Carlyle Group Collapsing
Carlyle's lenders demanded more than $400 million to meet margin calls. The fund defaulated on $16 billion of debt yesterday.
``If Carlyle's lenders want their money right away, they'll liquidate the fund,'' said Hank Calenti, a London-based analyst at RBC Capital Markets. ``That will put pressure on already stressed credit markets.''The question is are you going to find buyers and at what price?
``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,'' Carlyle said in the statement. It expects additional margin calls today of $97.5 million.
It's almost like some one trying to refinance their mortgage, but can not because the home is worth less than the mortgage owed.
"This is not only a problem for Carlyle,'' Jochen Felsenheimer, the Munich-based head of credit strategy at UniCredit SpA, wrote in a note to clients today. ``We expect a further flood of downgrades especially of higher-rated securities, putting enormous pressure on the system.''
That's assuming the rating agencies, specifically Moody's and S&P, would downgrade them. It looks like they have been MIA. I don't see them changing at this point.
"Carlyle won't be the end of it,'' said Greg Bundy, executive chairman of Sydney-based merger advisory firm InterFinancial Ltd. and a former head of Merrill Lynch & Co.'s Australian unit. "There's more to come. The problem is no one can give you an educated guess about how much.''
That is truly scary.
Dollar Diving
Most economists told us this wouldn't happen. Now we are seeing a collapse of the US Dollar. The dollar fell to below 100 Yen for first time since 1995. It approached parity with Swiss Franc.
If as we wrote yesterday, the Middle East countries start dumping the dollar, it could get even uglier.
``Sentiment for the dollar continues to deteriorate very, very rapidly and if we're not careful this will turn into a dollar crash,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon, the securities unit of Credit Agricole SA, France's second-biggest bank. ``The risk is that we see a fairly aggressive move sharply lower towards 95 yen, and that could really perk up the interest of the Bank of Japan.''
Let's hope this is the bottom for the dollar. Otherwise, the gas prices will keep going up. What a mess!
U.S. Retail Sales
The US Retail sales did not help the dollar as they declined .6% vs. an expected increase of .2%. I wonder if there is anyone out there still saying we are not in a recession.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDRmYse1_2Pk&refer=home
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