Accredited Home Lenders, which plunged 35% to close at $5.82 Monday on news that private equity firm Lone Star Funds is backing away from its $400 million buyout of the company, is suing Lone Star to force it to honor its commitment. Lone Star submitted a regulatory filing Friday stating that because of "the drastic deterioration in the financial and operational condition" of Accredited, it "does not expect to be accepting shares tendered." The move is viewed by some analysts as a gambit to knock down the purchase price. "It's a little bit of a game of chicken," said analyst Scott Valentin of Friedman, Billings, Ramsey (an advisor to Accredited). "The value of [Accredited's] assets have come down a lot since the deal was announced. What does Lone Star have to lose?" Lone Star agreed in June to buy Accredited for $15.10 a share, but the value of lenders with significant subprime exposure has plummeted since then. The transaction was approved by state regulators on Friday, hours before Lone Star pulled out. Accredited, which maintains that it has satisfied all conditions for the deal, said "industry conditions and the condition of the capital markets do not provide a basis for Lone Star to walk away from its obligations." Auditors have warned that if the deal is not completed, Accredited could collapse. The tender offer expires Tuesday night.
Sources: MarketWatch, Forbes, Bloomberg, TheStreet.com
Commentary: Accredited Home Lenders Gets Regulatory Approval for Sale to Loan Star • Accredited Home Lenders: Buyout Gets Scrapped • Speculation Continues to Plague the Accredited Home Lenders and Lone Star Merger
Stocks/ETFs to watch: LEND. Competitors: FNM, FRE
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