First NLC Files for Bankruptcy

First NLC Financial Services, LLC will file for Ch.11 bankruptcy protection and liquidate its assets after efforts to recapitalize and sell the ailing subprime lender failed. First NLC, the origination subsidiary of Friedman, Billings, Ramsey Group, Inc., was to be sold to an affiliate of Sun Capital Partners in a deal to recapitalize First NLC, announced last July. FBR was to invest $15 million as part of the recapitalization plan. FBR said in a press statement after market close on Friday that it would not close the planned sale and recapitalization as a result of the bankruptcy, and that it “does not expect to recover its remaining $12 million investment in FNLC.” First NLC laid off hundreds of workers in August, which led many to believe the proposed deal was in doubt. Today’s bankruptcy marks the latest failure of a formerly high-flying subprime lender; hundreds have failed in 2007, but I believe First NLC is the first major lender to fail in 2008.