Hedge Funds

Carlyle Says Liquidity Crisis Worse than in 1998: FT


Carlyle Capital, the troubled mortgage-backed securities fund belonging to U.S. private equity firm Carlyle Group, said the current liquidity shortages are worse than those encountered during the 1998 crisis, the Financial Times reported on Wednesday.

The paper quoted an e-mail sent to Carlyle Capital's shareholders in which the fund said its business model was designed "to withstand a liquidity event equal to the events of October 1998 when the demise of Long Term Capital Management threatened the financial markets."

"The recent liquidity disruption is significantly worse than the events of 1998," it added.

On Tuesday, the fund said in a statement that it had already spent $100 million from a loan granted by Carlyle Group last week and that it would draw another $100 million in installments.

Caught in the turmoil caused by the U.S. subprime crisis, Carlyle Capital was forced to cancel its dividends and sell assets to meet cash needs less than two months after listing on Euronext Amsterdam.

The Financial Times also said Carlyle Capital was apologizing, in the same email, to investors for a "lapse in communication" after extending the second $100 million loan from Carlyle Group.