Accredited Stops Accepting
New U.S. Loan Applications
by Kevin Kingsbury
From The Wall Street Journal Online
August 23, 2007
Subprime mortgage lender Accredited Home Lenders Holding is no longer accepting new U.S. loan applications and will cut more than half its work force as the company deals with the ongoing credit-market turmoil.
The San Diego firm said "substantially all" of its retail lending business, which is made up of 60 retail branches and five retail support locations, "will be effectively closed" as of Sept. 5, affecting 480 positions. Another 490 jobs will be lost at the wholesale operations, which will close five of its 10 divisions and cut staff at the other five. About 340 jobs will remain.
Also, staff at Accredited's headquarters will shrink to about 220 from 400 and the company's settlement and insurance-services business "will be substantially reduced." No details on the unit's cutbacks were provided.
Once the moves are completed, the firm's work force will be about 1,000, down from 2,600 as of June 30. Accredited's Canadian operations aren't affected by the restructuring.
"These difficult decisions were made out of necessity in light of the continued and widely publicized turbulence in the mortgage and financial markets, but with a heavy heart," said Chairman and Chief Executive James A. Konrath.
The restructuring announcement comes a day after Accredited said it would trade $1 billion in home loans to an investor in exchange for the right to buy those loans back later this year at a premium. The complex deal essentially protects the lender from loans losing value while offering the chance to turn a profit if the turbulent mortgage market improves.
At the same time Accredited deals with its struggles, the company has been pushing to get its proposed $400 million acquisition by private-equity firm Lone Star Funds closed. The deal's deadline was recently extended two weeks to Aug. 28. Lone Star has been contending that conditions to the closing haven't been met, but Accredited has argued that isn't the case.
Lone Star said earlier this month in a filing with the Securities and Exchange Commission that it might pull out of the deal, blaming "the drastic deterioration in the financial and operational condition" of the subprime-mortgage lender.
Last week, Accredited said over 97% of its stock had been tendered by shareholders in support of the $15.10 a share offer made in June.
In premarket trading, the stock fell 15 cents to $6.40.
Accredited -- long viewed as one of the stronger independent lenders because of its relatively prudent underwriting policies -- saw its shares plummet to a 52-week low of $3.77 in March, after disclosing its funding challenges amid the broader struggles of an industry plagued by rising delinquencies on loans made to high-risk borrowers. It was among the top 20 subprime lenders last year.
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