Delta Financial Heads for Bankruptcy

Delta Financial, a subprime lender that as recently as May was turning a profit, said today that it will seek bankruptcy protection. The company is the latest among hundreds of subprime lenders forced to exit the business as the mortgage industry has faced historic upheaval.

From the press statement:

The Company previously announced on November 15, 2007 that it had entered into a letter of intent with an affiliate of Angelo, Gordon & Co. … Also on November 15, 2007, the Company entered into a standstill agreement with three of its warehouse providers. Each of these agreements was subject to several varying conditions, including the Company’s pricing a securitization of mortgage loans.

The Company has been unable to complete such a securitization transaction upon satisfactory terms. Consequently, on December 5, 2007, the Company received reservation of rights notices from its warehouse lenders indicating that events of default have occurred under the warehouse facilities and the standstill agreement …

In light of the foregoing, the Company does not expect to be able to consummate the above-referenced transaction with Angelo Gordon. Furthermore, the Company does not believe that it will be able to continue as a going concern.

The lender laid off 470 of its staff in early November as it said at the time that it “hoped” it could locate additional operating capital, and was one of the more risk-averse subprime lenders in the industry. The company said in March that it had abandoned variable-rate subprime lending years ago.

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