Talk about night and day in the subprime mortgage lender industry. On one end New Century Financial Corp. (Pink Sheets: NEWC) filed for bankruptcy, and on the other Accredited Home Lenders Holding Co. (NASDAQ: LEND) obtained more than $1 billion in new financing.
Accredited received $1.1 billion through the combination of a new $500 million warehouse facility from a large commercial bank and the renewal of one of its existing warehouse facilities with an investment banking firm for $600 million. The company is also in discussions with another investment banking firm regarding the renewal of a $650 million warehouse facility.
At the end of the first quarter, Accredited said that it has $350 million in cash and that it originated $1.8 billion of mortgage loans in the quarter. This is down from the $3.6 billion for the first quarter of 2006, but obviously better than many of the subprime lenders who said they had to stop lending.
The company also announced the closing of a $230 million term loan facility with the San Francisco-based hedge fund Farallon Capital Management, LLC. The loan has a five-year term; is secured by a pledge of certain subsidiaries and a security interest over certain company assets. Farallon also received warrants to purchase 3.23 million shares of Accredited common stock. The warrants have an exercise price of $10 per share and a term of 10 years.
Accredited Chairman and Chief Executive Officer James A. Konrath made the following comments in a press release. “We are pleased with the closing of the term loan with Farallon. The loan is a key component of our plan to improve the Company’s liquidity in order to maneuver in a non-prime mortgage market that has become even more turbulent than the market we described in our conference call on February 14, 2007.”
“The Farallon loan, along with the restructuring of our warehouse financing capacity and recent loan dispositions, provides Accredited with greater flexibility in originating loans, securitizing ongoing loan production, and pursuing various strategic options,” added Konrath.
Accredited’s good fortune came just hours after rival New Century Financial filed for bankruptcy protection. New Century said it agreed to sell some assets, including its mortgage-servicing platform, for $189 million and cut 3,200 jobs, reducing its workforce by 54%.
Shares of Accredited were trading up $1.90 per share to $10.38 per share on volume of about 7 million shares.
Shares of New Century were trading up 7 cents to 98 cents per share on volume of over 1.3 million shares.