Saturday, March 08, 2008


AP via Cryptogon:

Margin Calls for Carlyle Capital

March 7th, 2008

Via: AP:

Lenders to Carlyle Capital Corp. Ltd. have begun to liquidate securities held in its $21.7 billion portfolio and the fund said Friday it was considering “all available options.”

The margin calls against Carlyle portend an ominous development one day after the fund was served with default notices, convulsing already skittish markets.

Shares in the fund, a listed mortgage-bond fund managed by private equity firm the Carlyle Group, were suspended Friday. The stock closed down Thursday almost 60 percent at $5.00 on Euronext Amsterdam.

Carlyle Capital said it received additional margin calls and default notices Thursday from banks that help finance its portfolio of residential mortgage-backed securities. It said it may not be able to meet the increased requirements.

The fund said it was unable to meet margin calls from four banks Thursday, raising fears that its entire portfolio could be unwound. Securities have dropped sharply in recent weeks as banks pull back on their lending, forcing investment vehicles and funds like Carlyle to dump assets.

In Friday’s statement, Carlyle Capital said it had received “substantial additional margin calls and additional default notices from its lenders.” It also said that lenders were selling off securities held as collateral.

Carlyle Capital leverages its $670 million equity 32 times to finance a $21.7 billion portfolio of residential mortgage-backed securities issued by U.S. housing agencies Freddie Mac and Fannie Mae.

To do this, it enters into repurchase agreements with banks, which involve posting the mortgage securities as collateral in exchange for cash.

If the value of the security held as collateral falls, the lender will ask for more collateral — a “margin call” — in order to secure the loan. If the borrower does not meet the margin call by putting up more collateral, the lender may sell the security.

Sudden price moves in the underlying assets can send margins spiraling, quickly depleting a fund’s cash.

Labels: , ,


Post a Comment

<< Home

Web Site Counters
Staples Coupons