Seeking Alpha
Profile|
( followers)  

Shares of subprime mortgage lender New Century Financial fell 4.4% to $3.70 in AH trading after the company announced it will no longer accept loan applications because some of its backers are refusing to provide funding. The shares had already nosedived 25% during regular trading to close at $3.87. The stock is down more than 73% since last Friday's close. New Century has breached one of the covenants, or minimum financial targets, on which its agreements with warehouse lenders are based, and has not succeeded in securing waivers from five of its lenders. The bank has been obliged to repurchase some bad loans by one of its lenders, but has received $265 million in financing from another; Citigroup is rumored to be the former and Morgan Stanley the latter. New Century is also the subject of a federal investigation into its accounting practices. In related news, David Einhorn, manager of the Greenlight Capital hedge fund, resigned his position as a director of New Century. Greenlight owns 6.3% of New Century's shares. The value of that stake has gone from over $160 million in mid-2006 to about $14 million.

Sources: MarketWatch (I, II), Wall Street Journal
Commentary: New Century Leads Subprime Lender Selloff as its Shares Plummet 70%Asset-Backed Insecurities: Containing the Subprime Mortgage CollapseSubprime Trade Nailed (With a Little Help From Napoleon and Trump)
Stocks/ETFs to watch: New Century Financial Corp. (NEW). Competitors: Countrywide Financial Corp. (CFC), Pacific Premier Bancorp Inc. (NASDAQ:PPBI), Novastar Financial Inc. (NFI), Fremont General Corp. (FMT)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Source: New Century Halts New Loans; Einhorn Resigns