The American mortgage crisis wreaked further damage on the private equity industry yesterday as Carlyle Group, the US buyout firm, was forced to cut the price of its mortgage fund and the amount it will raise by $100 million.

Carlyle pulled the plug on the fund, which would have listed on the Amsterdam stock exchange and invested almost exclusively in AAA-rated mortgage-backed securities, because investors are growing increasingly nervous about exposure to the credit markets.

The amount to be raised is being cut from $400 million to $300 million while the share price is cut to $19 from an initial $20 to $22 range.

The cut means that under Dutch market rules, the float has to be postponed until new documents are filed.

Although Carlyle would have invested about 95 per cent of the fund instruments backed by low-risk mortgages, investors are concerned about rising home-loan default rates across the board as the growing number of delinquencies in the high-risk "subprime" sector threatens to spread.

Investors are also growing wary about highly-leveraged funds in general and are thought to have been concerned that Carlyle was planning to borrow about $17 against every $1 raised, exposing them to significant losses if the investments went wrong.

Carlyle’s decision to postpone the float coincides with a dramatic change in the attitude of lenders to financing leveraged buyouts. As losses on subprime mortgages mount they are increasingly nervous about the high-risk loans private equity firms use to finance their deals and about companies borrowing to fund acquisitions.

Jim Owers, professor of finance at Georgia State University, said: "The era of easy credit has ended. Lenders are rather dramatically cutting back loans to private equity deals because of their overall similarity to subprime mortgages in terms of the risk they represent."

Myers Industries, the plastic, rubber and metal products group, became the latest American company to pull a bond offering. The $350 million junk bond issue would have helped to finance Goldman Sach’s agreed leveraged buyout of Myers.

Meanwhile, Catalyst Paper, the Canadian news print and specialty paper company, has scrapped a $200 million offering of junk bonds, citing "adverse" market conditions. It had planned to use the debt to fund investment and acquisitions. Magnum Coal postponed a $350 million junk bond offering.

In a sign that investor nervousness is spreading to Europe, Arcelor Finance, the borrowing vehicle of the steel company being acquired by Mittal Steel, put off its plans to issue more than 1 billion euros in bonds, again citing difficulties in the debt markets. In Malaysia, MISC, the shipping company, put its $750 million bond issue on ice.

The growing difficulty of borrowing threatens the future profits of private equity firms because the more it costs to finance their leveraged buyouts, the less they will make on deals.

These fears have contributed to the recent decline in the share price of Blackstone, which became the first US buyout firm to list on Friday last week.

The shares, which were priced at $31, jumped by nearly a quarter on their first morning of trading, before ending the day 13 per cent higher at $35.16. But they have since fallen and were trading at $30.83 at mid-day yesterday, below their offer price.

Investors nervousness about buyouts began to surface on Friday as Thomson Learning, a former division of the media giant Thomson, scaled down the bond offering with which its new private equity owners, Apax Partners and the Ontario employees’ pension fund, had planned to help finance their takeover from $2.14 billion to $1.6 billion.

On Monday, a $1.55 billion bond offering, to help fund the leveraged acquisition of US Foodservice, America’s second largest food distributor, was pulled.

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