New Century Gets Default Claims, Says It Lacks Cash (Update1)
By Yalman Onaran
March 12 (Bloomberg) -- New Century Financial Corp., the U.S. mortgage company whose stock plunged 90 percent this year, said lenders claim it's in default and are demanding accelerated payments. The company said it lacks cash to meet those demands.
Creditors including Morgan Stanley, Citigroup Inc. and Goldman Sachs Group Inc. sent New Century letters last week alleging default, the Irvine, California-based home lender said in a filing today with the U.S. Securities and Exchange Commission. Creditors are demanding New Century repurchase all outstanding mortgage loans financed by them.
``The company and its subsidiaries do not have sufficient liquidity to satisfy their outstanding repurchase obligations,'' New Century said in the filing.
New Century, the second-biggest U.S. home lender to people with bad credit histories, has used up cash as rising default rates forced it to buy back loans it sold to investors. The company said last week it's in talks with lenders and potential partners about refinancing or ``other alternatives.''
New Century's financing agreements have so-called cross- default provisions that trigger accelerated payments. Should all of its creditors force it to repurchase their loans, the total obligation would be about $8.4 billion, New Century said.
`No Assurance'
Talks with lenders are continuing, and it can give ``no assurance'' that efforts to refinance the debt will succeed, the company said.
New Century has received about $975 million of new financing from Morgan Stanley. It used additional financing from the New York-based securities firm to pay Citigroup Inc. about $717 million on March 8, after Citigroup demanded repurchase of its loans, New Century said in today's filing.
New Century's stock fell on Friday to $3.21, its lowest in more than eight years, as Merrill Lynch & Co. analyst Kenneth Bruce predicted the mortgage company will go bankrupt. In early trading, the shares were at $1.86 on the New York Stock Exchange.
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