Carlyle Capital forced in liquidation

by Gill Montia

Story link: Carlyle Capital forced in liquidation

Private equity firm, Carlyle Group, is liquidating its £11 billion hedge fund, Carlyle Capital.

The Guernsey-based affiliate company, which invested primarily in two US mortgage lenders, has been unable to secure refinancing.

In a statement from its New York offices, Carlyle said that the fund had “not been able to reach a mutually beneficial agreement to stabilise its financing”.

A spokeswoman has confirmed that the fund will be wound up and assets returned to its main lending banks.

The news has heightened fears that other hedge funds could face a similar fate, as the money markets enter a new and more desperate phase of the credit squeeze and banks harden their outlook.

A recent rise in short-term interbank lending rates has made it more costly for banks to borrow from each other and some lenders are issuing margin calls to recover what cash they can from borrowers.

Carlyle Capital invested in AAA-rated mortgage debt issued by government-backed lenders, Fannie Mae and Freddie Mac, which are considered the two most secure mortgage lenders in the US.

The hedge fund borrowed money from around a dozen banks, including Bank of America, Citigroup and Merrill Lynch.