Friday, August 31, 2007

It’s official: Lone Star wants to amend tender offer

Yesterday, Lone Star delivered a letter to Accredited Home Lenders Holding Co.’s Board of Directors, which essentially asked for a substantial price cut on the company. It is clear to anyone that Accredited is worth well below $15.10 a share, and its price is declining with each passing day. Therefore, the new price Loan Star is offering is $8.50, “a premium of 35% over the closing price of the Company Common Shares on August 30, 2007”, according to the letter. Still a good price I would say, especially knowing that Lone Star could simply walk away from the deal – leaving the $12 million break up fee behind and after lengthy court proceedings, that is.

And as I read reports on home prices, I can’t help wondering what’s going on. Not that a decline of 0.1% vs. an increase of 0.1% makes much difference, but the way they present data is quite confusing. OFHEO (the Office of Federal Housing Enterprise Oversight, the regulator of Fannie Mae and Freddie Mac) came up with a 0.1% increase in home prices in Q2, and growth of 3.2% year-over-year, the slowest in a decade. Naturally, OFHEO Director James Lockhart didn’t fail to mention that “significant price declines appear localized in areas with weak economies”, but I would say these numbers are too vague because of the way they’re calculated. An index compiled by Standard & Poor’s Corp. showed that home prices declined 3.2% from last year, how’s that for slow house appreciation. Naturally these indices are calculated in different ways and based on different sets of data, so it’s hard to compare, but they both paint similar pictures of the housing market: no more “easy money” and “rapid appreciation”, this is the bursting of the housing bubble (or so say the pessimists).

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