Carlyle Capital expects banks to seize some $16B in
assets
Joseph Altman, THE ASSOCIATED PRESS
March 13, 2008
NEW YORK - Carlyle Capital Corp. said it expects creditors to seize all of the fund’s remaining assets after unsuccessful negotiations to prevent its liquidation, sending its shares plunging. The Amsterdam-listed fund shook financial markets last week after missing margin calls from banks on its US$21.7 billion portfolio of residential-mortgage-backed bonds. Carlyle’s troubles have amplified fears that billions of dollars of depressed mortgage-backed securities will flood the market, reducing their value even further. More than $5 billion of Carlyle’s securities have already been sold, but the fund tried to negotiate with the banks to prevent the liquidation of the remaining $16 billion.
« Although it has been working diligently with its lenders, the company has not been able to reach a mutually beneficial agreement to stabilize its financing, » Carlyle said in a news release. Shares tumbled 94 per cent to 18 cents in Amersterdam. The shares have lost more than 98 per cent of their value this year and traded at $12 just last week. Carlyle posted the securities as collateral under repurchase agreements, so if the value of the securities fall, the lender has the right to ask for more collateral - a margin call - to secure the loan. If the borrower does not meet the margin call, the lender may sell the security.
The value of mortgage-backed securities plummeted as U.S. home prices fell and foreclosures surged, prompting the banks to ask Carlyle for more than $400 million in additional capital. The fund was unable to come up with the money, prompting lenders to start foreclosing on the securities.
As of Wednesday, Carlyle said it has defaulted on about $16.6 billion of its debt, and the rest is expected to go into default soon.
Carlyle Capital Corp. is one of 55 funds managed by the Washington, D.C.-based Carlyle Group, one of the largest private equity firms in the world with US$76 billion in assets.
Carlyle Group « participated actively » in the fund’s negotiations with its lenders to refinance its portfolio and was prepared to provide substantial additional capital if sustainable terms could be achieved, the fund’s statement said.
But hopes for refinancing fell apart after some lenders said the value of the collateral had declined further, which would result in additional margin calls Thursday of about $97.5 million.
Carlyle Capital is registered in Guernsey, a U.K. dependency in the English Channel off the coast of Normandy, but managed by New York-based executives. It was the first Carlyle Group fund to go public, at $19 a share in July on the Euronext exchange in Amsterdam.
Trading of the fund’s shares was suspended last week after tumbling more than 50 per cent to $5 apiece on the news that the fund wasn’t able to meet the margin calls.
assets
Joseph Altman, THE ASSOCIATED PRESS
March 13, 2008
NEW YORK - Carlyle Capital Corp. said it expects creditors to seize all of the fund’s remaining assets after unsuccessful negotiations to prevent its liquidation, sending its shares plunging. The Amsterdam-listed fund shook financial markets last week after missing margin calls from banks on its US$21.7 billion portfolio of residential-mortgage-backed bonds. Carlyle’s troubles have amplified fears that billions of dollars of depressed mortgage-backed securities will flood the market, reducing their value even further. More than $5 billion of Carlyle’s securities have already been sold, but the fund tried to negotiate with the banks to prevent the liquidation of the remaining $16 billion.
« Although it has been working diligently with its lenders, the company has not been able to reach a mutually beneficial agreement to stabilize its financing, » Carlyle said in a news release. Shares tumbled 94 per cent to 18 cents in Amersterdam. The shares have lost more than 98 per cent of their value this year and traded at $12 just last week. Carlyle posted the securities as collateral under repurchase agreements, so if the value of the securities fall, the lender has the right to ask for more collateral - a margin call - to secure the loan. If the borrower does not meet the margin call, the lender may sell the security.
The value of mortgage-backed securities plummeted as U.S. home prices fell and foreclosures surged, prompting the banks to ask Carlyle for more than $400 million in additional capital. The fund was unable to come up with the money, prompting lenders to start foreclosing on the securities.
As of Wednesday, Carlyle said it has defaulted on about $16.6 billion of its debt, and the rest is expected to go into default soon.
Carlyle Capital Corp. is one of 55 funds managed by the Washington, D.C.-based Carlyle Group, one of the largest private equity firms in the world with US$76 billion in assets.
Carlyle Group « participated actively » in the fund’s negotiations with its lenders to refinance its portfolio and was prepared to provide substantial additional capital if sustainable terms could be achieved, the fund’s statement said.
But hopes for refinancing fell apart after some lenders said the value of the collateral had declined further, which would result in additional margin calls Thursday of about $97.5 million.
Carlyle Capital is registered in Guernsey, a U.K. dependency in the English Channel off the coast of Normandy, but managed by New York-based executives. It was the first Carlyle Group fund to go public, at $19 a share in July on the Euronext exchange in Amsterdam.
Trading of the fund’s shares was suspended last week after tumbling more than 50 per cent to $5 apiece on the news that the fund wasn’t able to meet the margin calls.
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