Carlyle Capital Bringing the Stock Market Down
Today’s big news is that the Carlyle Capital bond fund is nearing collapse. MarketWatch reports on the current state of Carlyle Capital affairs:
Shares in Carlyle Capital tumbled 77% in midmorning trading Thursday to 65 cents. The stock has fallen 95% from $12 since the fund first announced it had missed some margin payments earlier in March.
So far, Carlyle said it’s defaulted on $16.6 billion of its debt and its remaining borrowing is expected to go into default soon.
Carlyle Capital is the bond fund affiliated with The Carlyle Group, a private equity firm with ties to the Bush family. The main problem with Carlyle Capital right now is that it has a great deal in mortgage bond fund investments. And mortgage backed securities are not doing well right now. A $200 billion Fed plan to increase liquidity and buy mortgage-backed securities isn’t changing that.
Carlyle Capital was in talks to create new deals with lenders, but those began to fall apart late yesterday. The fund has announced that now lenders will control nearly all of the assets remaining to Carlyle Capital.
Because of its model of highly-leveraged investments, Carlyle Capital has seen great success in the past. Now, though, those highly-leveraged investments (which are also proportionately risky) are proving the fund’s downfall.
And it’s bringing the rest of the stock market with it.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional.
Tags: Carlyle Group stock market, Carlyle Group bond fund, stock market news, investing blog,
stock market down, mortgage backed securities, home equity line of credit
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