Magazine article American Banker

New Century: All Warehouse Lenders Pulling Their Funds

Magazine article American Banker

New Century: All Warehouse Lenders Pulling Their Funds

Article excerpt

All of New Century Financial Corp.'s warehouse lenders have withdrawn their financing from the company or given notice of their intent to do so, the Irvine, Calif., subprime lender said Monday.

Several creditors also have sought to end servicing relationships, New Century said in a filing with the Securities and Exchange Commission.

It also confirmed that Citigroup Inc. was the creditor that had withdrawn a $717 million facility, and that Morgan Stanley had replaced Citi. (New Century had disclosed the withdrawal and the replacement last week, but only press reports had identified the lenders involved.)

The announcement that all the other warehouse lenders were withdrawing their lines cast further doubt on New Century's already dim prospects for survival. Trading in its shares was suspended Monday.

Bose George, an analyst with KBW Inc.'s Keefe, Bruyette & Woods Inc., said Monday that he expects either a bankruptcy filing or an emergency sale in the near future, and that he is pessimistic anything will be left over for equity investors, particularly in light of hard-hit pricing on the subprime assets that make up New Century's collateral.

In a research note Monday, Robert Napoli, an analyst with Piper Jaffray & Co., wrote, "It appears unlikely" that New Century will get new financing, and the company appears "likely to liquidate." He described its possible disappearance as "a much-needed reduction of capacity for the subprime mortgage industry."

New Century shareholders would be left with nothing after liquidation, he wrote. "Assuming a 20% loss rate on the $8 billion of repurchase requests," New Century "would have to absorb $1.6 billion of losses, essentially wiping out shareholder equity."

A spokeswoman for New Century said Monday that all the information it had to disclose publicly was contained in its recent filings and press releases. …

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