Carlyle Capital Unsuccessful in Refinancing Efforts, Nears Collapse
An affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors.
Carlyle Capital, a fund listed in Amsterdam, stated yesterday that negotiations with lenders deteriorated late in the day after a drop in the value of its mortgage investments which it said would result in margin calls of $97.5 million on top of the $400 million it was already facing.
A "successful refinancing is not possible," Carlyle Capital said, after trying for the past week to work out a deal with lenders to stave off bankruptcy.
Bond futures in Europe rose after the news back to levels they traded at before the U.S. Federal Reserve and other central banks coordinated on Tuesday to inject liquidity into credit markets. The dollar also fell.
The credit crunch, triggered last year when sub-prime mortgages made to risky U.S. borrowers went sour, has put increasing pressure on lenders to shore up capital and made it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities -- the investments that Carlyle Capital was set up to invest in.
Carlyle Capital, based in Britain's offshore dependency of Guernsey, said in the only assets it has left are AAA-rated residential mortgage-backed securities, and that it expected lenders to foreclose on this collateral.
"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.
Published on March 13, 2008
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