Credit-Based Asset Servicing and Securitization LLC (C-BASS), one the nation’s largest subprime and scratch-and-dent mortgage operations, said this morning that it has entered into an agreement to acquire Fieldstone Investment Corporation, one of the nation’s top 25 subprime lenders. The company had been on the auction block since early December, according to industry sources. The deal is worth an estimated $260 million, and represents a 112 percent premium over the company’s closing stock price of $2.60 per share on February 15. C-BASS said it will acquire all of the outstanding common stock of Fieldstone for $5.53 per share in cash. Fieldstone’s loan portfolio stood at $5.9 billion at the end of the third quarter 2006, consisting primarily of 2/28 ARM first liens; the company had run into financial troubles as of late, reporting a loss of $45.0 million during the third quarter and renegotiating the terms of its credit facilities in December in order to remain in compliance with liquidity covenants. The REIT operates in all 50 states, and employs 1,100 nationwide.
The per share purchase price is subject to a $0.20 reduction if Fieldstone does not settle certain outstanding litigation prior to the merger. Under the terms of the merger agreement, C-BASS also said Fieldstone will stop dividend declarations, unless doing so would be necessary to maintain its status as a REIT. According to C-BASS, the acquisition of Fieldstone supports its strategy of aligning with companies that have significant investments in mortgage securities, where C-BASS’s wholly-owned subsidiary, Litton Loan Servicing, as servicer, can enhance the underlying value of these securities. In addition, Fieldstone’s origination platform creates synergies for C-BASS, the company said. “This transaction represents an excellent opportunity for C-BASS and strengthens the depth of our organization. We look forward to working with Fieldstone on enhancing their loan programs through our proprietary analytics and the skill of Litton Loan Servicing,” said John Draghi, COO at C-BASS. “We believe that Fieldstone’s origination business will be stronger as a result of our affiliation, and we look forward to the opportunity to acquire a portion of Fieldstone’s loans for the C-BASS portfolio on an ongoing basis.” “We believe the significant premium to the market price that C-BASS is offering to our stockholders is the best opportunity for our stockholders to recognize value in this very challenging time in the non-prime mortgage industry,” said Michael Sonnenfield, Fieldstone president and CEO. “We believe that we will be more successful building our origination business by integrating our platform with C-BASS and Litton and their industry leading analytics, servicing and loss mitigation capability.” For more information, visit http://www.fieldstoneinvestment.com and http://www.c-bass.com.