Carlyle Capital Corporation has acknowledged that its lenders are likely to take possession of its remaining assets, consisting of US government agency AAA-rated residential mortgage-backe
Carlyle Capital Corporation has acknowledged that its lenders are likely to take possession of its remaining assets, consisting of US government agency AAA-rated residential mortgage-backed securities, after efforts to negotiate a refinancing of its extensive leverage, reported to amount to 20 times its capital, failed to deliver an agreement.
The Carlyle-sponsored fund says it has defaulted on some USD16.6bn of its debt failed to meet margin calls totalling more than USD400m over the past seven business days. While Carlyle Capital is domiciled in Guernsey and listed in Amsterdam, its managers are in the US and hold a 15 per cent stake in the company. Having announced on February 29 that it would retain fourth-quarter earnings and not pay a dividend, the fund revealed six days later that it had failed to meet some margin calls.
The USD10bn New York manager Drake Management is considering liquidating all three of its hedge funds, which account for roughly half its total assets under management. Its flagship Global Opportunities Fund, which had USD3bn in assets, lost a quarter of its value last year.
Managers Anthony Faillace and Steve Luttrell blamed the losses on extreme volatility of certain capital markets over the past six months and expect market disruptions to continue for some time. Drake is surveying its options: continue to manage the funds, shut them down or allow investors to shift assets to a new fund.
The one silver lining for Drake is that it isn’t facing margin calls, as it had scaled back its use of leverage. Drake, founded by BlackRock and Pimco alumni Faillace and Luttrell in 2001, suspended redemptions from Global Opportunities last year.
London’s Toscafund Asset Management has offered to shore up the capital levels of ailing US mortgage lender Washington Mutual. The USD8bn hedge manager says it is ready to participate in any consortium looking to inject capital into the Seattle firm, which has been hammered by the US housing market meltdown.
Goldman Sachs Group is among the firms rumoured interested in recapitalising Washington Mutual, the largest US savings-and-loan institution that is believed to be under regulatory pressure to recapitalise. Tosca, led by Martin Hughes, began investing in the US firm last year and already owns a large stake in it.
Montana Board of Investments is mulling its first fund of funds investment after Grosvenor Capital and BlackRock made presentations to the board, which oversees assets of USD13bn. Its consensus is to proceed with caution and to continue assessing the asset class, according to chairman Terry Moore, but the board has committed USD20m to buyout fund Oak Hill Capital Partners III.
Private equity specialist Kevin Tunick, who was previously a manager at Harvard Company, the university’s endowment management firm, is now overseeing the University of North Carolina endowment’s private equity investments. Tunick helped run Harvard’s USD4.1bn private equity portfolio, out of the endowment’s total of USD35bn in assets.
Sovereign wealth funds will outsource USD200bn annually to fund managers over the next five years, according to economist Stephen Jen of Morgan Stanley. He estimates the sovereign funds currently have USD2.9trn in assets and have already bought financial stocks worth USD46bn since 2006. Jen expects Japan to set up a sovereign wealth fund before year-end. In February, Russia launched a state investment fund with capital of USD32bn.
