What are Broker’s Exposure to Carlyle Capital ?

Broker’s trading exposures to Carlyle Capital’s soon to be defaulted fund — rumored to be leveraged at an astonishing 32 X! — has been the big question circulating street desks today.

Here’s one set of numbers currently circulating on the potential exposure (analyst unknown):

-Citibank (C)  $4.7B
-Lehman (LEH)  $3B
-BoA  (BAC) $2B
-UBS  $1.8B
-Bear Stearns (BSC) $1.7B
-ING $1.5B
-JPMorgan (JPM)  $1.4B
-Calyon $1.3B
-Merrill Lynch (MER)  $760m
-BN Paribas  $600m
-Credit Suisse   $500m

I cannot vouch for the accuracy of these numbers, but this is what is getting pinged around Wall Street trading desks . . .

>

UPDATE: March 14, 2008 1:15pm

FT is reporting this list was culled from CCC’s annual report, and is therefore out of date.

The only question is whether it got better or worse . .  .

>

Thanks, JD.

UPDATE: March 13, 2008 11:15am

Standard & Poor’s comments on subprime write-downs, via Briefing.com:

Standard & Poor’s Ratings Services believes that the bulk of the write-downs of subprime securities may be behind the banks and brokers that have already announced their results for full-year 2007. "There may be some additional marks to market as market indicators have shown deterioration in the first quarter. However, when we dissect the percentage of write-downs taken against various types of exposures, in our opinion the magnitude of some write-downs is greater than any reasonable estimate of ultimate losses… The write-downs of collateralized debt obligations (CDOs) of subprime asset-backed securities (ABS) by large banks and investment banks (referred to as banks) in North America and Europe to-date total approximately $110 bln. To this amount we add approximately $40 bln in write-downs of insurers (financial guarantors and other insurers) and banks in the Gulf States and Asia to arrive at a rough estimate of $150 bln in global disclosed write-downs to-date… Based on available information, we believe that the largest players can be seen as having undertaken a rigorous valuation methodology to come up with conservative valuations. Citigroup (C) and Merrill Lynch (MER), for example, value their high-grade supersenior tranches at 52% and 68% discounts to original exposure, respectively. The broader range of banks values them at only a 30% discount. Similarly, Citi and Merrill value the supersenior tranches of the mezzanine CDOs at 63% and 73% discounts, respectively, whereas the broader range of banks values them at a 48% discount… We believe Citi and Merrill in particular have taken conservative views in this regard, and have built in liquidity premiums.

Now if only these guys had any credibility left . . .

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Douglas Watts commented on Mar 13

    Count me in for a buck. I’m feeling lucky …

  2. John commented on Mar 13

    barry

    i can vouch for it being passed around the street

  3. Ross commented on Mar 13

    The Swiss at par? Who could of thunk it?

    Me

  4. Pool Shark commented on Mar 13

    Ross,

    The Aussie Dollar is next.

    btw, 1 Yen = $.01 US.

  5. michael schumacher commented on Mar 13

    funny story about the swiss franc. Was in Las vegas over the weekend and actually found a 10 franc bill lying on the floor, I took it to the currency exchange and it was at $9.80 (and realizing it sort of has become the newest carry trade I cashed it in)………I should have kept it for shits and giggles.

    BTW the Pallazo (newest Hotel) is going to be quite a red herring in about a year…along with the around 15k new rooms coming on line over the next two years. Foreign tourist’s outnumber Americans 10-1 and LV should realize that it will only continue to grow if it embraces foreign tourists……because as the concierge indicated to me american tourists in Vegas (as a continued revenue stream) is over.

    Ciao
    MS

  6. scorpio commented on Mar 13

    go Carlyle! what Bush/Cheney/Greenspan havent yet done to the average US citizen/soldier/taxpayer Poppy Bush and James Baker and David Rubenstein can finish off. what a trifecta

  7. michael schumacher commented on Mar 13

    PS-

    re: yen
    the TV channels in the hotel had Korean, Chinese, vietnamese, fillipino but alas not one Japanese channel..not even Fuji TV…….

