NEW YORK (AP) — The likely liquidation of Carlyle Capital Corp.'s remaining assets sent the fund's shares plummeting more than 90 percent yesterday and rattled stock markets around the globe. It was also a high-profile setback for private equity fund Carlyle Group.

Carlyle Capital said late on Wednesday that it expected creditors to seize all of the fund's remaining assets — investment-grade mortgage-backed securities — after unsuccessful negotiations to prevent its liquidation.

Its shares, which went public at $19 a share in July and traded at $12 just last week, tumbled 93.6 percent to 18 cents on the Euronext exchange.

The Amsterdam-listed fund shook financial markets last week after missing margin calls from banks on its $21.7 billion portfolio of residential-mortgage-backed bonds. Carlyle's troubles have amplified fears that billions of dollars of depressed mortgage-backed securities will flood the market, reducing their value even further.

"Although it has been working diligently with its lenders, the company has not been able to reach a mutually beneficial agreement to stabilise its financing," Carlyle Capital said in a statement.

Carlyle's troubles heightened worries about the billions of dollars in depressed mortgage-backed securities, one factor that sent stock markets down.

The sell-off would mark a huge defeat for the Washington, DC-based Carlyle Group, one of the largest private equity firms in the world with $76 billion in assets. Carlyle Capital, registered in Britain but managed by New York-based executives, was the first of its 55 funds to go public.

Carlyle Group said yesterday that the defaults would not affect its other investments.

"We believe it will not have a measurable impact on any of our other funds, investments and portfolio companies," the Carlyle Group said in a statement. It manages $81.1 billion and has invested $43 billion of equity in 774 corporate and real estate transactions that cost a total of $229.3 billion.

In Bermuda, Butterfield Bank said at the weekend that its private-equity partnership fund in conjunction with the Carlyle Group had no exposure to Carlyle Corp.

Since the beginning of the credit crunch, Carlyle Group has extended loans to Carlyle Capital to help meet margin calls, including a $150 million revolving loan, Citigroup analyst Donald Fandetti told investors in a research note March 6. "It appears CCC is fully drawn on this line and so far no further loans have been provided."

Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC, said it didn't make sense for Carlyle Group to keep bailing out its mortgage-focused fund.

"If it's a stand-alone entity that's vulnerable to failure, then you let it go and you bear the consequences but you certainly don't throw good money after bad," Wilkinson said.

More than a year ago, the fund leveraged its $670 million equity 32 times to finance a $21.7 billion portfolio of AAA-rated residential mortgage-backed securities issued by Freddie Mac and Fannie Mae. It borrowed money from at least a dozen banks and firms, including Bank of America Corp., Citigroup Inc. and Merrill Lynch & Co.

Carlyle Capital posted the securities as collateral under repurchase agreements, so if the value of the securities fall, the lender has the right to ask for more collateral — a margin call — to secure the loan. If the borrower does not meet the margin call, the lender may sell the security.

The value of mortgage-backed securities has plummeted as US home prices fall and foreclosures surge, prompting the banks to ask Carlyle Capital for more than $400 million in additional capital. The fund was unable to come up with the money, prompting lenders to start foreclosing on the securities.

As of Wednesday, Carlyle Capital said it has defaulted on about $16.6 billion of its debt, and the rest is expected to go into default soon.