What Are Brokers' Exposures to Carlyle Capital?

Brokers' trading exposures to Carlyle Capital's soon to be defaulted fund -- rumored to be leveraged at an astonishing 32X! -- has been the big question circulating street desks Thursday.

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 (UBS) $1.8B
-Bear Stearns (BSC) $1.7B
-ING (ING) $1.5B
-JPMorgan (JPM) $1.4B
-Calyon $1.3B
-Merrill Lynch (MER) $760m
-BN Paribas $600m
-Credit Suisse (CS) $500m

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

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 and Merrill Lynch, for example, value their high-grade super-senior 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 super-senior 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...

Comments

[Lisa:]

Once again Goldman dodges the bullet.

2008 Mar 13 04:25 PM

[Mr Mortgage:]

Hi Barry,

The operative phrase is ..."Based on available information,". Just wait until the Pay Options, ALT-A, Prime and Home Equity loans start popping. They already are starting here in CA. As a matter of fact, in CA 66% of all new foreclosure activity are Notices of Default, which are the 90-day lates (preforeclosure). This means a wave is coming and the lip is just here.

Also, the impact from the 'negative equity effect' is just starting to be realized.

By the sounds of this report, they are still holding to their guns that this is still a 'subprime thing'. They should know better.

2008 Mar 13 05:44 PM

[poet1:]

How great is the possibility that Citigroup will go bankrupt? If all these other shoes are set to drop, & Citi is playing down their problems-

2008 Mar 13 07:28 PM

[Richard Shi...:]

Barry,Mark,

Right you are, I personally know a few people "on the verge" whose home equity lines have not quite run out. These are prime and alt-a types. Also, I think S & P limited its prediction to "supprime" but the market heard what it wanted to hear.

What a mess.

2008 Mar 13 10:10 PM

[jbmaria:]

Mr. Shinnick,
Are you still "gambling" on ETFC?
Just wondering if recent events have run you off?

2008 Mar 14 05:23 PM

[Richard Shi...:]

JbMaria,

Long gone, I actually made a miniscule profit on that trade, but I saw the writing on the wall and jumped out in the $4.90 range. Its those pesky mortgages again. In any case, these days the long trades are just hedges and the short trades seem to be the real "investments" as it is hard to hold any long trades with any conviction.

2008 Mar 14 05:55 PM

[jbmaria:]

Mr. Shinnick,

Seems like prudent move.
My plan is to wait until they throw up a "clean" Q or two.
I own a tiny bit of AMTD,no mtg.exposure,but getting marked down with all things financial.They'd appear to be the baby amidst the bathwater?
I believe SCHW is the ultimate winner in the OLB space now that ETFC has shot itself in the foot,knee and groin.
SCHW is actually trying to build its bank/mortgage side which would match,maybe surpass, the full service ETFC model I always liked.Seems like a smart move as we can be pretty certain anything they write now will be of super high quality.Targeting $17.50 as an attractive risk/reward level (yeah,a guess).
Have you any current interest in the OLB space or are you just playing total defense re financials? Is this really Armageddon?

2008 Mar 15 01:15 PM