    Sort of tells you something…

    Ciao
    MS

  8. Bearish Blind Squirrels commented on Mar 13

    The stock market recap from October 11, 2002, on the New York Times. This was the day after the market had a big jump, which essentially ended the last bear market. Here are the quotes from the article:

    “Analysts said a rebound had been expected after Wednesday’s steep declines, but they doubted that it would last, given uncertainties like war with Iraq.

    “I don’t think fundamentally anything has changed from the pessimism of yesterday,” said Matt Brown, head of equity management at Wilmington Trust. ”There are still declining earnings estimates.

    Analysts said that while a recent spate of heavy selling has made stocks attractive to bargain hunters, more steep declines were possible. They said the market could be pressed in the coming weeks as more earnings reports are released.

    Mr. Brown of Wilmington Trust said that the Dow could fall below the 7,000 mark, which would have been unimaginable earlier in the year.

    “I would put it at maybe a 50-50 chance,” he said. ”I see the market right now as fairly valued. It’s possible we may need to get into the dirt-cheap category before the market starts picking up again.””

    Sounds familiar???

  9. Bearish Blind Squirrels commented on Mar 13

    “It’s always tough to have any conviction at times like this. Pretty much every news organization and website drones on about how it’s just a “short-covering rally” due to a “limp-wristed Fed” and the “market still has problems”. ”

  10. rob commented on Mar 13

    hmm. No GS on the list of creditors. How did Carlyle miss them?

  11. scorpio commented on Mar 13

    my understanding is Carlyle Cap went public last July, so several months after it became pretty well known to anyone w a brain cell that the markets and leverage were going to come undone. question: did they throw every piece of garbage they had in the house into this vehicle at 32 X leverage? i mean leveraged loans, etc all marked at 100c as they off-loaded to the new vehicle?

  12. scorpio commented on Mar 13

    yen now below par for first time since 1995. check your charts on S&P re 1995 parabolic. i think this the beginning of an unwind that should take out the whole era. good-bye Bear Stearns

  13. Chief Tomahawk commented on Mar 13

    Look at what’s happening to Bear Stearns today…

    Paulsen & Bernanke better get out the paddles for an electro shock…

  14. Darkness commented on Mar 13

    Honolulu is full of foreign tourists too, a broader set than usual. All stripes of Asian, European, Brit and for the first time Eastern European/Russian too. Maybe the lesson in getting our money back is to lure it back with sun and fun.

  15. Bearish Blind Squirrels commented on Mar 13

    I am buying like crazy… It is all over the papers how bad things are…

    Today’s retail investors pessimism is one of the lowest readings since 1986, and in recent history has only been matched by August 28th and 31st, 1998.

    Time to load up Barry!!!

  16. Nick Godt commented on Mar 13

    STOCK DECLINES STEEPEN AS TREASURY CHIEF FAILS TO REASSURE INVESTORS; KEY GAUGES DOWN 1.8%

  17. Douglas Watts commented on Mar 13

    In an interview, Bear Chief Financial Officer Samuel Molinaro told the paper there is no truth to speculation of deep trouble at the firm.

    Well, there you have it …

  18. Steve Bowles commented on Mar 13

    That list comes from a Times (of London) article a few days ago that referenced its source as the Carlyle Annual Report.

    As to the Moody’s comment. wtf ? You have mezzanine tranches on a CDO, you have super senior tranches on synthetic CDO’s. What the hell is a supersenior mezzanine tranche ?

  19. Stuart commented on Mar 13

    Paulson essentially admits they don’t know how to fix this mess.

  20. michael schumacher commented on Mar 13

    It is unfixable if the current system is allowed to stay the same……

    $300 billion in less than two day’s trading is yet another attempt to keep it the same.

    Ciao
    MS

  21. Ross commented on Mar 13

    When was it exactly that S&P told us about the writeoffs they saw coming? Year? Month? Decade?

    Time to break up the ratings cartel.

