Mumbai: Carlyle Capital Corporation, the Dutch affiliate of US-based private equity firm Carlyle Group, has defaulted on about $16.6 billion of debt and said its lenders are likely to take possession of its remaining assets.
Carlyle Capital said talks with lenders have broken down after a drop in the value of its mortgage investments, which it said would result in margin calls of up to $500 million, including fresh demands of up to $97.5 million.
"It has become apparent to the company that the basis on which lenders are willing to provide financing against the company's collateral has changed so substantially that a successful refinancing is not possible," Carlyle Capital said.
Dutch market regulator AFM said it was monitoring developments closely.
Reports, meanwhile, said counterparties to Carlyle's repurchasing agreements, including Deutsche Bank, Merrill Lynch & Co. and Bear Stearns Cos., have already sold off assets.
The news added to the stress in global credit markets, triggered by last year's subprime mortgage crisis. Lenders are under increasing pressure to shore up capital and revalue collateralised debt, mortgage portfolios and other fixed-income securities.
US Federal Reserve and other central banks are making a coordinated attempt to inject liquidity into credit markets.
The default by the fund prompted spreads to widen on the iTRAXX Asia ex-Japan investment grade index, and European credit spreads also widened to near record levels.