seuss
Tuesday, 11 March 2008, 6:08 pm
Market Scan
Carlyle Capital Could Lose Billions
Vidya Ram , 03.10.08, 12:00 PM ET
LONDON - Private equity firm the Carlyle Group came under renewed pressure to come to the rescue of its beleaguered investment fund, Carlyle Capital, which warned on Monday that creditors could liquidate up to $16 billion of assets.
A spokeswoman for the Carlyle Group told Forbes.com that it was considering "all options" to maximize the interests of stakeholders in Carlyle Capital, adding that the Amsterdam-listed fund's troubles had not materially affected the parent company or its other 54 funds. So far it has provided an unsecured credit facility of $150 million to the fund, which it launched last July.
The pressure was on after Carlyle Capital announced Monday that creditors of the bank may have liquidated up to $5 billion of assets on the open market. It warned that while it was in negotiation with lenders over backing for $16 billion in securities, it could be forced to liquidate the assets if an agreement is not reached.
http://www.forbes.com/2008/03/10/carlyle-c...ts09_print.htmlShares in Carlyle Capital have been suspended since Thursday, when it first warned that it was struggling to meet the flood of margin calls--or demands from lenders to provide additional collateral--that have followed an increased aversion to residential mortgage backed securities.
"Due to recent turmoil in the market for mortgage-backed securities, the company's lenders have significantly reduced the amount they are willing to lend against the company's portfolio of U.S. government agency AAA-rated residential mortgage-backed securities,'' Carlyle Capital said.
Until last month Carlyle Capital had a $21.7 billion portfolio of securities backed by government agencies Freddie Mac and Fannie Mae. However, as risk aversion has spread well beyond subprime, the value of these assets has plunged, leading to increased margin calls from lender banks.
Carlyle Capital, which had borrowed 32 times its capital to fund its investments, like other heavily leveraged funds been particularly vulnerable. Its troubles are similar to those of Peloton Partners, a London-based hedge fund which collapsed last week after creditor banks withdrew their funding, forcing the liquidation of assets.