In what it hopes will be a uplifting step in a sinking subprime market, struggling residential mortgage provider Accredited Home Lenders agreed to be acquired by private equity firm-Lone Star Fund V LP for approximately $400 million or $15.10 cash per share today.
"The agreement is the best alterative available to protect shareholder value and provide capital," James Konrath, chairman and chief executive officer, said in a release.
The acquisition is structured as an all-cash tender offer and the company's outstanding 9.75% series A perpetual cumulative preferred shares of Accredited Mortgage Loan REIT Trust will continue to remain outstanding. The transaction is expected to close in the third quarter 2007.
This is not the first acquisition related to the company. Accredited acquired Aames Financial Corp., last year, combining both firm's funding and origination capabilities and increasing the combined the companies' financing capacity of $7 billion (ASR, June 5, 2006).
But the recent subprime fiasco has left Accredited on shaky ground. In March, the company announced it would need to raise capital and would be cutting jobs (ASR, March 19, 2007). The firm then closed on a $230 million term loan facility provided by Farallon Capital Management in April but last month announced it would not file its first quarter 10-Q and predicted a significant loss in profits. As a result of the sector's bleak outlook, Moody's Investors Service and Standard and Poor's put the company on watch for a downgrade and negative credit watch, respectively, earlier this year.