Wednesday, April 4, 2007

Accredited Home Lenders Obtains $500 Million Line Of Credit In An Attempt To Stay Afloat

In efforts to stay afloat in the troubled mortgage market, Accredited Home Lenders is considering various strategic options, including a merger, raising additional capital, or some other “strategic transaction”, according to a statement. The lender has already obtained a $500 million warehouse line of credit from an undisclosed commercial bank. Combined with a renewed borrowing arrangement for $600 million, this means that Accredited has arranged $1.1 billion in financing, which will help it avoid the tragic fate of some fellow subprime lenders. It is also in discussions to renew other sources of financing.
Analysts believe that Accredited currently has sufficient liquidity to keep operating, even though its long-term outlook remains challenging. Accredited’s auditor, Grant Thornton LLP, has resigned and will not complete its audit of the lender’s financial statements for 2006. According to economists, Accredited has better management and portfolio than those of other subprime lenders, which means it has better chances to stay in business. It is also not a Real Estate Investment Trust, or REIT, and therefore is not required to distribute most of its income in dividends. Unlike many other mortgage companies, Accredited has not stopped lending, even though it issued fewer loans in the first quarter of 2007 than a year earlier.

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