West Palm Beach (HedgeCo.Net) – When Carlyle Capital announced that lenders would most likely take over their assets after failed attempts at refinancing, investors rushed for redemptions, causing shares to plummet and lose most of their value.
“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 recent statement.
Using heavy leverage, Carlyle Capital invested in triple-A rated mortgage debt issued by Fannie Mae and Freddie Mac. As the credit crunch tightened and those investments lost value, Carlyle put up more money into margin calls. A $150 million line of credit was granted from their parent company, the Carlyle Group, but even that could not stop the inevitable downfall.
A spokesman for the company said it “has not been able to reach a mutually beneficial agreement to stabilize its financing.”
As of this week, Carlyle had defaulted on $16.6 billion of debt, prompting some lenders to liquidate assets. An attempt was made to stifle redemptions and revive the fund, but that failed Wednesday night after further declines of collateral. Its shares proceeded to fall more than 87.5 percent on Thursday, ending the day at 0.35 Euros (.55 USD). In one week, shares have fallen more than 90%.
Carlyle Capital was set up in 2006 by the Carlyle Group, in order to diversify their business. Despite the initial connection, the Carlyle Group has insisted that they have not purchased any of Carlyle Capital’s securities, but merely share a name and are linked by the $150 million line of credit that was granted.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: [email protected]
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