  22. Vermont Trader.. commented on Mar 13

    IMHO – just keep 1 eye on crude… if it breaks lower the market will rally. Until it does so all rallies are shortable.

  23. matt m. commented on Mar 13

    Did anyone catch the interview with Ken Fisher from Fisher Investments on Bloomberg last night….about 5:30? If I had money with him, I would redeem today. What a BS artist! Pure salesman! Another guy getting his clients buried.

    Likes C because of operating earnings and stated that balance sheet means nothing….. nothing. Of course, he didn’t mention what his cost basis was….they never do when they’re down 50% on a position.

  24. TempusFugit commented on Mar 13

    “Standard & Poor’s Ratings Services believes that the bulk of the write-downs of subprime securities may be behind the banks and brokers that have already announced their results for full-year 2007.”

    Does anyone doubt that Big 4 auditors, having been scared to death in the aftermath of 2002 (Enron/Worldcom/AA&Co.) will this time be extremely conservative and rule-bound? S&P may lack credibility but the CPAs, not so much.

  25. michael schumacher commented on Mar 13

    crude will not go lower unless a similar trick ala GSCI circa August 2006 is pulled….

    This (oil trading) is nothing more than the electricity bullshit that Enron pulled in California creating the perception of shortages through volume trading. The math just does not add up due to the rampant use of canceled contracts just before the expiry. And people wonder why shortages are reported at a time where inventory levels are peaking.

    Remember Oil inventories are at highs and the price still goes up. It’s not just about the dollar as the media would like you to believe.

    Ciao
    MS

  26. mikkel commented on Mar 13

    Am I the only one that thinks it’s ironic that there is supposedly a bounce on a report saying that the subprime writeoffs are nearly over on the exact same day that the market supposedly opened lower because a hedge fund blew up on their PRIME securities?

  27. Dee Leverage commented on Mar 13

    The market is going to do one of two things here…collapse to 10,000 on the dow and make a sharp V, or slowly grind lower for 2 weeks and have a relief rally.

  28. mikkel commented on Mar 13

    MS I agree completely (although I think that the falling dollar is enabling the practice) but certainly the people controlling the oil/ag markets are highly leveraged and in other things too? Do you foresee a massive and quick collapse in commodities at some point?

  29. Eric commented on Mar 13

    Dear Bearish Blind Squirrels:

    Please remember never to buy on a downtrend–always wait for it to reverse before buying. Before then reversal you have no idea how far away the bottom might be. And just before and just after the bottom, the price is approximately the same, so you have nothing to lose by waiting either…

  30. cinefoz commented on Mar 13

    Add gold and this writer to the list of speculator driven commodities and uninformed, lazy writers:

    Gold at $1,000 on Weak Dollar, High Oil
    Thursday March 13, 11:02 am ET

    By Lauren Shepherd, AP Business Writer

    Gold Futures Hit $1,000 Per Ounce Benchmark on Falling Dollar, Rising Oil Prices

    Click Here

    I think the only way to improve business news is to point out the worst examples of it. Perhaps I am overly optimistic, doing this might help.

  31. Scot commented on Mar 13

    Where are all those chest pounding Bulls today?

    What was that Tuesday, a one day cameo?

  32. michael schumacher commented on Mar 13

    only if it is “allowed”……and the Fed has proven it will not allow anything to occur under 12k..

    It should have happened already IMO. That it has not may mean it will in 2009 and in a much bigger way.

    What will allow it to happen is margin calls on a large scale….based on what I read that is about to happen on a scale that no one has ever seen.

    Remember “go out and shop” that will solve it all…..LOL

    Ciao
    MS

  33. Estragon commented on Mar 13

    S&P may be broadly correct, but note: “Based on available information, we believe that the largest players can be seen…”

    It’s what they don’t say, but imply, that really should concern us. Many smaller “players” haven’t gone to the confessional yet, and they’re not likely as able to sustain losses as those who have. Case in point is Carlysle.

    It’s entirely possible that some of these smaller players are doubling down in a desperate last ditch effort to survive.

