Carlyle Capital Default, Record Low in Dollar

123jump.com Staff
13 Mar, 2008
New York City

Carlyle Capital Corporation may lose all of its remaining assets as early as next week after the company and lenders failed to agree on refinancing terms. The fund assets may be liquidated adding more strains to already volatile credit markets and dragging dollar to a record low against euro. The recent decline in mortgage securities prices prompted margin calls of $98 million due tomorrow. Carlyle will not meet these margin calls and is forced to surrender its collateral assets of $17 billion.

[R]9:00AM New York – Carlyle Capital Corp may lose the remaining asset to lenders.[/R]

Carlyle Capital Corporation and its group of lenders failed to agree on refinancing package. The company said in a press release that its lenders will “promptly” take possession of “substantially all of the remaining assets.”

Carlyle Capital Corp trades in Amsterdam under the ticker CCC after it raised $400 million in public offering. The company then had capital base of $1 billion, including the $600 million raised in private placement. Carlyle Capital stocks fell 68% on the Amsterdam stock exchange.

The only assets held in the Company’s portfolio as of today are U.S. government agency AAA-rated Residential Mortgage-backed Securities. During the last seven business days, Carlyle received margin calls in excess of $400 million. As the company was unable to pay these margin calls, its lenders proceeded to foreclose on the RMBS collateral.

In the last few days pricing of several of these securities deteriorated substantially as credit markets remain under stress.

In total, through March 12, the Company has defaulted on approximately $16.6 billion of its indebtedness. The remaining indebtedness is expected soon to go into default. Until March 5, the company had met all of the margin requirements imposed by its repo counterparties. However, on March 5, the Company received additional margin calls from seven of its 13 repo counterparties totaling more than $37 million.

The company has met margin calls from three of these financing counterparties that have indicated a willingness to work with the company, but did not meet the margin requirements of the four other repo financing counterparties as it noted on March 6, 2007.

The company with capital of $670 million has a loan to capital ratio of 32 to 1 with a portfolio of $21.7 billion of residential mortgage backed securities issued by the U.S. backed lending agencies of Fannie Mae and Freddie Mac.

Since the liquidity crisis in global fixed income markets started in August, the Company has sold almost $1 billion in non-RMBS assets to improve liquidity and reduce leverage. The company recently received $150 million of revolving loan facility from its parent group in emergency funding. The company needed to meet additional margin call tomorrow of $97.5 million to cover the recent declines in prices in the last three days.

John Stomber, chief executive, highlighted in the latest annual report for the year 2007 the current credit market turmoil. He suggested that the investment fund will likely take advantage of the current credit market conditions and will benefit as investors prefer higher rated securities.

The company sounded negative tone in its latest press release and said, “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.”

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