Carlyle Group's mortgage-bond fund said creditors may liquidate as much as $16 billion of securities unless the two sides reach agreement on debt repayments.

The fund has asked lenders to refrain from further sales after they liquidated collateral securing $5 billion of debt, Carlyle Capital Corp. said in a statement today. It is meeting lenders to discuss more than $400 million of margin calls and is ``evaluating all options,'' the Guernsey, U.K.-based fund said. Carlyle Capital used loans to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, which the firm says have an ``implied guarantee'' from the U.S. government. Even those bonds have slumped following the collapse of the subprime-mortgage market, leading to the failure of hedge funds led by Peloton Partners LLP.

``This particular Carlyle entity wasn't prepared,'' said Philip Keevil, a senior partner in London at Compass Advisers LLP and former head of European mergers at Salomon Smith Barney Inc. ``They hadn't started selling ahead of time and now they're having trouble liquidating their positions.''

Started by David Rubenstein 21 years ago, Carlyle expanded its mortgage investments last year, selling $300 million of shares in Carlyle Capital.

``Due to recent turmoil in the market for mortgage-backed securities, the company's lenders have significantly reduced the amount they are willing to lend against the company's portfolio of U.S. government agency AAA-rated residential mortgage-backed securities,'' Carlyle Capital said today.

Fund Plunge

Since March 5, lenders have told Carlyle Capital that they consider it ``in default under financing agreements,'' the release said. The fund plunged 58 percent to $5 in Amsterdam on March 6 after disclosing it couldn't meet lenders' demands for more collateral to offset a decline in its holdings.

Carlyle Group sold the shares for $19 in a July initial public offering. The stock was suspended from trading March 7.

``We're evaluating all options,'' Emma Thorpe, a Carlyle spokeswoman in London, said by telephone. ``Nothing has been ruled in, and nothing has been ruled out.''

Unless Carlyle Group provides additional financing, the fund ``could be forced into significant asset sales into a weak market or could face bankruptcy,'' Citigroup Inc. analysts including Donald Fandetti in New York wrote last week in a note to clients. Thorpe declined to comment on the Citigroup report.

Carlyle Group, the world's second-biggest leveraged-buyout firm by assets, has extended $150 million in credit to Carlyle Capital since August.