March 7 (Bloomberg) -- The collapse of the subprime- mortgage market has engulfed Carlyle Group, the world's second- biggest leveraged-buyout firm by assets.

Carlyle Capital Corp., the firm's mortgage-bond fund, was suspended from Amsterdam trading today after it failed to repay lenders, who in turn sold assets held as collateral. The fund expects more margin calls, which may deplete capital. The pool may be liquidated and the stock left worthless, Bear Stearns Cos. analyst Keith Baird said in a note to clients.

``This marks a further savage step in the ongoing credit implosion of recent months,'' Baird wrote today.

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The blowup is a rare set-back for Carlyle founder David Rubenstein, who created the fund and tapped public markets for capital as part of efforts to expand his Washington-based firm beyond LBOs. Carlyle Group has extended a $150 million credit line to Carlyle Capital since August. It hasn't said how much of that line remains.

If Carlyle Group doesn't provide more 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 yesterday in a note to investors.

Carlyle Capital is ``considering all options,'' the fund said in its statement. Emma Thorpe, a spokeswoman for Carlyle Group in London, declined to comment.

The fund plunged 58 percent yesterday to $5 after first disclosing it couldn't meet lenders' demands for more collateral to offset a decline in its holdings. Carlyle sold the shares for $19 in an initial public offering in July.

Missed Calls

Carlyle borrowed to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, notes that Carlyle says have the ``implicit guarantee'' of the U.S. government.

The fund, run by John Stomber, originally delayed and then cut the size of the IPO by about 25 percent as the subprime contagion began. It then added the money raised in the IPO to a private $590 million pool opened in 2006. For every dollar of equity in the fund, the pool borrowed $32.

The effect of the U.S. subprime-mortgage market collapse has spilled over into top-rated agency debt, knocking down the value of the residential mortgage-backed securities. The Guernsey, U.K.-based fund said the agency mortgages it holds have the ``implied guarantee'' of the U.S. government.

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