Carlyle Capital said late yesterday its lenders are likely to take possession of its assets after it was unable to reach an agreement to stabilise its financing.
Carlyle Capital, an affiliate of private equity firm Carlyle Group, said it has defaulted on about $16.6 billion of its debt and said the only assets held in its portfolio as of Wednesday were US government agency AAA-rated residential mortgage-backed securities.
The news provided another sign of stress in global credit markets and prompted spreads to widen on the iTRAXX Asia ex-Japan investment grade index.
Carlyle Capital said that during the last seven business days the company had received margin calls in excess of $400 million.
It said it was unable to pay the margin calls, so its lenders had proceeded to foreclose on the mortgage-backed securities collateral.
Analysts said the news would deepen the gloom over a global credit crisis that emanated from the US housing downturn.
Shares of Carlyle Capital have lost about 78 per cent of their value since February 29th when it said it would retain fourth-quarter earnings and not pay a dividend to preserve the long-term value of shareholder's equity.
On March 6th, it said it had not been able to meet some margin calls, which snowballed over the next few days as more of its lenders feared it would default.