  34. Rated….ehhh commented on Mar 13

    Could it be that the rating agencies get a free pass if they start reading from the pre-approved script?

  35. Stuart commented on Mar 13

    S&P is blatantly attempting to pump. Sickening.

  36. Bearish Blind Squirrels commented on Mar 13

    Dear Eric,

    You are blind (or reading too much of bearish …. here) not to see the re-test of the January lows and the major reversal with 5:1 breadth. You remind me of an egg teaching a chicken. (I have been picking perfect bottoms since 1990. How long have you been in this business?)

    Jason Rooney on Minyanville noted that when the S&P has rallied 2% or more in a day, then drops at least 0.5% the following day; it gaps down the next day the vast majority of the time. It looks like that pattern is going to play out again.

    Lets look back into history:

    There were only five prior instances of similar to today’s setups. (The opening gap down greater than 1% after the S&P has rallied 2% or more in a day, then drops at least 0.5% the following day)

    1. Buying those opening gaps and holding until the close resulted in all five trades being winners, averaging +1.3%.

    2. Holding for two trading days also led to five winners, with an average return of +3.5%.

    3. The average maximum loss during the two days was -0.9% compared to an average maximum gain of +4.3%.

    4. Two of the five occurrences were in early September 1998, as the market was trying to recover from the late August sentiment extreme (Russian Default of 1998 credit crises).

    5. I will take such odds anytime (+4.3% vs. -0.9%).

  37. wheres wells? commented on Mar 13

    so where’s wells fargo in all this mess?

  38. Jay commented on Mar 13

    End of subprime write-downs? Does this also include write-downs of:

    -prime mortgages
    -LBO debt
    -credit card debt
    -home equity loans
    -commercial mortgages
    -car loans
    -corporate debt

    Anyone?

  39. Alfred commented on Mar 13

    The resuscitation teams desperately try to revive Wall Street. There was a piece in last weeks Economist ‘Don’t market to markit’. The tempting believe seems to be that the excessive markdowns have build in a ‘liquidity premium’ into Wall Street firms. I dare to challenge it. For this actually to happen the Case/Schiller has to stabilize and go higher, and I do not think this is realistic in 08 and 09. The losses are real and and the repricing has still further to go.

  40. 49er commented on Mar 13

    If S&P was so incorrect at the top, what leads one to believe they are correct now.
    They have about as much credibility as Bernanke and Bush, the B&B brothers.

  41. Jdamon commented on Mar 13

    I have a friend who works at Wells Fargo who has stated that Wells is very, very conservative in its approach to business. They believe any loans originated as a Wells First are rock solid. They didn’t buy much (if any CDO’s), they are really big on the servicing side of the business.

    He told me Wells was about to get into the Sub-Prime business, but was way late to the punch bowl and was just dipping its toes in when it collapsed.

    They have been thrown out with the bathwater and they should definitely outperform over the next couple of years

  42. Al Czervic commented on Mar 13

    Stuart,

    S&P has little to do with it. Just todays’ cover story. The orders came down this morning to crank it up, hit every offer and don’t stop. This isn’t Britain or Germany. Down 2% is not permitted here.

    Now I’ve never commented about “the PPT” or market manipulation. But I’ve been looking at streaming intra-day charts long enough to recognize an “intervention” when I see one. Not the first and won’t be the last.

  43. Bearish Blind Squirrels commented on Mar 13

    More historic data for Eric:

    In the past when we have seen a “largest gain in five years” after the markets have hit a new low, the markets have followed though to the upside over the ensuing MONTHS without fail (no exceptions)

  44. Bearish Blind Squirrels commented on Mar 13

    More historic data for Eric:

    In the past when we have seen a “largest gain in five years” after the markets have hit a new low, the markets have followed though to the upside over the ensuing MONTHS without fail (no exceptions)

  45. bc123a commented on Mar 13

    Barry, I agree with S&P predictions on the *subprime* writedowns. There is nothing more to write down, for christ sake.

