Carlyle Capital Corporation (CCC), the Dutch-listed affiliate of US private equity firm Carlyle, admitted today it is likely to be liquidated after failing to reach an agreement with its lenders.

Talks between the Guernsey-based company and its bankers fell apart yesterday and the company announced last night the failure to rescue the firm.

Efforts to rescue the company, which has defaulted on $16 billion of debt, have failed and the company has been unable to prevent its bankers from seizing the assets.

"The company expects that its lenders will promptly take possession of substantially all of the Company’s remaining assets," it said.

Shares in the group fell by 70 per cent when they resumed trading this morning after being suspended since last week. CCC shares opened at €2.80 and immediately fell to €0.63.

The collapse and liquidation of Carlyle Capital will be a financial blow to its parent, Carlyle Group, and its wealthy managers who own 15 per cent of the American private equity firm.

The hammering of Carlyle Corporation and its rapid demise will cause more jitters in the credit markets and is likely to widen credit spreads in the debt markets, making it more difficult to raise funds.

Demands for $400 million in margin calls from bank lenders tipped Carlyle Corporation over the edge.

The firm was unable to meet the cash calls that rolled in over the past week and the company's lenders, led by Deutsche Bank and JP Morgan Chase began to sell off collateral which Carlyle Corporation had pledged in security for the loans. By Monday this week, bankers had liquidated some $5 billion of Carlyle Capitals assets.

Carlyle said last night that it had defaulted on approximately $16.6 billion of its borrowings and expected to default on the remainder. The company's outstanding indebtedness totals some $21 billion.

Set up in 2006, Carlyle raised less than $700 million from investors but expanded the fund with massive borrowings to purchase mortgage securities.

Unlike the sub-prime securities which have featured in the recent American housing slump, these were triple-A rated mortgages but even their value has fallen sharply in the credit crisis, putting Carlyle Corporation in default with its lenders.

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