Carlyle Mortgage Bond Fund Suspended (Bloomberg) (07-03-2008)

March 7 (Bloomberg) -- Default notices served on Carlyle Group has caused the company’s mortgage-bond fund to be suspended in Amsterdam trading, as it was jeopardizing shareholders' capital.

Carlyle Capital Corp. has said in a statement that the default notices issuers have liquidated some residential mortgage-backed securities held by the fund and may sell more as talks continue. The fund had “substantial” margin calls and additional default notices from lenders yesterday, it said.

Carlyle Capital said yesterday it had failed to meet margin calls, prompting creditors to seek immediate repayment. Started by David Rubenstein in 1987, Carlyle increased its mortgage holdings last year, selling $300 million of shares in Carlyle Capital. The fund used leverage to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac.

The fund said today the additional margin calls and increased collateral requirements “could quickly deplete its liquidity and impair its capital” as they would be “well in excess” of the margin calls received two days ago.

Carlyle Capital was suspended in the Netherlands at the regulator's request after falling 58 percent yesterday to $5. Carlyle sold the shares for $19 in July's initial public offering.

Carlyle spokeswoman in London didn't immediately return calls for comment.

The Carlyle fund said it missed four of seven margin calls worth more than $37 million. It said today it believed it had sufficient liquidity as of last week.

Source: Bloomberg