The company leveraged its $670 million equity 32 times to finance a $21.7 billion portfolio of AAA-rated residential mortgage-backed securities issued by U.S. housing agencies Freddie Mac and Fannie Mae....Source
What could possibly go wrong?
How about a 3 1/2%* decline in the value of your assets? That's 0.035%*.
From FT Alphaville:
Details of Carlyle’s situation were released by the fund on Monday morning. CCC is facing/faced margin calls of $400m from its lenders, who have already liquidated $5bn of Carlyle assets held under repo agreements.
Another $16bn of FNMA and FHMLC assets are on the line - with Carlyle in “ongoing negotiations” with lenders.
What’s curious, though, is that, as the statement makes clear, deficiency notices haven’t been sent to Carlyle on the assets liquidated so far - in other words, the assets held their par value. Why then, were margin calls being made in the first case?...MORE
Hey, lookee there, Fannie Mae, twice in one day!
...The implosion of CCC, caused by the unexpected drop in the value of securities issued by US government agencies Fannie Mae and Freddie Mac, threatens to leave a stain on the reputation of Carlyle, one of the world’s biggest private equity groups.
Here are a couple CI posts on Carlyle:
Carlyle's Blue Wave Hedge Fund Loses 9.3% Since March
It is not known if they will be attending Hedge Funds World Zurich 2007 - Leading the way for the world’s most sophisticated investors!
This one has both Carlyle and Enron:
Making Ethanol from Wheat is Stupid