Bankruptcy rumors swirled around top-three subprime lender New Century Financial Corp. last week - with one analyst likening the company's financial condition to a "death spiral" - as it ceased accepting mortgage applications and entertained heated discussions with its warehouse lenders and other liquidity providers. As of press time, New Century had secured amended warehouse agreements with six of its lenders, although its fate was largely contingent on the funding decisions of the five additional lenders in contracts with the company.

New Century has been hit with $150 million in margin calls over the past week, about $80 million of which was still outstanding from five lenders. An undisclosed lender stepped in extending $265 million intended for refinancing or satisfying existing debts. The loan was collateralized by New Century's REIT mortgage portfolio and residual assets - an arrangement described by JPMorgan Securities analyst Andrew Wessel as "essentially mortgag[ing] its last unencumbered assets in order to stave off immediate bankruptcy."

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