A Better Outlook for "New Century"

Chris Brendler, an analyst with Stifel Nicolaus upgraded New Century from “Sell” to “Hold”, saying the company still has enough cash to handle its current tough situation. He called liquidity concerns, which led to last week’s 43% drop in stock prices, “premature”. Before last week’s disaster, Stiefel Nicolaus’ opinion of New Century was quite negative, which means they foresaw trouble ahead.

According to Brendler, New Century has $360 million in cash and $17 billion in borrowing arrangements, 50% of which aren’t utilized and it seems that the company will be able to manage. It is still unclear how badly the adjustments to mortgage value will affect New Century, but analysts believe it will be able to wriggle out of its financial fix.

New Century shares rose 2.9% to $17.70 in pre-market activity, as other subprime lenders’ stocks climbed an average of 0.5%. These include Countrywide Financial, IndyMac Bancorp and Novastar Financial.

Nevertheless, the outlook for subprime mortgage lenders remains challenging, as delinquency rates on high-risk loans rise.