The end is near for Carlyle Capital Corporation. The mortgage hedge fund yesterday said that although it has been working diligently with its lenders, it has not been able to reach a “mutually beneficial agreement” to stabilize its financing.
Therefore, it expects that its lenders will promptly take possession of almost all of the Company’s remaining assets, which are U.S. government agency AAA-rated residential mortgage-backed securities.
During the past week, Carlyle received margin calls in excess of $400 million and in total, through March 12, the Carlyle Group affiliate has defaulted on approximately $16.6 billion.
The hedge fund’s parent pumped in $250 million in credit and loan facilities and was prepared to provide substantial additional capital if the fund could successfully refinance with its lenders. But the fund said negotiations deteriorated late yesterday when, among other things, the pricing service utilized by certain lenders reported a drop in the value of the RMBS collateral, which is expected to result in additional margin calls today of approximately $97.5 million.
“Overall, it has become apparent…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,” according to the firm.
Carlyle Group management has a 15% stake in the hedge fund.