The credit crunch is, if anything, getting more acute again. Banks are more scared about lending to one another and are rushing to call in loans or demand more collateral, or extract better terms from borrowers.

Carlyle Group is discovering how awkward that can be. Its foray into structured credit is now looking spectacularly ill-timed. The private equity group floated its listed vehicle, Carlyle Capital Corporation, in Amsterdam just days before the financial earthquake struck in August. The idea was to raise a thin layer of equity capital, gear up with gargantuan dollops of debt (the prospectus talks airily of gearing of up to 51 times) and invest the proceeds in rock-solid mortgage securities yielding a smidgin more than the debt interest. Easy money, in theory.

It almost immediately started to go wrong, and Carlyle’s partners soon had to inject some emergency funding, but the tone of yesterday’s announcement suggests another lurch downwards in CCC’s fortunes.

To miss margin calls and receive a notice of default from one of its lenders is an unnerving admission. It was only last week that CCC said it was meeting all margin calls. Conditions and sentiment in the credit markets can deteriorate with great speed. There are echoes here of Peloton, the hedge fund that last week collapsed in a matter of days after its leveraged credit bets went wrong. Because it is a listed entity, CCC’s visibility is much higher than that of bank SIVs, which have been able to nurse their wounds in private.

CCC is important because of its size ($22 billion of assets), because of its sponsor and fund manager, Carlyle, and because of the obvious impatience being shown by its bankers. An improvement in credit market conditions could dispel many jitters. Normally, underlying assets cover the liabilities. But some kind of restructuring may now be necessary. And if conditions deteriorate further, Carlyle will be faced with some difficult choices.

Does it inject equity or offer more lines of credit to tide CCC over, or does it walk away? With the exception of Standard Chartered, banks faced with similar questions over their SIVs have stood by them, worried about the reputational damage.

Carlyle is not a bank, but it prides itself on its standing in the international community and its pull with world leaders (past advisers include George Bush Snr and Sir John Major). To allow its Amsterdam offshoot to slip unhelped into the canal would do it no favours.

Meanwhile, London, which a year ago was taking flak for allowing innovative IPO business such as CCC to be poached by Amsterdam, is looking wiser, or luckier, by the day.

patrick.hosking@thetimes.co.uk

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