Carlyle Unit's New Margin Calls May Hit Cashflow

Private equity firm Carlyle Group's Dutch-listed affiliate said on Friday 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 U.S. government agency AAA-rated residential mortgage-backed securities," Carlyle Capital Corporation (CCC) said.

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

CCC shares closed on Thursday at a level of $5, after starting the day trading at levels of around $11.5.

CCC said on Friday 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 it received Wednesday".

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.

"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 said.

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

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