Lou Gerstner-Led Carlyle Capital on Brink of Collapse

The Carlyle Group's publicly traded Carlyle Capital Corp. defaulted on approximately $16.6 billion of debt. The company said that the remaining indebtedness is expected to soon to go into default.

CCC is the Washington-based investment firm's mortgage bond fund and is the latest casualty of the U.S. credit crisis. In total, Washington-based Carlyle Group had $74.9 billion under management in 57 funds.

"The company expects that its lenders will promptly take possession of substantially all of the company's remaining assets," the company said in a statement. Carlyle chairman Gerstner was CEO and chairman of IBM from 1993 until his retirement in December 2002.

According to an article at the time in The New York Times, Gerstner was to sit on the investment committees of two of the firm's funds, a venture fund and a buyout fund. It has not been disclosed if Gerstner was part of the CCC group.

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Among its many deals, The Carlyle Group's technology group this past January acquired KCS.net Holding AG, an enterprise resource planning solution vendor and Microsoft Gold Certified Partner based in Liestal, Switzerland.

Gerstner has been credited with turning around IBM in the early '90s when the company was accused of putting too much focus on its mainframe business and under Gerstner subsequently shifted to the technology services business.

One of the company's coups was its hostile takeover of the software company Lotus Development in 1995. After much bargaining, IBM bought the company for $3.52 billion. Gerstner then reorganized the company into four units: the personal computer software business, communications software, telecommunication networks and consulting

Gerstner has also acknowledged his own missteps during his IBM tenure, such as underestimating the networking market and not selling computers directly to end users. On a more personal front, he was also criticized for his harsh management style that clashed with IBM's kinder, software corporate culture at the time.