Carlyle Capital Lenders to Seize Assets `Promptly' (Update2)

[Joanne98]

Source: Bloomberg

March 13 (Bloomberg) -- Carlyle Group's mortgage-bond fund, which received more than $400 million in margin calls since March 5, said it was unable to reach an agreement with lenders, who will ``promptly'' take over all of its remaining assets.

Talks on a so-called standstill agreement with lenders failed, Amsterdam-listed Carlyle Capital Corp. said in a statement last night. Through March 12, the company has defaulted on about $16.6 billion of debt, and any remaining debt is expected ``soon'' to go into default, according to the statement.

Treasuries extended gains as investors took the collapse of the talks as a sign that credit market losses are deepening. The dollar's drop to a 12-year low against the yen accelerated after the fund's announcement.



Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=a27ldweXtg0Y&refer=news

[salin]

1. IIRC, this fund levereged about 700 mln to finance (borrow) 12 bln to "secure"

mortgage-backed securities. The banks that did the lending, it seems, are not going to get much back for the dollar for what it they gave in financing. Another article this am said that six more hedgefunds were frozen yesterday -that suggests to me, that a whole lot of financial institutions are going to take more rounds of significant write-downs in the coming month or so.

[Joanne98]

3. I was thinking about the hedge funds..

[salin]

4. It sadly looks like things are going to get

bloody. I would bet that a whole lot of institutional investors (such as TIA-CREF, state employee pension funds, etc.) own a whole lot of these "securities" from some of these hedgefunds. The recouping of pennies on the dollars for those investments (and it isn't clear to me how that even happens when the CDOs are so complex that it seems that they would have to somehow be unentwined before any hard assets are found to allow those "pennies on the dollars" to be realized) - is going to hit folks relying on pensions/annuities, etc. very hard.

[Joanne98]

5. I know. I was hoping they would have time to get out. I hate it when pension funds

get hit.

[The Backlash Cometh]

16. Is there any silver-lining salin?

i.e. is this the beginning of the end of the Carlyle Group?

[Robbien]

18. The Carlyle Group limited its liability for Carlyle Capital

It will only lose about $150 mil on this bankruptcy. The Banks are the ones who are going to be hurt since they are only getting fractions of pennies on the dollar back. They were the ones who loaned Carlyle Capital $32 dollars for every dollar Carlyle Capital had in collateral.

[The Backlash Cometh]

19. If the world's banks go belly-up, who benefits from all this?

[Robbien]

21. Hedge Funds

Hedge funders have been making a mint on gambling on the outcome of this mess. The banks made a mint in collecting fees on creating the debt it loaned to Carlyle. Payback time for the banks now.

The original investors lose their money, but the original investment was peanuts.

The people who get hurt the most = we the people.

[The Backlash Cometh]

23. Who are they? by name?

Edwards was an investor, would he lose money? Chelsea Clinton works for one, so I assume it means she has job security?

As painful as this might turn out, I'm hoping that there is some scorched earth backlash going on that will at least put an end to some of the Enron type arrangements. I mean, besides the Hedge Fund Enron type arrangment.

[Robbien]

25. Carlyle Group is private

so only the original investors were hurt in this deal (with of course banks being the biggest loser). Carlyle Capital was a hedge fund.

correction edit: Carlyle Capital went public last year so Stock Market investors were hurt.

Hedge funds are many. There are over 5,000 of them. One would probably not recognize the names of most of the hedge funds. They are mainly private, unregulated. Many US hedges are registered in the Cayman Islands. Most large banks have several hedge funds. In fact news reports yesterday said CitiBank just put in over a billion to help out six of its hedge funds.

All the big players have their own hedge funds. Carlyle may have more hedge funds in its group umbrella.

Hedge fund investors are usually the very wealthy, pension funds, etc. News reports lately say that States and Municipalities are looking to start investing in Hedges.

Hedge funders have also formed a powerful lobby group. I don't foresee much help coming from our greedy politicians.

[The Backlash Cometh]

29. So a private, unregulated investment industry brings this country to its knees.

When do the bells go off? This is pure free-market capitalism the way the Republicans preach and look where it has taken us.

[salin]

34. They take a hit - but not death knell provoking one... however...

I would bet they are swimming in debt-financing for many of their "acquisitions" - it could be that the debt currently held - a bit down the road starts getting "called in" - which could - start spinning a deathknell for the CG.

