Dutch-listed investment fund Carlyle Capital Corporation announced Thursday it had failed to reach a deal with its creditors and had defaulted on debt of nearly 17 billion dollars (11 billion euros).
"Although it has been working diligently with its lenders, the company has not been able to reach a mutually beneficial agreement to stabilize its financing," the fund said in a statement.
"The company expects that its lenders will promptly take possession of substantially all of the company's remaining assets," the statement said.
The only assets still under its control were US government agency AAA-rated residential mortgage-backed securities, it said.
Over the last seven business days Carlyle received margin calls of more than 400 million dollars that it was unable to honor, it said.
"In total, through March 12, the company has defaulted on approximately 16.6 billion dollars of its indebtedness. The remaining indebtedness is expected soon to go into default," the statement said.
The predawn announcement, combined with near-record oil prices and a slumping dollar, sent share prices plunging in Asia and Europe.
Shares in CCC fell 70 percent to 0.83 euros when they resumed trading on the Amsterdam stock exchange after being suspended on Wednesday.
The stock opened at 2.80 euros and quickly fell to 0.63 euros, triggering an automatic cool-down suspension, a spokeswoman for the NYSE Euronext-owned stock market said.
Investors fled in response to the fund's liquidation. Margin calls require a company to show proof that it has cash reserves equal to a portion of the value of shares or positions it holds on a given market.
The fund is linked to the Carlyle Group, a leading US private equity firm whose advisors include political luminaries such as former president George H. W. Bush.
Although it is registered in Britain and listed in the Netherlands, Carlyle Group runs Carlyle Capital out of its New York offices.
CCC is one of 55 funds managed by Carlyle Group, one of the largest private equity firms in the world with 76 billion dollars in assets.
The Carlyle Group said Wednesday the fund's difficulties would not have a measurable impact on its finances.
Its executives hold about 15 percent of the fund's capital, but privately, and the two firms are linked only by a contract of investment advice, Carlyle Group said.
"The company explored a variety of proposals with its lenders in an attempt to refinance its portfolio on sustainable terms. The Carlyle Group participated actively in those negotiations and was prepared to provide substantial additional capital if a successful refinancing could be achieved," the failed fund's statement said.
In addition to Carlyle, top funds such as Blackstone and KKR also have seen their values sliding in recent months.
