Monday, August 27, 2007
Carlyle Capital Corporation Limited
For Immediate Release
Recently, several of our shareholders have asked us for information about the current status of CCC's investment portfolio. Because CCC has publicly traded securities and is subject to various rules and regulations pertaining to selective disclosure, we relied on our press releases and our website instead of communicating directly with individual shareholders. We understand these efforts have been unsatisfactory and frustrating to many of you. We sincerely apologize for this lapse in communication. In an attempt to better communicate with our shareholders, I offer this brief view of the state of the credit markets and the impact of recent events on CCC.
We designed CCC's business model to withstand a liquidity event equal to the events of October 1998 when the demise of Long Term Capital Management threatened the financial markets. We believe the recent liquidity disruption is significantly worse than the events of 1998. Unlike 1998, the market for AAA rated US agency floating rate capped mortgage backed securities issued by Fannie Mae or Freddie Mac was materially affected by recent events and the market for repurchase agreements secured by high quality agency issued mortgaged backed securities experienced instability.
This environment produced two adverse consequences for CCC: (i) a modest decline in the fair value of AAA rated US Government agency issued mortgage-backed securities, and (ii) an increase in collateral (margin) required by our lenders. As the fair value of our MBS portfolio declined, our lenders made margin calls to ensure that the amount of CCC's indebtedness did not exceed the fair value of the underlying collateral.In addition, some of our lenders have recently decreased the amount they were willing to lend CCC to 97% of the fair value of the underlying securities, from the historical lending rate of 98% of fair value. Consequently, CCC's liquidity cushion has not been sufficient to meet recent margin calls. Management and the board have acted swiftly and definitively to address the dramatic change in our business environment. The actions we have taken are described in the attached press release and we look forward to discussing them with you on our analyst call scheduled for Wednesday, August 29, 2007 at 9:00 A.M. (EDT) (2:00 P.M. London time).
We are also reviewing our communications policy and intend to develop a plan that will keep you better informed, while maintaining compliance with applicable regulation. You may also access CCC's website at www.carlylecapitalcorp.com for copies of our news releases, financial statements, and other important information.
CCC thanks you for your continued support.
John C. Stomber
CEO, President and CIO