AMSTERDAM (Reuters) - "An affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors.

      The Carlyle Group said in a statement on Thursday that as Carlyle Capital Corp (CARC.AS: Quote, Profile, Research), a fund listed in Amsterdam, was unable to reach a deal with lenders it expected those lenders to take possession of the fund's remaining residential mortgage-backed securities assets.

      Carlyle said it had worked "exhaustively" to assist Carlyle Capital and took "extraordinary measures" to help it through its liquidity crisis.

      It stressed that Carlyle Capital Corp (CCC) was a separate legal and business entity, and that it believed CCC would not have a measurable impact on Carlyle's other funds, investments and portfolio companies. Carlyle Group said that Carlyle Capital's defaults did not trigger cross-defaults for any Carlyle borrowings.

      The Carlyle Group, based in Washington, DC, has more than $75 billion under management. One of the world's largest private equity firms, it owns companies including TV ratings firm Nielsen, doughnut seller Dunkin' Brands and former General Motors unit Allison Transmission.

      Carlyle Capital said in New York late on Wednesday that talks with lenders deteriorated after a decline in the value of its mortgage investments, which it said would result in margin calls of $97.5 million on top of the $400 million it was already facing.

      A "successful refinancing is not possible," Carlyle Capital said, after trying for the past week to work out a deal with lenders to stave off bankruptcy.

      The credit crisis, triggered last year when subprime mortgages made to risky U.S. borrowers went sour, has put increasing pressure on lenders to tighten credit and made it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities -- the investments that Carlyle Capital was set up to invest in..."

    

      NEW YORK (Reuters) - "Wall Street banks are facing a "systemic margin call" that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), said in a report late on Friday.

      JPMorgan, which sent a default notice to Thornburg Mortgage Inc. (TMA.N: Quote, Profile, Research) after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group's mortgage fund also failed to meet $37 million in margin calls this week.

      "A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages," according to the report co-authored by analyst Christopher Flanagan. "We would characterize this situation as a systemic margin call."

      The credit crisis that began about a year ago will likely intensify after Friday's weak February U.S. employment report "that most definitely signals recession," JPMorgan said.

      Indeed, corporate bond spreads widened to a new record on Friday, surpassing levels seen in October 2002 during a boom in bankruptcies following the dot-com crash. U.S. employers cut payrolls in February for a second consecutive month, slashing 63,000 jobs, the biggest monthly job decline in nearly five years, the U.S. Labor Department reported on Friday.

      "The weak February employment report points to an economy in recession," JPMorgan said..."

      India (sundayherald.com) - "IT IS the new face of hunger. A perfect storm of food scarcity, global warming, rocketing oil prices and the world population explosion is plunging humanity into the biggest crisis of the 21st century by pushing up food prices and spreading hunger and poverty from rural areas into cities.

      Millions more of the world's most vulnerable people are facing starvation as food shortages loom and crop prices spiral ever upwards.

      And for the first time in history, say experts, the impact is spreading from the developing to the developed world.

      More than 73 million people in 78 countries that depend on food handouts from the United Nations World Food Programme (WFP) are facing reduced rations this year. The increasing scarcity of food is the biggest crisis looming for the world'', according to WFP officials.

      At the same time, the UN Food and Agriculture Organisation has warned that rising prices have triggered a food crisis in 36 countries, all of which will need extra help. The threat of malnutrition is the world's forgotten problem'', says the World Bank as it demands urgent action.

      The bank points out that global food prices have risen by 75% since 2000, while wheat prices have increased by 200%. The cost of other staples such as rice and soya bean have also hit record highs, while corn is at its most expensive in 12 years.

      The increasing cost of grains is also pushing up the price of meat, poultry, eggs and dairy products. And there is every likelihood prices will continue their relentless rise, according to expert predictions by the UN and developed countries.

      High prices have already prompted a string of food protests around the world, with tortilla riots in Mexico, disputes over food rationing in West Bengal and protests over grain prices in Senegal, Mauritania and other parts of Africa. In Yemen, children have marched to highlight their hunger, while in London last week hundreds of pig farmers protested outside Downing Street.

      If prices keep rising, more and more people around the globe will be unable to afford the food they need to stay alive, and without help they will become desperate. More food riots will flare up, governments will totter and millions could die.

      Food scarcity means a big increase in the number of people going hungry,'' says the WFP's Greg Barrow. Without doubt, we are passing through a difficult period for the world's hungry poor.'' The WFP estimates it needs an additional $500 million to keep feeding the 73 million people in Africa, Asia and central America who require its help. We need extra money by the middle of 2008 so we don't have to reduce rations,'' says Barrow.

      He also points out that age-old patterns of famine are changing. "We are feeding communities of people we didn't expect to feed," he explains.

      As well as being rural, the profile of the new hungry poor is also urban, which is new. There is food available in the markets and shops - it's just that these people can't afford to buy it. This is the new face of hunger.'' The food shortages will also affect western industrialised nations such as Scotland, Barrow says. Scarcity means that some foods will get very expensive, or disappear from supermarkets altogether, meaning a move to seasonal, indigenous vegetables.'' Of the 36 countries named last month as currently facing a food crisis, 21 are in Africa. Lesotho and Swaziland have been afflicted by droughts, Sierra Leone lacks widespread access to food markets because of low incomes and high prices, and Ghana, Kenya and Chad among others are enduring "severe localised food insecurity".