[Joanne98]

2. Dollar Falls to 12-Year Low of 100 Yen on Carlyle Fund Failure

March 13 (Bloomberg) -- The dollar fell below 100 yen for the first time since 1995 and to a record low against the euro after a Carlyle Group fund moved closer to collapse, triggering concern of more turmoil in financial markets.

The dollar was close to parity with the Swiss franc and slumped against the British pound after Carlyle said lenders will take over the assets of its mortgage-bond fund and President George W. Bush acknowledged the U.S. currency's decline was not ``good tidings.'' The dollar's drop may prompt Middle East central banks to reduce holdings of the currency, Greg Gibbs, a strategist at ABN Amro Holding NV in Sydney, said in a report.

``Investors are getting out of dollar assets and this is going to lead to a dollar crash,'' said Tetsuhisa Hayashi, chief currency manager of foreign-exchange trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender. ``The U.S. economy is getting worse.''

The dollar fell as low as 99.77 yen against the dollar, the weakest since Nov. 9, 1995, before trading at 100.15 at 9:24 a.m. in London, from 101.79 late yesterday. The dollar weakened against the euro to $1.5624, the lowest since the introduction of the common European currency in January 1999. It also slumped to a record low of 1.0060 Swiss francs. Against the euro, Japan's currency advanced to 156.21, from 158.30.

Japanese authorities sold the currency on all four occasions since 1995 when the yen approached the 100 mark in a bid to support exporters including Toyota, the world's second-biggest automaker. The Bank of Japan sold 14.8 trillion yen ($148 million) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.

Japanese Exporters

The yen's 24 percent gain against the dollar from 4 1/2-year low on June 22 was ``unexpected'' and will damage earnings, Toyota Motor Corp. President Katsuaki Watanabe said today.

``We must continue cost cuts by all means,
http://www.bloomberg.com/apps/news?pid=20601087&sid=a8q2vC2.8OyU&refer=worldwide

[Joanne98]

6. Carlyle Capital Nears Collapse as Rescue Talks Fail (Update3)

March 13 (Bloomberg) -- Carlyle Group's mortgage-bond fund moved a step closer to collapse after failing to reach an agreement with lenders who demanded more than $400 million to meet margin calls.

Concern about the fate of Carlyle Capital Corp., which began to buckle a week ago from the strain of tumbling home-loan assets, helped push the dollar to a 12-year low against the yen today. The fund said in a statement that it defaulted on about $16.6 billion of debt as of yesterday. Lenders will ``promptly'' take over all of its remaining assets and any remaining debt is expected ``soon'' to go into default, Carlyle Capital said.

Carlyle Capital plunged as much as 70 percent in Amsterdam trading. Carlyle Group, co-founded by David Rubenstein, tapped public markets for $300 million in July to fuel the fund just as rising foreclosures caused credit markets to seize up. In the past month, at least a dozen funds have closed, sold assets or sought fresh capital as banks tightened lending standards.

``If Carlyle's lenders want their money right away, they'll liquidate the fund,'' said Hank Calenti, a London-based analyst at RBC Capital Markets. ``That will put pressure on already stressed credit markets.''

Carlyle Capital's plea for refinancing on residential mortgage-backed securities failed late yesterday after a pricing service used by some lenders reported a decrease in the value of the assets, the firm said.

`Refinancing Not Possible'

``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 said in the statement. It expects additional margin calls today of $97.5 million.
http://www.bloomberg.com/apps/news?pid=20601087&sid=av2FTiDdc1fo&refer=home

[BR_Parkway]

7. So instead of holding on to their bad investment, they are going to

let the bank take it off their hands?

Wow, I always forget how the "party of personal responsibility" is supposed to act when I watch their members.

[leveymg]

8. Are we going to see a FORECLOSED sign up in at the Bush Family Kennebunkport mansion?

Will they seize G.H.W.'s 900 horsepower fishing boat?

A tragedy.

[Festivito]

30. Bush 41 took his money out of Carlyle years ago. (As tho he knew)

And the problems Carlyle have now are all too similar to the kind of Bush created problems in other Bush buisiness ventures.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3218709

[leveymg]

32. Ponzi schemes are like that

Early in, early out. The last chickens in the coop are the first plucked.

[greiner3]

9. I've read where bush 41 and romney have large stakes in this company;

Recently they've bought Dunkin Donuts, Staples and Allison transmissions. This last one is where my brother worked. He said that the main selling point was that they are the unit that builds all of the US tanks. They were also pulling in a pretty good profit which is why the unit sold for GM in the first place a year ago. The sale was for 4.2 billion and today if you have, say, 2 billion hanging around you too could build and won tanks. Woo-hoo. Clear case of 2nd amendment rights I'd say. Who wouldn't want to get one of those things on a crowded interstate and strafe some asshole who just cut you off?

