Mumbai: Lenders to Carlyle Capital Corporation Ltd, a Dutch-listed affiliate of the US-based Carlyle Group, have begun to liquidate securities held in its $21.7 billion portfolio, in a sign that the subprime mortgage market turmoil has taken its toll on the Carlyle Group, the world's second-biggest leveraged buyout firm by assets.

Carlyle Capital had said earlier it received margin calls totaling more than $37 million on Wednesday and expected at least one more default notice.

Carlyle Capital, which received additional margin calls and default notices from banks that help finance its portfolio of mortgage-backed securities, said it may not be able to meet the increased requirements.

Carlyle Capital said it had received "substantial additional margin calls and additional default notices from its lenders," and that lenders were selling off securities held as collateral.

Carlyle Capital, with an equity base of $670 million, manages to finance a $21.7 billion portfolio of residential mortgage-backed securities issued by US housing agencies Freddie Mac and Fannie Mae by entering into repurchase agreements with banks.

This involve posting the mortgage securities as collateral in exchange for cash and if the value of the security held as collateral falls, the lender will ask for more collateral - a "margin call" - in order to secure the loan. If the borrower does not meet the margin call by putting up more collateral, the lender may sell the security.

Counterparties for Carlyle Capital's repurchasing agreements were as of the end of 2007: Bank of America, Bear Stearns, BNP Paribas, Calyon, Citigroup, Credit Suisse, Deutsche Bank, ING, JP Morgan, Lehman Brothers, Merrill Lynch and UBS.

Carlyle Group has a $150 million credit facility with Carlyle Capital.

Meanwhile, trading in shares in the fund was suspended today. The stock was down almost 60 per cent at $5.00 on Euronext Amsterdam yesterday.

Carlyle Capital said it is in discussions with its lenders about its financing situation, but warned shareholders that the additional margin calls and increased collateral requirements to keep funding in place could quickly deplete its liquidity and impair its capital.

Carlyle Capital said, as of last week, it believed it had sufficient liquidity. It had also reassured investors on its funding situation in is annual report, saying it had $2.4 billion in unused repo lines and a $130 million (84.86 million euros) liquidity cushion.

CCC said lenders could liquidate more securities, adding that the company was in discussion with its banks regarding financing and considering all available options.

Carlyle Group has a $150 million exposure to Carlyle Capital through a credit facility.

Carlyle Group's affiliation with CCC includes management links as Carlyle Group partners Bill Conway and Michael Zupon sit on CCC's board of directors.

Carlyle Capital reported a 2007 net profit of $16.8 million last month but it decided against a dividend for the fourth quarter after a $34 million loss in the third quarter.