NovaStar Shares Hit by Possible Delisting

October 18, 2007 No Comments »

Struggling mortgage lender NovaStar Financial saw shares dip $1.43, or 19.38 percent a day after the NYSE warned of a possible delisting.

On Wednesday, the NYSE moved to delist shares of NovaStar, saying 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.

The Kansas City-based company also doesn’t qualify for a NYSE listing because its market cap of roughly $56 million is below minimum requirements.

NovaStar plans to fight the possible delisting, saying it will seek a review of the NYSE’s determination, and will explore “alternative arrangements” for its stock listing if the appeal proves unsuccessful.

The lender also saw the S&P downgrade $306.6 million of RMBS in its 2007 securitizations, which could lead to margin calls and additional trouble.

It’s the latest bit of bad news to hit the beleaguered lender who recently laid off 500 employees and ceased its wholesale operations because of dire conditions on the secondary market.

On Tuesday, NovaStar agreed to sell its servicing rights to Morgan Stanley’s Saxon Mortgage for $175 million in cash in a bid of pay down mounting debt.

NovaStar is down to roughly 600 employees, and is believed to be originating loans through its retail channel, though it’s unclear how effective the lender is performing in the current market.

Shares of NovaStar ended the day at $5.95, a bit higher than their 52-week low of $4.17, but a far cry from the 52-week high of $129.00.

To be continued…

Leave A Response