Monday, March 12, 2007

More Subprime Problems

New Century Financial loses funding:

New Century's woes deepened on Monday after the stricken subprime mortgage firm said its lenders are cutting off credit.
The NYESE delayed the opening of trading in New Century shares 9:30 a.m. Eastern, pending a news announcement, according to market sources.

The stock had dropped 56% to $1.42 in pre-market trades on the mortgage lender's latest credit woes.

The firm said in a filing with the Securities and Exchange Commission Monday that lenders under its short-term repurchase agreements and aggregation credit facilities had either discontinued their financing or notified the company they plan to do so.

Bloomberg added this:

New Century Financial Corp., the nation's second-biggest subprime lender, said today it doesn't have the cash to pay creditors who are demanding their money now, increasing speculation that the company will go bankrupt.

Shares of the Irvine, California-based company, already down 90 percent in 2007, lost half their remaining value in pre-market trading. New Century said in a federal filing it doesn't have funds to give to lenders including Morgan Stanley, Citigroup Inc. and Goldman Sachs Group Inc. The creditors want New Century to repurchase all outstanding mortgage loans they financed.

``They're one step closer to bankruptcy,'' said Bose George, an analyst at Keefe Bruyette & Woods in New York who rates the shares ``market perform.'' ``The only possibility for survival now is for someone, potentially an investment bank, to step in.'' Bose said a rescuer might provide more money in return for a large equity stake.

This is not a Mom and Pop storefront. It's the second largest subprime lender in the country. That should indicate the degree of problems the industry is facing right now.