[maseman]

28. My grandfather worked

at Allison Transmission for over 35 years as an engineer.

[RantinRavin]

10. You are now seeing the real reason for the run up in oil/gas prices

As these big investors are yanking money out of sub prime mortgage backed funds they need somewhere else to hide their money. Energy funds are returning higher profits than the equity markets so they are a great place to put capital. These funds now have to do something with the extra cash and are buying oil and gas, in turn driving the prices up higher, making for an even better return on investment, in turn attracting more cash....it's anever ending cycle until the bubble burst.

[lildreamer316]

35. How long do you think this will go?

This theory makes sense to me. How long do you think until the bubble bursts on this one?

[NashVegas]

11. It Couldn't Have Happened to a Nicer Group of People

..

[Delphinus]

15. Agree on one part ...

but what impact does this have on the real people of this country (world)?

[Deny and Shred]

12. This is not a collapse of The Carlyle Group, just a capital fund of theirs.

I'd like to see the parent company forced to sell assets to meet these margin calls, but they'll just axe this fund, screw the fund's investors, and the parent Carlyle Group will keep right on going. WooHoo, indeed.

[Demeter]

13. This Is Just the Beginning

The rest of the bastards will crumble and default, too.

[amandabeech]

31. Perhaps Carlyle got the idea for the hedge fund from its own experience with CDOs.

That would mean that it has plenty of this stuff itself.

Since Carlyle is private, info on its margin calls would not be subject to Securities and Exchange Commission public disclosure rules.

The rumor mill would be the source for any info.

Personally, I hope that these SOBs end up with zilch.

[emad]

14. BBC coverage: There will be some very scared people in hedge-fund land today"

SNIP:

On Wednesday, CCC said that it had not been able to refinance its business. It said it had so far defaulted on about $16.6bn (£8.1bn) of its debt and the only assets it had left were US government AAA-rated residential mortgage-backed securities.

CCC said it also expected to default on this after the portfolio's value was marked down again on Wednesday.

"Almost within the blink of an eye, a business that had borrowed $21bn from the world's biggest banks to invest in high-quality mortgage-backed securities will be gone, liquidated, kaput," said BBC business editor Robert Peston.

"Such is the whirlwind blowing through global financial markets."

endsnip

http://news.bbc.co.uk/1/hi/business/7293663.stm

[CoffeeCat]

17. Please tell me that this means BushCo suffering?

I'd like to see the whole lot of them, out in the streets--complaining about the lack of safety net.

Wouldn't it be great to walk up to Barbara Bush--as she sits on her cot in a homeless shelter eating
fried pork rinds--and say, "So this is nice. This is a good set up you got here. Ok, you have fun now."

[Barrett808]

27. Iirc, BFEE sold its interest in Carlyle a couple of years ago.

Anybody remember?

[MetaTrope]

36. Only the bin Laden arm of the BFEE

[lonestarnot]

20. heh

The fund was set up in August 2006 with roughly $670 million in cash from Carlyle's owners and other investors, and about $300 million in additional capital raised from a public stock sale.

The capital allowed the fund to go to banks and borrow far more, leveraging its cash investment some 20 times into the portfolio.

The Carlyle Group last summer loaned Carlyle Capital $150 million to cover debt obligations.

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/13/AR2008031300061.html?hpid=topnews

[underpants]

22. Well thank GOD we don't have bozos like this in charge of US

imagine what they might screw up

[DS1]

24. Yeah!

Fuck all you Bush fuckers!

[GliderGuider]

26. This is just one symptom of much, much bigger problems

The problems in the financial system are so big they could screw the world up for decades:

Bear Stearns
Ambac
MBIA
700 trillion dollars in unregulated derivatives
US banks' non-borrowed reserves that should be at $43 billion are at negative $15 billion
The muni bond market is essentially frozen.
Yesterday's pledge of $300 billion into the financial markets by the Fed and other world central banks bought one day's reprieve from the stock market slide.
6% of all mortgages in the USA are in default.
US Homeowners' equity is below 50% for the first time since WWII
The US credit card bubble is set to pop.

While there is a nice touch of schadenfreude in Carlyle's trouble, I suggest saving the champagne -- we might need it for bartering later.

[Javaman]

33. But but but...

For the love of god, what of Dunkin Donuts??????????