Accredited ‘Exploring’ Strategic Options; Warns of Liquidity Crisis

In the latest sign that Wall Street creditors are pulling back fast from subprime lending, Accredited Home Lenders Holding Co. (NASDAQ:LEND) said Tuesday that it is currently exploring various “strategic options” to raise capital, as the company’s liquidity has rapidly dissipated.

The company said that its available cash resources have been affected primarily by margin calls under its warehouse and repurchase facilities since January 1, all of which have been met to date, as well as ongoing loan repurchases. Accredited reported that it has paid approximately $190 million in margin calls on its facilities since January 1, and that approximately two-thirds of those margin calls have been received and paid since February 15.

The San Diego, Calif.-based subprime lender also said it is seeking waivers and extensions of waivers of certain financial and operating covenants under its warehouse and repurchase facilities, including waivers relating to required levels of net income.

Accredited said the company has been operating under various waivers under these facilities since December 31, and warned in a press statement that “there can be no assurance that the company will be successful in receiving any of the required waivers.”

The company’s warning spooked numerous sources Housing Wire spoke with, all of whom drew a connection with the current liquidity crisis facing competitor New Century Financial.

“It’s pretty clear New Century is being hammered by the Wall Street community that had been funding its loans,” said one source, on the strict condition he not be identified. “Now Accredited says it has seen its liquidity dry up much faster than it thought, which too means they’re being hit pretty hard by Wall Street.”

The company had originally delayed filing its 2006 annual report with the SEC last week, saying that it needed time to digest its fourth quarter purchase of Aames Investment Corporation.

At that time, the company said that poor market conditions were likely to impair the goodwill established in the acquisition, but did not disclose any threats to the company’s liquidity. Sources at the time had questioned, however, whether the company was understating the risks to its business.

For more information, visit http://www.accredhome.com.

Full disclosure: The author owns no securities of the publicly-traded corporations discussed in this story.