Carlyle fund closer to brink
Updated: 2008-03-14 13:34
Carlyle Group's mortgage bond fund moved a step closer to collapse after failing to reach an agreement with lenders who demanded more than $400 million to meet margin calls.
Concern about the fate of Carlyle Capital Corp, which began to buckle a week ago from the strain of tumbling home loan assets, helped push the dollar to a 12-year low against the yen yesterday. The fund said in a statement that it defaulted on about $16.6 billion of debt as of Wednesday. Lenders will "promptly" take over all of its remaining assets and any remaining debt is expected "soon" to go into default, Carlyle Capital said.
Carlyle Capital plunged as much as 70 percent in Amsterdam trading. Carlyle Group, co-founded by David Rubenstein, tapped public markets for $300 million in July to fuel the fund just as rising foreclosures caused credit markets to seize up. In the past month, at least a dozen funds have closed, sold assets or sought fresh capital as banks tightened lending standards.
"If Carlyle's lenders want their money right away, they'll liquidate the fund," Hank Calenti, a London-based analyst at RBC Capital Markets, said. "That will put pressure on already stressed credit markets."
Carlyle Capital's plea for refinancing on residential mortgage-backed securities failed late on Wednesday after a pricing service used by some lenders reported a decrease in the value of the assets, the firm said.
"The basis on which lenders are willing to provide financing against the company's collateral has changed so substantially that a successful refinancing is not possible," Carlyle said.
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