NovaStar Reports Loss, Faces High Chance of Delisting

November 14, 2007 No Comments »

NovaStar Financial reported a third-quarter loss of $598 million after market close Wednesday, and said its shares could be de-listed from the New York Stock Exchange.

The Kansas City-based lender said there was a “high likelihood” that its shares would be de-listed and would probably resume trading on the over-the-counter bulletin board, a move which could lead to bankruptcy.

The subprime lender said it lost $64.05 per common share in the third quarter, compared to net income of $2.91 per common share, or $25.3 million a year earlier.

“As the mortgage environment has grown progressively worse through 2007, we have greatly reduced our business activity and simplified our organization,” said NovaStar Chief Executive Scott Hartman, in a statement.

“Going forward, our strategy is to manage the cash flows from our portfolio of mortgage-backed securities and operate our retail brokerage operations.”

Since the end of the third quarter, the embattled lender has sold $175 million in mortgage servicing rights and $364.3 million worth of home loans.

NovaStar has also suspended the payment of the next dividend on its Series C Preferred Stock and Series D-1 Preferred Stock.

It was one of the top 20 subprime mortgage lenders last year, originating more than $10 billion in home loans, according to Inside Mortgage Finance.

But recent turmoil in the mortgage industry forced the lender to shutter its wholesale division in August, leading to 500 layoffs.

And one month later, NovaStar announced that it would cut 275 jobs and close 12 of its 16 retail loan origination offices.

In mid-October, NovaStar warned of a possible delisting after the NYSE said it was terminating its status as a Real Estate Investment Trust, retroactive to the beginning of the year, for failure to pay investors a required dividend.

Shares of NovaStar ended the day down six cents, or 1.29%, to $4.59, but plummeted a further $1.79, or 39%, to $2.80 in after hours trading.

A decision from the NYSE on the possible delisting is expected on December 5th, the company noted.

Update: Shares of NovaStar were down $2.77, or 60.37%, to $1.82 in late trading Thursday, valuing the company at a mere $17 million and change.

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