HEDGE FUND CONNECTED TO POWERFUL FIGURES TANKS

WASH POST A publicly traded affiliate of the Carlyle Group said that lenders were seizing its assets, sending the fund, Carlyle Capital, into insolvency. The collapse of Carlyle Capital is the first time a Carlyle Group fund has failed and is a stinging embarrassment for the District private-equity powerhouse, which has built an international reputation with a client list that reaches around the world.

The high-profile downfall, part of the broad turmoil in credit markets worldwide, followed a week of frantic negotiations between the Carlyle Group and a number of lenders. Carlyle Group's three founders as recently as Monday were considering injecting cash into the fund as a way to usher it through the credit crisis.

By yesterday the fund had defaulted on $16.6 billion of debt and said it expected to default soon on its remaining debt. The fund's $21.7 billion in assets were exclusively in AAA mortgage-backed securities issued by Fannie Mae and Freddie Mac, traditionally considered secure and conservative investments, which it was using as collateral against its loans.

In a statement, Carlyle Capital said that it had been unable to meet margin calls in excess of $400 million over the past week and that it expected its lenders to take control of its remaining assets. The lenders, headed by Deutsche Bank and J.P. Morgan Chase, began selling the securities last night, according to a report on the Wall Street Journal's Web site.

The problems at Carlyle Capital have preoccupied the top leaders at Carlyle Group. The firm's founders, David M. Rubenstein, William E. Conway Jr. and Daniel D'Aniello, had been in meetings with lenders in an effort to resolve Carlyle Capital's problems, not only to protect their own investment and that of employees who have put millions of dollars into the company, but also to preserve Carlyle's Midas-touch reputation.

CNBC Fears that more private equity groups, hedge funds and mortgage lenders are struggling with their financing are putting heavy pressure on global equity markets, which have tumbled in recent months on fears of a U.S. recession and the widening fallout from a global credit crunch. . .

Managers at Carlyle Group own about 15 percent of Carlyle Capital, which listed in July 2007, as the credit crunch began to take hold of the global financial system.

The Carlyle Group, based in Washington, DC, has more than $75 billion under management and has attracted a string of high-profile advisers including U.S. President George Bush in the early 1990s and former British Prime Minister John Major.

One of the world's largest private equity firms, The Carlyle Group owns a range of companies including TV ratings firm Nielsen, doughnut seller Dunkin' Brands and former General Motors unit Allison Transmission.

According to CCC's annual report, counterparties for its repurchasing agreements as of the end of 2007 were Bank of America, Bear Stearns, BNP Paribas, Calyon, Citigroup, Credit Suisse, Deutsche Bank, ING, JP Morgan, Lehman Brothers, Merrill Lynch and UBS.