Carlyle Mortgage Fund Defaults On Margin Calls

Mar 7 2008 | 10:30am ET

A publicly-listed Carlyle Group hedge fund has defaulted on some $37 million in margin calls. And the fund said it expects things to get worse.

Carlyle Capital Corp., a mortgage-backed securities fund the Washington, D.C.-based private equity giant listed in Amsterdam, said it missed four of seven margin calls yesterday. It added that it expects to receive at least one more notice of default.

The margin requirements were not “representative of the underlying recoverable value” of its triple-A-rated Fannie Mae and Freddie Mac bonds, which Carlyle Capital said “have the implied guarantee of the U.S. government and are expected to pay at par at maturity.”

Carlyle Capital owns about $20 million in agency bonds.

Dutch regulator AFM suspended trading of the fund’s shares on Euronext Amsterdam following the announcement.

Some lenders have begun liquidating the fund’s collateral, Carlyle Capital said.

The fund has sold almost $2 billion in assets since this past summer, and received $250 million in credit and loan facilities from its parent.

Carlyle Capital opened in 2006, followed by a public offering of $300 million worth of shares last year. The fund said it has met more than $60 million in additional collateral requirments in the last week.


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