Carlyle Capital Corporation (CCC) on brink of collapse

| March 14, 2008
”Carlyle

Carlyle Capital Corporation (CCC), a unit of the private equity firm Carlyle Group, has defaulted on about $16.6 billion of debt and as a result, will not be able to meet lenders’ demands for money.

CCC’s problems are the latest indication of the credit crisis, triggered last year when sub-prime mortgages made to risky US borrowers went bad. This has put increasing pressure on lenders to tighten credit.

Analysts are fearing that other investment funds may now face similar problems.

The US mortgage-backed bond fund will collapse if its lenders seize its remaining assets, which is widely expected.

During the last 12 months, global banks and hedge funds have been buying mortgage-backed securities, which offered strong returns and were seen as relatively safe investments during the US housing boom.

However, after the hike in interest rates, which led to a fall in the housing market, they have fallen in value, particularly in the sub-prime market.

Carlyle Capital said that talks with lenders deteriorated after a decline 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.

The group said a ‘successful refinancing is not possible’ after trying for the past week to work out a deal with lenders to stave off bankruptcy.

The Carlyle Group is based in Washington, DC and has over $75 billion under management. It is one of the world’s largest private equity firms.


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