The financial crisis has made the world less focused on the U.S., which will have to face up to the fact that it is not as significant as before, Carlyle Group co-founder David Rubenstein told a large audience at the World Business Forum in New York:

“After World War II we were 48 percent of the world’s GDP; now we are about 20 percent of the world’s GDP… We have to get used to the fact that the dollar is relatively cheap and … that the dollar is probably not going to be the reserve currency that it’s been for so many years.”

Rubenstein said the center of the financial world won’t just be New York, but spread between here, London, Shanghai, Dubai, Sao Paulo and a few other cities.

Rubenstein concentrated particularly on the U.S. economy’s problems, listing issues such as the deficit, inflation, taxes and employment. He said that the U.S. is about two years into the recession and probably has a “month or two to go.”

He listed the areas he thinks are attractive investment opportunities: distressed investing, companies getting support from the U.S. government, energy (both carbon and alternative),  healthcare and emerging markets such as China, India and Brazil.

Among the final tidbits of advice that the private equity chief shot at the audience was to avoid excessive leverage:

“What we learned out of this most recent recession is if you borrow a lot of money it comes home to roost, so I’d avoid leverage–even normal leverage can be very dangerous at times when the economy goes down.”

Private equity firm The Carlyle Group gave a blunt assessment of 2008, when a financial crisis pulled three of its portfolio companies — German auto parts maker Edscha, energy company SemGroup
and Hawaiian Telcom — into bankruptcy protection or administration.
    
In its annual report, Carlyle told investors “the year 2008 was a humbling experience for us and most of the financial services industry. After several years of unprecedented growth, product innovation, geographic expansion, capital deployment and investment gains, our world changed dramatically.”
    
Going forward, Carlyle takes a cautious view.
    
“In 2008, the financial landscape change — and it will remain changed for the foreseeable future. Operating conditions for our portfolio companies will remain challenging. Transactions will be fewer and smaller. More equity will be required and debt terms will be less favorable. And hold periods will increase while returns will decrease.”

Click here to see the full Carlyle Group annual report.

The sale of the Neuberger asset management arm of Lehman might have been agreed back in September, but it’s not quite a done deal.

The whole process has been rather messy — Lehman put a majority percentage of the prized asset management arm up for sale in August, prior to filing for bankruptcy.

The unit, one of Lehman’s best performing assets, drew interest from a number of private equity bidders such as Kohlberg Kravis Roberts, Hellman & Friedman, Blackstone, Bain Capital and Clayton Dubilier & Rice, sources previously said.

Some estimates valued the unit between $8 billion and $10 billion.

After its September bankruptcy filing, the whole of the asset was marketed. Bidders were whittled down to the winning team of Bain Capital LLC and Hellman & Friedman LLC who clinched the deal for $2.15 billion.

Typically, that would have been the end of it — but because the sale was being done after Lehman filed for bankruptcy, an auction is to take place and could draw counter bids. The 45-day clock for the auction started ticking in October and stops at noon on Monday.

The most likely potential bid could come from Carlyle Group, which together with former Neuberger Berman Chief Executive Jeffrey Lane, in October filed an objection to the sale of Neuberger and said in court it would itself be interested bidding, but believed that Bain and H&F had an unfair advantage.

A source familiar with the matter previously told Reuters that Carlyle was expected to bid.
Lane, according to the Wall Street Journal, is a Wall Street veteran who joined Neuberger in 1998, saw the firm through its 1999 IPO and $2.6 billion sale to Lehman Brothers in 2003. After serving as a vice chairman of Lehman, Bear Stearns hired Mr. Lane in 2007 to try and shore up its asset-management unit after two of its hedge funds collapsed, the WSJ said. After Bear itself imploded, Mr. Lane became chief executive of private bank Modern Bank, it said.

Carlyle and Lane claimed the price paid for Neuberger was too low and violated Lehman’s obligation to maximize the value of its asset sales to pay off creditors, in an objection filed in the U.S. Bankruptcy Court for the Southern District of New York.

It goes against so-called Hornbook Law, the most basic, elementary law of all.

“This is patently contrary to hornbook law that a debtor which sells assets in a chapter 11 case has an obligation to seek the highest and best values for the benefit of its estate,” the objection said.
Other bidders could also come out of the woodwork. Silverlake has been one name mentioned by sources as having shown interest in the past.

The sale of Neuberger next week could be interesting if there’s a fight for the asset, with an auction set for court on Wednesday.

These are the deadlines the bankruptcy court has set:

• The deadline to submit a Qualified Bid (as defined in the Bidding Procedures) is December 1, 2008 at 12:00 noon (New York time).
• An auction has been scheduled for December 3, 2008 at 10:00 a.m. (New York time).
• The deadline to lodge an objection with the Bankruptcy Court to the proposed sale is December 17, 2008 at 4:00 p.m. (New York time). Objections must be filed and served in accordance with the Bid Procedures Order.
• The Bankruptcy Court will conduct a hearing to consider the proposed sale on December 22, 2008 at 10:00 a.m. (New York time).