Reuters
March 13, 2008
By Vidya Ram
LONDON - Carlyle Capital stood on the brink of collapse on Thursday as lenders were expected to take possession of all the investment fund's remaining assets after failing to reach an agreement on $16.6 billion of debts. Hopes that its parent company, the Carlyle Group would come to the rescue have also failed to materialize.
Shares in the Guernsey-based investment fund plummeted 70.4%, or 1.97 euros ($3.07), to 83 euro cents ($1.29), in Thursday morning trading on the Amsterdam Euronext exchange, after the company said it expected its lenders to take possession of all its remaining assets because it had failed to reach a "mutually beneficial agreement" on $16.6 billion of debt. The company has received margin calls totaling $400 million on its portfolio of U.S government agency residential mortgage-backed bonds, as risk aversion has spread well beyond subprime assets.
Just a week ago, Carlyle Capital (other-otc: CARYF - news - people ) warned the market that it had begun to receive default notices after getting margin calls for additional collateral from lender banks. All along, Carlyle Capital had warned that the risk of repossession remained. But there were hopes that Carlyle Group, the private equity firm that launched the fund last July, would step in. The parent company has already provided an unsecured credit facility worth $150 million to the fund, and has said it was considering all options.
Carlyle Capital that said while its parent company had participated "actively" in negotiations with lenders and was prepared to provide substantial additional capital if a successful refinancing deal could be reached, negotiations had deteriorated on Wednesday when a pricing service used by some lenders reported a drop in the value of the assets' collateral. Carlyle Capital expects additional margin calls on Thursday to total $97.5 million.
"Overall, it has become apparent to the company that 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 Capital said in a press release on Thursday.
The news, which was seen as a sign of how devastating the credit crisis has been, even for those with assets once considered relatively low-risk, sent shock waves across the European market. The Dow Jones Eurostoxx 50 was down 2.3%, in Thursday morning trading, with the banking sector tumbling 3.3%.
Source: Reuters
Carlyle Capital On Brink Of Collapse
