Carlyle Near Collapse After Defaulting on $16B

Big banks put screws to overextended fund
By Jason Farago,  Newser Staff
Posted Mar 13, 2008 7:31 AM CDT
The floor of the Amsterdam stock exchange, where Carlyle Capital trades. Carlyle Capital has defaulted on $16 billion in debts.   ((c) Petrick2005)
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(Newser) – Carlyle Capital announced overnight that it is defaulting on $16.6 billion in debt, and its creditors are likely to take possession of its remaining assets. The latest casualty of the credit catastrophe is a major embarrassment for Carlyle Group, the private equity firm whose executives own 15% of the fund, reports the Wall Street Journal. Carlyle's fall demonstrates how the world's biggest banks are now playing hardball with their best clients.

Carlyle's troubles came from borrowing too much money—an "astronomical" 32 times what it managed. Last week the fund was forced to plead with Deutsche Bank, JP Morgan, Chase and other lenders to hold off on margin calls. But the protestations fell on deaf ears, and the banks began selling off the fund's assets. This morning in Amsterdam, where its shares trade, Carlyle Capital's shares were in free fall, dropping 70% to trade at 83¢ a share.