Shares of troubled bank Fremont General Corp. rose more than 40% last week amid a flurry of news that took a number of market participants by surprise and roiled those with a short interest in the business. Fremont announced iStar Financial planned to buy its commercial real estate unit for $1.9 billion;
a Gerald Ford-led investor group would take a minority interest in the company; and former Fremont Chief Executive Louis Rampino would relinquish his position to Carl Webb, among other senior management moves.
The Santa Monica, Calif.-based Fremont agreed to sell its troubled subprime lending business to hedge fund Ellington Capital Management in April, leaving only its retail banking unit, which focuses on certificates of deposit, in tact.
The price that Fremont was able to sell its commercial lending business at and the involvement of Ford's group in the company were the primary driver of investors' new optimism in Fremont. iStar also bought a 30% stake in Fremont's roughly $6.5 billion loan portfolio and agreed to fund up to $4.4 billion of unfunded loan commitments associated with it.
Ford, well-known for his successful turnaround of Golden State Bancorp prior to its sale to Citigroup, will become chairman of Fremont. He replaces James McIntyre. Fremont's new chief executive Webb was once Golden State's president and chief operating officer. J. Randy Staff, Golden State's former chief financial advisor, will replace Patrick Lamb as Fremont's chief financial officer. The Ford-led group paid Fremont $80 million for its minority stake in the company.
Fremont, once one of the largest U.S. subprime mortgage lenders, was one of the first to publicly show signs of deterioration as it struggled under loan repurchase requests. The lender in February announced it would no longer originate subprime loans.
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