Magazine article American Banker

Fieldstone REIT Amended Credit: A Straw in Wind?

Magazine article American Banker

Fieldstone REIT Amended Credit: A Straw in Wind?

Article excerpt

Last week brought another sign that subprime mortgage lenders are struggling to retain their Wall Street funding arrangements as profitability dwindles.

Fieldstone Investment Corp., a Columbia, Md., real estate investment trust, revealed it had renegotiated its credit agreements with units of JPMorgan Chase & Co., Credit Suisse, and Lehman Brothers to avoid being in breach of net worth and operating profit requirements. The amendments are good through Jan. 31, and Fieldstone is trying to get them extended.

"Our lenders suggested that we wait before making some of the covenant changes permanent, to allow more time to determine the proper long-term thresholds," Mark Krebs, Fieldstone's director of investor relations, said Friday.

Fieldstone now must maintain a tangible net worth of at least $365 million, down from the previous minimum of $400 million, he said. The credit agreements were also modified so that Fieldstone will not be considered in breach of profitability covenants if it posts a fourth-quarter operating loss as expected, on top of a $45 million third-quarter loss that was due to delinquencies on new loans.

The company "expects to be in compliance" with the modified agreements at yearend, Mr. Krebs said.

Warehouse lenders can call their loans to mortgage companies if they fail to meet certain conditions. Such covenant violations have become a huge concern in the industry because of the surprise closure this month of Ownit Holdings LLC, an Agoura Hills, Calif. …

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