Business World

An affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors.

The Carlyle Group said in a statement on Thursday that as Carlyle Capital Corp (CARC.AS: Quote, Profile, Research), a fund listed in Amsterdam, was unable to reach a deal with lenders it expected those lenders to take possession of the fund’s remaining residential mortgage-backed securities assets.

Carlyle said it had worked “exhaustively” to assist Carlyle Capital and took “extraordinary measures” to help it through its liquidity crisis.

It stressed that Carlyle Capital Corp (CCC) was a separate legal and business entity, and that it believed CCC would not have a measurable impact on Carlyle’s other funds, investments and portfolio companies. Carlyle Group said that Carlyle Capital’s defaults did not trigger cross-defaults for any Carlyle borrowings.

The Carlyle Group, based in Washington, DC, has more than $75 billion under management payday loan. One of the world’s largest private equity firms, it owns companies including TV ratings firm Nielsen, doughnut seller Dunkin’ Brands and former General Motors unit Allison Transmission.

Carlyle Capital said in New York late on Wednesday that talks with lenders deteriorated after a decline in the value of its mortgage investments, which it said would result in margin calls of $97.5 million on top of the $400 million it was already facing.

A “successful refinancing is not possible,” Carlyle Capital said, after trying for the past week to work out a deal with lenders to stave off bankruptcy.

The credit crisis, triggered last year when subprime mortgages made to risky U.S. borrowers went sour, has put increasing pressure on lenders to tighten credit and made it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities — the investments that Carlyle Capital was set up to invest in. 

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