Carlyle unit says new margin calls may hit cashflow

Private equity firm Carlyle Group's Dutch-listed affiliate said it may face cashflow problems after it received substantial additional margin calls and default notices.

"In the past several days there has been a rapid and severe deterioration in the market for US government agency AAA-rated residential mortgage-backed securities," Carlyle Capital Corporation (CCC) said.

CCC had said earlier it received margin calls totalling more than $37 million on Wednesday and expected at least one more default notice.

The Dutch market regulator (AFM) suspended trading in CCC after its shares closed at $5, having lost more than half their value at the end of the week.

Carlyle Group has a $150 million exposure to CCC through a credit facility.

CCC said some of its Residential Mortgage-Backed Securities (RMBS) had been liquidated by lenders and additional margin calls and increased collateral requirements "would be significant and well in excess of the margin calls during the middle of last week".

Even more securities could be liquidated by lenders, it said, adding the company was in discussion with its lenders regarding its financing and considering all available options for the company.

Britain's The Times newspaper reported lenders included Bank of America, Bear Stearns, BNP Paribas, Calyon, Citigroup, Credit Suisse, Deutsche Bank and ING.

"Based on the weakened market, several of the company's lenders marked down the value of the company's RMBS securities and informed the company that they would soon materially increase their collateral requirements," CCC said.

These additional margin calls and increased collateral requirements could quickly deplete its liquidity and impair its capital, CCC added.

Listed on the Amsterdam exchange last July, CCC invests in products including investment grade mortgage-backed securities.

As of last month, CCC had a $21.7 billion investment portfolio of AAA-rated floating-rate capped US mortgage-backed securities issued by Fannie Mae and Freddie Mac.

It reported a 2007-net profit of $16.8 million last month and Carlyle Group agreed to increase an unsecured revolving credit facility to $150 million from $100 million.