Carlyle Group asserts fund losses will not spread
LONDON: Carlyle Group, the U.S. private equity firm run by David Rubenstein, said Wednesday that losses at its $16 billion mortgage-bond fund would not hurt the companys 59 other private equity and venture capital funds.
The $150 million credit line Carlyle Group extended to Carlyle Capital Corp. was provided by the firms executives, not investors in its private equity and venture capital funds, the Washington firm said. The partners own about 15 percent of Carlyle Capital, or CCC.
Carlyle Capital is in talks with creditors to avert a sale of assets after some lenders said it had defaulted on margin calls. The fund, which had $670 million of equity in total at the end of December, used loans from 12 banks, including Citigroup and Deutsche Bank, to buy about $22 billion of AAA-rated mortgage debt issued by Fannie Mae and Freddie Mac.
“Theyre reassuring investors in their private equity business that its not their money thats at stake,” said Philip Gisdakis, senior credit strategist at UniCredit in Munich. “As a private equity company, you dont want a fund with your name on it marked default. ”
Carlyle Capital dropped as much as 49 percent in Amsterdam. Its shares are down more than 80 percent since its first sale to the public in July.
“The challenges facing CCC will have no measurable impact on any other fund,” Carlyle said. Carlyle Group is working “tirelessly” with Carlyle Capital to “maximize value for all interested parties,” the firm added.
Stung by almost $190 billion in losses and writedowns from the subprime mortgage markets collapse, banks are asking for extra collateral on even the safest forms of debt.
The spread between 30-year agency mortgage bonds and 10-year U.S. Treasuries widened to more than 200 basis points Wednesday, the highest since 1986, data compiled by Bloomberg showed.
