Carlyle Capital Corp., a U.S. mortgage fund affiliated with the private equity giant Carlyle Group, says that it has been unable to meet its margin calls, and is likely to have its assets seized by creditors.

The New York-based firm reported that during the last seven days, it has received margin calls of more than US$400 million. It was unable to pay these margin calls, so its lenders proceeded to foreclose on its collateral. So far, the company has defaulted on approximately US$16.6 billion of its indebtedness. The remaining indebtedness is expected soon to go into default.

The fund announced that, although it has been working with its lenders, it “has not been able to reach a mutually beneficial agreement to stabilize its financing. The company expects that its lenders will promptly take possession of substantially all of the company’s remaining assets.” The only assets currently held in the company’s portfolio are U.S. government agency AAA-rated residential mortgage-backed securities.

The company said it 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. Negotiations deteriorated late on March 12 when, among other things, the pricing service utilized by certain lenders reported a drop in the value of the RMBS collateral that is expected to result in additional margin calls tomorrow of approximately US$97.5 million,” it noted.

“Overall, it has become apparent to the company that the basis on which lenders are willing to provide financing against the company’s collateral has changed so substantially that a successful refinancing is not possible,” it concluded.