More Margin Calls at Carlyle

Updated from 9:32 a.m. EST

Carlyle Capital said Friday morning that it had received "substantial" additional margin calls and more default notices from lenders due to the plummeting market for mortgage-backed paper.

Carlyle, a fixed-income investment company managed by an affiliate of private-equity firm the Carlyle Group, made the disclosure a little more than a day after it said it has received $97 million in margin calls since it filed its annual report Feb. 29. Carlyle has failed to meet four of the margin calls and has already received one notice of default and expects at least one more, it said.

Carlyle on Friday said some of its residential mortgage-backed securities had been liquidated by lenders that had already issued default notices to the company. Carlyle blamed its problems on "a rapid and severe deterioration" in the market for the triple-A rated mortgage-backed securities issued by government-sponsored Fannie MaeFNM and Freddie MacFRE.

"Based on the weakened market, several of the Company's lenders marked down the value of the company's [residential mortgage-backed] securities and informed the company that they would soon materially increase their collateral requirements," Carlyle said in a statement.

Citigroup responded to the latest news by downgrading Carlyle Capital, listed on the Euronext exchange, to a sell from hold. It cited as one of its chief concerns that it appeared the firm has drawn down the entirety of a $150 million loan from Carlyle Group to meet its margin calls.

"If Carlyle Group does not provide another backstop, [Carlyle Capital] could be forced into significant asset sales into a weak market or could face bankruptcy," Citi said in its note.

The margin calls at Carlyle and at jumbo home lender Thornburg MortgageTMA have rattled stocks. The Dow Jones Industrial Average shed 214 points Thursday, after Carlyle's disclosure and Thornburg's announcement that it had failed to meet a $28 million margin call from JPMorgan ChaseJPM, triggering a series of defaults on various lending agreements.

The announcement comes just two days after the mortgage lender announced a cash infusion involving about $1 billion of prime hybrid adjustable-rate mortgage loans. Thornburg has been burned by nearly $600 million in margin calls over the past month, following the slide in the mortgage-backed securities market.

Analysts have questioned whether a further mortgage sector downturn -- or more failed margin calls -- would prompt an eventual bankruptcy filing by Thornburg.

Some other stocks taking their lumps this year courtesy of the mortgage crisis include Countrywide Financial CFC, Wells Fargo WFC, IndyMac IMB and Bank of America BAC.