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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (108787)	3/10/2008 11:58:28 AM
From: MulhollandDrive	Respond to of 306849

looks like he who panicked first, panicked best <ng> Carlyle Capital seeks standstill pact By Martin Arnold Published: March 10 2008 09:12 \| Last updated: March 10 2008 09:12 Carlyle Capital Corporation said on Monday it had requested a standstill agreement with its lenders after some of them liquidated almost a quarter of the Amsterdam-listed fund’s $21bn of residential mortgage-backed securities. The Carlyle Group’s ill-judged foray into the public markets to launch CCC, a heavily-leveraged fund that invested in AAA-rated mortgage securities, is hanging in the balance after it received $400m more margin calls from lenders. The implosion of CCC, caused by the unexpected drop in the value of securities issued by US government agencies Fannie Mae and Freddie Mac, threatens to leave a stain on the reputation of Carlyle, one of the world’s biggest private equity groups. CCC said in a statement it was ”in ongoing negotiations with the remaining lenders, who hold approximately $16bn in securities, and, if a mutually beneficial agreement is not reached, some of these lenders may also liquidate their securities”, unless its last-ditch talks could reach an agreement, after it had failed to meet a number of margin calls last week.. ”While these talks continue, the company has discussed and requested a standstill agreement whereby its lenders would refrain from foreclosing and liquidating their collateral, and we are awaiting responses,” it said. The company said ”certain lenders may have liquidated in the open market the collateral securing approximately $5bn of indebtedness”. It added that no deficiency notices had been received from lenders selling collateral, suggesting they recouped most of their loan. ”To the best of the company’s knowledge, no creditors have instituted legal action against the company of any kind,” it said. Shares in CCC were suspended on the Amsterdam stock exchange on Friday at $5, well below their $19 initial public offering price last July. Analysts at Citigroup warned that unless Carlyle pumped more money into CCC it ”could be forced into significant asset sales into a weak market or could face bankruptcy”. Carlyle has already extended a $150m loan to help its stricken fund. Carlyle, like many other funds, is locked in a showdown with banks who are reducing their financing lines to funds with big investments in mortgage and corporate securities. But the banks’ attempt to manage their exposure, which makes sense on an individual basis, risks precipitating a systemic crisis. By cutting back on their lending, the banks are forcing funds to unload securities. At the same time they are increasing the likelihood of a death spiral in the market as funds such as Carlyle’s are selling those debts into a falling market, causing the prices to plunge further, which in turn brings on additional margin calls. To the extent that banks hold many of those same securities, the banks become victims of their own actions as they mark down their own positions. The crisis in the mortgage-backed securities market has also hit Kohlberg Kravis Roberts, which is struggling to keep its listed investment fund, KKR Financial Holdings, afloat after Standard & Poor’s cut ratings on its commercial paper notes last week. Copyright The Financial Times Limited 2008