Buyout deal of the week: Carlyle Capital Corp.

Carlyle Capital Corp., an Amsterdam-listed fixed income affiliate of The Carlyle Group, last week announced that it failed to refinance its portfolio of residential mortgage-backed loans, just days after missing margin calls. It had defaulted on over $16 billion of the $21.7 billion portfolio, and creditors were expected to seize all remaining assets, as of press time last week.

This doesn’t appear to be an obvious “Deal of the Week.” But no completed transaction last week had nearly the ramifications of this one’s failure.

First, there is the massive loss of shareholder value. Imagine if all the portfolio companies in Carlyle’s last fund collapsed all at once, and you’re still just approaching what’s happened here.

Second, this is a major stain on the reputation of The Carlyle Group. The firm was a separate legal and business entity from Carlyle Capital, but the firm nonetheless lent its name, and says that it also “worked exhaustively to assist Carlyle Capital with its negotiations to obtain financing arrangements.” It also provided a $150 million subordinated line of credit. All of those efforts were for naught.

Finally, this episode will go down as a cautionary tale for the next buyouts bubble, which we’ll certainly see within the next decade. Stick to what you know, because what you don’t know can hurt you.