Carlyle steel unit sale to Russian firm collapses

* Russia's Novolipetsk terminates deal to buy US rival

* Steelmaker John Maneely owned by buyout firm Carlyle

* Lawsuit against Novolipetsk pending

By Megan Davies

NEW YORK (Reuters) - Russian steelmaker Novolipetsk Steel (NLMK.MM) (NLMKq.L) has pulled out of a $3.5 billion agreement to buy U.S. rival John Maneely Co from buyout firm Carlyle, the U.S. company said on Friday.

The deal, struck in August, has looked on shaky ground since October when Washington, D.C. based-Carlyle [CYL.UL] sued Novolipetsk (NLMK) to complete the deal, claiming the Russian firm had breached its obligations to close the transaction.

John Maneely's parent, DBO Holdings, owned by Carlyle, said in a statement on Friday that the Russian steel producer had terminated the deal. A source familiar with the situation said that Novolipetsk informed Carlyle that they were terminating the deal on Thursday.

DBO alleged in the October lawsuit that NLMK had the financing available to do the deal but "failed to ... take the necessary actions ... to consummate" the takeover.

The deal was to have been financed from available bank commitments, and a $2 billion bridge loan provided by Merrill Lynch, Deutsche Bank and Societe Generale, the parties said in August.