      In India last year, more than 25,000 farmers took their own lives, driven to despair by grain shortages and farming debts. "The spectre of food grain imports stares India in the face as agricultural growth plunges to an all-time low," warns India Today magazine..."

      London (business.timesonline.co.uk) - "The global credit crisis plunged to new depths yesterday as persistent fears over the collapse of a large financial institution caused funding markets to dry up and forced the US Federal Reserve to make available up to $200 billion (£99.3 billion) of emergency financing.

      The Fed said that a “rapid deterioration” in the credit markets in recent days had prompted it to begin a series of fresh cash injections in an effort to shore up the balance sheets of America’s stricken banks. Unemployment also shot up in the US last month, adding to the gloom. US stocks tumbled, dragging the Dow Jones industrial average down 138.40 points to 11.902.00. Treasury prices jumped and the dollar fell to record lows.

      Bankers said that the moves underscored the deepening severity of the crisis, which was triggered last June by the collapse of the American sub-prime mortgage market and has got progressively worse since. One senior banker in London said: “This is the beginning of the real credit crisis and it’s not going to end without a major casualty.”

     Sources said that the present crisis was triggered by cash-strapped banks starting to get tough with their hedge fund clients by making margin calls on loans and drastically raising interest rate payments overnight. The move has pushed the funds into the panic-selling of assets, mostly AAA-rated US mortgage securities, and several are thought to be on the brink of collapse. One of them, Carlyle Capital Corporation (CCC), said yesterday that overnight it had received “substantial additional margin calls” linked to its souring investments in US mortgages.

     Thornburg, the US mortgage lender, exacerbated investor jitters when it said that it did not have enough cash to meet $610 million of margin calls. Last week Peloton, a London hedge fund, collapsed after it became unable to meet the banks’ demands.

     Bankers said that the problem was related to a perceived increased risk surrounding the AAA-rated prime mortgages and to the consequences of dangerous overleveraging of the funds themselves. In the case of Carlyle, its CCC fund had leveraged its assets by $30 for every $1 of its own cash.

     “The whole industry was created by cheap debt,” the banking source said. “It was really all just an illusion.”

     Underlining the Fed’s desperate attempts to calm markets, for the first time it said that it would accept mortgage-backed assets as collateral from the banks for fresh loans. As the fear spread, the perceived risk of owning US corporate bonds - measured by the widening of credit spreads – also rose to its highest level..."

      London (timesonline.co.uk) - "The spectre of food shortages is casting a shadow across the globe, causing riots in Africa, consumer protests in Europe and panic in food-importing countries. In a world of increasing affluence, the hoarding of rice and wheat has begun. The President of the Philippines made an unprecedented call last week to the Vietnamese Prime Minister, requesting that he promise to supply a quantity of rice.

      The personal appeal by Gloria Arroyo to Nguyen Tan Dung for a guarantee was a highly unusual intervention and highlighted the Philippines’ dependence on food imports, rice in particular.

      “This is a wake-up call,” said Robert Zeigler, who heads the International Rice Research Institute. “We have a crisis brewing in rice supply.” Half of the planet depends on rice but stocks are at their lowest since the mid1970s when Bangladesh suffered a terrible famine. Rice production will fall this year below the global consumption level of 430 million tonnes.

      Street protests and rioting in West Africa towards the end of last year were a harbinger of bigger problems, the World Food Programme said. The global information and early warning system of the Food and Agricultural Organisation (FAO) has monitored outbreaks of rioting in Mexico, Morocco, Uzbekistan, Yemen, Guinea, Mauritania and Senegal. There have also been protests in Jakarta, the Indonesian capital, over government price increases.Population pressure and increased wealth are mainly to blame for the resurgence of food insecurity. More people are eating meat and dairy products in Asia, which increases the demand on the animal-feed industry. Milk powder prices rose from $2,000 to $4,800 per tonne last year as rising consumption of milk products in Asia coincided with shortages in the Western world. Drought in Australia has worsened the problem as have government policies in Europe and America to increase the use of biofuels.

      Mounting concern about rice has prompted the Indian Government to restrict exports of certain varieties. The measure triggered a surge in global rice prices, which have risen 50 per cent in a year, according to the FAO. The rice shortage is even felt in Britain where the price of basmati, the biggest-selling variety, is rising rapidly.

      Wheat is suffering even greater pressures, with prices up 115 per cent in a year. A succession of droughts in Australia has put upward pressure on the cost of a food commodity that is already in short supply. Stocks are at a 40-year low and exports are being restricted from Beijing to Buenos Aires. Ukraine started closing its door to grain exports in June and Russia set a 40 per cent export tariff on wheat in January.

      Argentina has delayed the reopening of its wheat export registry until April to protect domestic supplies, and China, a net exporter of corn, rice and wheat last year, has imposed export quotas on grain in order to stem runaway food price inflation. A surge in its inflation index in December was blamed entirely on rising food prices, notably pork, which rose 48 per cent.

      Farmers worldwide are worried about feed costs. In Europe pig and poultry breeders are threatening to cut production unless they are paid higher prices..."