Carlyle Capital in $900m fire sale(3)

John Stomber, chief executive of Carlyle Capital Corporation, has apologised to shareholders about poor communication of portfolio troubles as its parent makes its second loan in a week.

Carlyle Capital Corporation, the Carlyle Group’s listed fund, has apologised to shareholders for not communicating as it faces a loss of up to $40 million after a forced sale of $900 million of assets. 

The loss, estimated at between $30 million and $40 million, will be partially offset by net interest income, but will result in an overall loss for the third quarter.

The Carlyle Group has had to lend its Euronext-listed affiliate a further $100 million, its second bail-out in eight days. 

John Stomber, chief executive officer of Carlyle Capital Corporation, also said sorry to shareholders for a “lapse in communication”, after relying on press releases and its website to keep them informed about the portfolio’s status.

The admission came as Carlyle Capital was forced to sell $900 million of assets “to create additional liquidity to weather current market conditions”. These, Stomber said, were significantly worse than the events of October 1998, when the demise of Long Term Capital Management threatened the financial markets, a crisis which the company’s business model had been designed to withstand. 

Carlyle Capital has had to sell its interests in four collateral loan obligations sponsored by The Carlyle Group. It has sold mezzanine debt securities and a substantial portion of bank loans at or above book value. The asset sales totalled less than 5 percent of all assets, and will provide between approximately $140 million and $150 million after meeting all its obligations for the associated debt. 

The company was released from its commitment to fund $75 million to one of The Carlyle Group’s distressed debt investment funds. 

The company has fully drawn on The Carlyle Group’s commitment, made on 20 August, to lend the company $100 million for one year on an unsecured, subordinated basis. The US alternative assets giant has offered an additional $100 million to be repaid from the proceeds of the asset sale. This loan has no fees associated with it.

Stomber said the company intended to keep its “high quality AAA-rated US agency mortgage-backed securities issued by Fannie Mae or Freddie Mac, representing approximately 95 percent of our assets”.

It has also strengthened its credit lines with its repurchase agreement counterparties.

He said the company was also reviewing its communications policy to keep shareholders better informed, while maintaining compliance with applicable regulation.

The vehicle’s share price plummeted on the news, falling 6.7 percent to $14.00.