Skadden Arps Slate Meagher & Flom has landed a lead advisory role on the liquidation this week of Carlyle Capital Corporation.

City-based restructuring partner Chris Mallon (pictured right) is leading the team for Skadden advising Carlyle Capital, which has defaulted on debts worth $16bn (£7.8bn). The company reported earlier this week that it had failed to reach an agreement with its lenders, which include Deutsche Bank and JP Morgan Chase.

The role comes after Mallon joined Skadden late last year from rival New York firm Weil Gotshal & Manges. Mallon, who has advised on such major restructurings as those of Global Crossing and Enron, previously headed up the City restructuring team at Weil Gotshal.

Skadden also advised Carlyle Capital on its initial public offering last year.

Linklaters is advising the Dutch-listed company in the Netherlands, fielding a team in Amsterdam headed up by managing associate Wim Hazeleger. Offshore firm Carey Olsen has also landed a role.

The high-profile mandate comes with restructuring lawyers gearing up for a wave of hedge-fund related instructions as banks start to withdraw support from highly-leveraged investors.

Recent weeks have also seen the London-based hedge fund Peloton Partners liquidate a £2bn fund after pressure from creditor banks. Continued falls in the value of mortgage-backed securities are expected to trigger more collapses across the sector.

Mallon told Legal Week: "The likelihood is that all of us who advise on restructuring will be seeing a lot of matters like this in the future. In the long term there will be years of litigation to come out of this."

Bingham McCutchen City chief James Roome commented: "There are clear signs of stress amongst hedge funds that have geared up to buy credit product. If prices of fixed income continue to rise, then market falls will continue."

Carlyle Capital, a subsidiary of private equity giant the Carlyle Group, was set up in 2006 and borrowed heavily to purchase AAA-rated mortgage securities, the value of which have fallen dramatically. The company is now expected to default on the remainder of debts that total around $21bn (£10.3bn).

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