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19 May 2024

Carlyle Corp to be liquidated

By Shuchita Kapur



Carlyle Capital Corporation (CCC), an affiliate of private equity firm Carlyle Group, is to be liquidated after getting the approval of its shareholders to sell its remaining assets.

The $22 billion (Dh80.7bn) Amsterdam-listed mortgage fund, one of the world’s biggest private equity groups failed to reach an agreement with its lenders to stabilise its financing. The company ran out of cash to meet margin calls – demands for more collateral – that exceeded $400 million.

“The company will now move forward with the winding up and liquidation application. During a compulsory winding up, all remaining CCC assets will be liquidated by a court-appointed liquidator in a timely manner,” CCC said in a statement.

The Carlyle Group Dubai office declined to comment on the issue when Emirates Business tried to contact them.

Officials of Mubadala Development Company (Mubadala), an investment and development arm of the Government of Abu Dhabi, which had bought 7.5 per cent stake in Carlyle Group for $1.35bn in September 2007 were also unavailable for comment.

Analysts at Rasmala Investments feel that this would not have any major impact on the private equity activity in the region.

“Carlyle Capital was an isolated company of the Carlyle Group and there is no reason to fear a ripple effect in the region.

It could have minor repercussions on the global financial industry but nothing more than that,” Abe Saad, Partner and Head of private equities at Rasmala Investments told Emirates Business.

The share prices of the company fell drastically after the liquidation news. Shares in CCC, which floated at $19 in July, fell down to below $1 but showed some improvement after David Rubenstein, co-founder of the Carlyle Group, pledged to compensate investors.

“Carlyle made a mistake or the markets just moved against them. We’re going to try and do some thing to make amends to investors,” said Rubenstein. However, the form of compensation is till not clear.

CCC’s liquidation represents one of the most dramatic casualties in the sector as lenders pull back from risk. One of its biggest lenders was Bear Stearns, the investment bank which has been bought over by the US Fed-backed JP Morgan. Other big lenders were Citigroup, Bank of America and UBS.

The fund, which had $31 of debt for every $1 of its own, had hoped to use its massive borrowings to generate returns from investments in mortgage securities. However, it could not go ahead with its strategy because of the turmoil in the mortgage markets.