Carlyle Capital Private-Equity Fund Faces Challenges

The Carlyle Capital Private-Equity Fund faced significant challenges in 2007 and 2008. It was a $21.7 billion fund, one of the largest private equity funds in the world.

The fund's leverage was a major issue, with a debt-to-equity ratio of 1.5:1. This means that for every dollar of equity, the fund had $1.50 of debt.

The fund's exposure to subprime mortgage-backed securities also played a role in its downfall. It held $17.8 billion in such securities, which lost significant value during the financial crisis.

Carlyle Capital Issues were a major concern for investors in 2007 and 2008. The firm's assets under management plummeted from $19 billion to $1.4 billion.

The collapse of the subprime mortgage market in the US led to a significant decline in the value of Carlyle Capital's assets, resulting in a liquidity crisis. This crisis forced Carlyle Capital to seek emergency funding from its parent company, The Carlyle Group.

Carlyle Capital's inability to meet its margin calls and other debt obligations led to a series of defaults, which ultimately resulted in its bankruptcy.

The private-equity fund Carlyle Capital has suffered a significant defeat. Its shares plummeted more than 90 percent after the fund's remaining assets were likely liquidated.

The fund's aggressive strategy of leveraging its $670 million equity 32 times to finance a $21.7 billion portfolio of mortgage-backed securities ultimately proved disastrous. This was a huge risk, and one that didn't pay off.

The value of mortgage-backed securities plummeted as US home prices fell and foreclosures surged, prompting lenders to ask for more than $400 million in additional capital. The fund was unable to come up with the money.

Carlyle Group participated actively in the fund's negotiations with its lenders to refinance its portfolio, but hopes for refinancing fell apart after some lenders said the value of the collateral had declined further. This led to additional margin calls of about $97.5 million.

Carlyle has agreed to purchase up to $300 million of equity sharing home loans from Unison.

This investment will enable Unison to launch its Equity Sharing Home Loan product, which combines traditional mortgage financing with emerging home equity investment options.

The product offers a below-market interest rate and allows homeowners to tap into their equity without refinancing their existing mortgage.

Unison's Equity Sharing Home Loan is a second mortgage that allows homeowners to make use of the potential appreciation of their home.

Homeowners can access a significant amount of equity, as U.S. homeowners have $11.5 trillion in tappable home equity as of second-quarter 2024.

Unison has helped more than 12,000 homeowners tap into their equity, with over $1.8 billion in assets under management.

Here are some key facts about the Unison Equity Sharing Home Loan:

Carlyle Capital Operations was a global private equity and asset management business with over $12 billion in assets under management.

The business was a part of the Carlyle Group, a multinational private equity firm.

It was active in over 100 countries and had a team of over 1,000 professionals.

Carlyle Capital Corp. defaulted on $16.6 billion of debt, making it a highly publicized case of defaults on debt.

The fund was a highly leveraged affiliate of buyout giant Carlyle Group, and it expected lenders to seize its portfolio of mortgage-backed bonds.

Carlyle Capital invested in highly rated securities issued by Fannie Mae and Freddie Mac, but even those relatively safe holdings lost market value as the credit crisis intensified.

The fund's shares, traded in Amsterdam, plummeted 87% on Thursday to about 35 cents, down from $19 a share when it went public in July.

Managers at Washington-based Carlyle Group own about 15% of Carlyle Capital, but they said the fund was a separate entity whose troubles wouldn't have a measurable effect on the private equity firm's other funds and investments.

Carlyle Group said it had worked exhaustively to assist Carlyle Capital and had taken "extraordinary measures" to help it through its liquidity crisis.

The fund raised $670 million by selling shares last year and then borrowed 32 times that amount, showing the extreme leverage that led to its downfall.

Analysts said other leveraged funds could face the same fate as Carlyle Capital, and that the credit crisis is causing a vicious spiral of unwinding leverage.

The unwinding of leverage is happening rapidly, with analysts saying it's unclear how much leverage must be wrung out before the crisis comes to an end.

Carlyle Capital Operations are surprisingly small in scale.

10 people are employed at Carlyle Capital.

Carlyle Capital was a global private investment firm that specialized in alternative investments, including private equity, real assets, and credit.

The firm was founded in 1997 by William Conway, Jr., Daniel D'Aniello, and David Rubenstein, who had previously worked together at the Carlyle Group.

Carlyle Capital was a subsidiary of the Carlyle Group and was established to invest in mortgage-backed securities and other types of credit investments.

It was headquartered in Washington, D.C. and had offices in several other locations around the world.

Carlyle Capital filed for bankruptcy in 2008 due to significant losses on its mortgage-backed securities holdings.