    So, let’s move on! Alt-A and prime writedowns are probably next.

    If I remember right, latest BSC scare was linked to their Alt-A (which is NOT subprime) portfolio.

    There is plenty of stuff undeservingly designated as “not sub prime”. And, as far as I know, real estate prices have still a long way down to the any kind of reasonable price-to-income ratio, which may put underwater many other borrowers.

    In short, S&P prediction will hold if somehow, magically, the real estate market stops falling, inventory dissapears, and banks start lending money as drunken sailors again. If they would even continue to do this in summer of 07 we would not talk about “crisis” now….

    As Diana Olick put it – until prices fall to the point where ordinary family can buy ordinary family house with traditional 30yr fixed mortgage and reasonable payments, the troubles will not stop.

    And between now and that point there are plenty of foreclosures, defaults, and writedowns waiting.

  46. Eric commented on Mar 13

    Dear Bearish B.S.,

    I am reassured as far as your own welfare is concerned, as your personal justification for diving into this market sounds quite sophisticated. However, orgasmic phrases like

    “I am buying like crazy… ”

    “Time to load up Barry!!!”

    make you sound quite the shill–even moreso the fact that you started your cheerleading with contentless generalizations like

    “It’s always tough to have any conviction at times like this”

    “Today’s retail investors pessimism is one of the lowest readings since 1986”

    and then proceeded to advise us all to get in to take advantage of the next two trading days!

  47. me commented on Mar 13

    I wonder if that asshold Gerstner is going to dance with the elephants again?

  48. mikkel commented on Mar 13

    I’m highly skeptical of any “historical analysis” that doesn’t do an ANOVA based on a) whether the trend is cyclical bull or cyclical bear and b) whether it is secular bull or secular bear.

    For instance, in ’98 the 200 day MA never even declined, and it bottomed with the 50 day MA a mere 4.5% below the 200 day. It didn’t even hit what I’d call a cyclical bull, it was just a correction within a bull market. Today the 50 is way below the 200, and the 200 is declining.

    In the last (or current depending on your opinion) secular bull market, there have been no cyclical double tops. The closest was the ’90 top only 8% above the ’87 top. But the ’87 top was a huge crash with immediate recovery. If you just delete three months, there was no bear market at all (not like the previous bear market in 00-03).

    By contrast, the last secular bear market in the mid 60s-70s saw multiple tops with protracted cyclical bear markets.

    Just pulling out a bunch of “well the market went up or down % and then did…” without even incorporating the two major trend variables is pointless.

  49. Joe commented on Mar 13

    When you start to hear the market does this without fail, the market changes the rules on you.

  50. DonKei commented on Mar 13

    Seconds, Joe.

    Now, why is CFC trading at $4.76/share? I thought all this messy mortgage stuff was cleared up by now. Isn’t that the S & P headline de jour?

    Best Quote of the Day:

    “Perhaps I am overly optimistic…”

    Cinefoz

  51. Tom commented on Mar 13

    I am the author of the numbers. got it from CCC year-end 2007 ann report, so numbers and parties may have shifted some.

  52. Norman commented on Mar 13

    Rob wonders how Caryle missed Goldman. But don’t wonder about such a thing, Rob, marvel in how Goldman missed Caryle; they are still the smartest guys in the room.

  53. Pat G. commented on Mar 13

    The “Standard & Poor’s Ratings Services” announcement was given credit for rallying the market today. Really?? Who would believe them?

  54. Eric commented on Mar 13

    Sorry man, that wasn’t me. I think there are two Erics posting around here…

  55. Richard commented on Mar 13

    once again no goldman. to date they’re down $600 million due to subprime fallout which is a mere pittance compared to the rest of the pack. they don’t work you 14 hour days and 8 hour weekends days for nothin!

  56. JustinTheSkeptic commented on Mar 13

    I’ll see you all at the end of the worst recession since the great depression. Though my timing might have been off. For some of us the meaning of it takes money to buy whiskey, might come too early, i.e. markets can be irrational longer than I can remain solvent.

Posted Under