Battered subprime lender New Century announced yesterday it filed for bankruptcy protection under Chapter 11. It will receive up to $150 million in debtor-in-possession financing from The CIT Group and Greenwich Capital Financial Products. Also, it has entered an agreement to sell its servicing assets and platform to Carrington Capital Management for around $139m. Greenwich Capital will buy certain loans and residual interests in some securitized trusts for $50m. These sales are subject to Bankruptcy Court approval. CEO Brad A. Morrice called the sales agreements a "positive development," noting the difficult but appropriate decision of proceeding through bankruptcy protection. New Century said it will immediately cut its workforce by about 3,200, or 54%, in order to align its cost structure and in preparation for a possible sale of its businesses. Shares of New Century trading on the pink sheets lost 13.7% to $0.92.
Sources: Press release, MarketWatch, Reuters, The Wall Street Journal
Commentary: Troubled New Century Cuts Ties With Freddie Mac • Financial Sector: Sometimes Bad Gets Worse • US Mortgage Liquidity Crisis Spreading to Private Equity
Stocks/ETFs to watch: New Century Financial (NEWC.PK), CIT Group (CIT). Largest New Century Creditors: Barclays (BCS), Citigroup (C), Countrywide Financial (CFC), Credit Suisse (CS), Goldman Sachs (GS), Lehman Brothers (LEH), Morgan Stanley (MS). Subprime Lenders: Accredited Home Lenders (LEND), Novastar Financial (NFI), Fremont General (FMT), Fieldstone (FICC)
Related: New Century Financial Restructuring Information web site
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