Subprime mortgage lender Accredited Home Lenders Holding Co. announced today that it had made a deal to sell $1 billion in mortgage loans under a 90-day purchase agreement to an unknown investor at an advance rate.
The sale of assets was a necessary evil for the company to limit exposure to margin calls and stay on its feet amid its souring deal with private equity firm Lone Star Funds.
Accredited said it sold $500 million in loans on Friday, and plans to sell the rest by October, with the ability to buy some back in November if the investor allows it.
While it seems the deal was made to keep Accredited afloat, the company said it would not produce or drain significant liquidity, though it may push Lone Star closer to finalizing the buyout.
Earlier this month, Accredited sued Lone Star for failing to complete their buyout of Accredited, which valued the company at $15 a share, a far cry from their current share price.
Lone Star responded, saying Accredited had not met conditions needed to close the deal, though Accredited said it had no idea what those conditions were.
A court trial to resolve that matter is scheduled for late September or early October, with Lone Star likely banking on the $12 million breakup fee instead.
The mortgage lender also has roughly $600 million worth of loans not covered by this agreement, which were funded by warehouse credit facilities and company cash.
Shares of Accredited were up on the news about 30 cents to $6.74 in midday trading.