Aircraft Hardware Corp.

Private-equity funds typically have 10-year terms, with the option to extend them for up to two years. As a crop of funds approach the end of their lifespans in today's volatile markets, more firms likely will take advantage of these extension periods to avoid forced sales, industry players said. Funds launched in 2005 and the years prior held about $115 billion in unrealized assets at the end of 2014, according to research firm Preqin Ltd.

Carlyle Partners IV is among the funds launched in the run-up to the 2008 financial crisis that went through the turbulent years after the collapse of Lehman Brothers Holdings Inc. The firm is hoping more time will buy it higher returns.

Carlyle promised to waive the management fees it charges fund investors for the remainder of the pool's life, two of the people with knowledge of the matter said. The Washington, D.C., firm, which holds minority stakes in the fund's final investments, doesn't expect to carry out heavy operational work on the portfolio, one of these people said.

The fund, which returned 2.4 times its invested capital by the end of 2015, is looking to steer its last two leveraged buyout-era deals to an orderly wind-down.

In 2006, Carlyle was part of a consortium including Blackstone Group, Permira and TPG that took chip maker Freescale Semiconductor Inc. private in a $17.6 billion deal, one of the largest technology leveraged buyouts of the time. Freescale was saddled by debt and used proceeds from its 2011 initial public offering to pay down some of the burden rather than cash out its private-equity backers.

The lukewarm IPO raised alarm bells the deal would be a black eye for the consortium. Freescale merged with Netherlands-based rival NXP Semiconductors NV in 2015, in a deal that valued Freescale at roughly $11.8 billion. With a two-year extension, Carlyle Partners IV has more time to decide how to sell its shares of the combined company, NXP.

The fund also has shares in Wesco Aircraft, an aerospace supplier that bought chemicals distributor Haas Group International Inc. in a 2014 debt-financed deal. The acquisition loaded Wesco Aircraft with more debt and didn't boost profitability as quickly as hoped for, according to a Moody's Investors Service note Sept. 17.

Wesco Aircraft ended Wednesday's trading session at $13.71, down nearly 40% from its all-time highest close of $22.74 in early 2014. NXP Semiconductors closed at $76.73, down more than 46% from its historic highest closing price of $112.25 in May. The stock prices of both companies have ticked upward in the past month, however, after dipping in early February.

Carlyle Partners IV also bore some of the cost of a 2014 legal settlement Carlyle entered into after a lawsuit alleged it colluded with other private-equity firms to drive down the prices of corporate buyout deals. The fund was investing during the period covered by suit, which Carlyle co-Chief Executive William Conway said "was without merit" in a 2014 earnings call. At the time, he said the firm would incur risks if it didn't settle claims and the settlement fees wouldn't significantly affect the fund's returns.

The longer Carlyle draws out the life of its fund, the more it risks damping its net internal rate of return. Since its inception in late 2014, the fund has delivered net internal rate of return of 13% and a gross internal rate of return of 16%, as of Dec. 31, according to the firm's fourth-quarter earnings report.

Write to Dawn Lim at dawn.lim@wsj.com

(END) Dow Jones Newswires

March 10, 2016 08:35 ET (13:35 GMT)

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