Tuesday, June 5, 2007

Accredited acquired by private equity fund

Accredited Home Lenders Holding Co. will be sold to Lone Star Fund V PL for $400 million. The fund will buy all of Accredited’s shares for $15.10 a piece, 10% higher than the stock’s price on Friday, June 1st. On Monday, Accredited’s stock traded for $15.12.

The offer will probably close in the third quarter of this year, which will mark the end of companies specializing solely in subprime lending as a field of business. Accredited is one of the last lenders operating exclusively in the subprime sector. NovaStar
Financial is looking for a buyer, too, and Delta Financial will probably remain in business because it did not originate adjustable-rate subprime loans.

Accredited has been “exploring strategic options” for a while now, as troubles in the subprime sector undermined its financial standing. It reduced its workforce of 4,200 by 1,300 in the first quarter, as delinquencies on its loans spiked. It had to sell most of its inventory at a substantial discount in order to raise cash, and received a $230 million term loan from Farallon Capital Management LLC. It also managed to renew an existing $600 million credit line, thus somewhat improving its situation. It was threatened by delisting from the Nasdaq Stock Exchange because it failed to file its annual report for 2006 on time, due to the resignation of its auditor, Grant Thornton LLP.

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