U.S. subprime mortgage lender Accredited Home Lenders Holdingsaid it reached an agreement to sell $2.7 billion of loans at a substantial discount to alleviate pressures from margin calls.
The news came after Accredited's stock more than doubled in the past two trading days on speculation that the company would get a capital injection or takeover bid. Shares hit a low on Tuesday as the crisis over subprime mortgages -- mortgages aimed at less creditworthy borrowers -- deepened.
Accredited's loans are now funded out of its warehouse and repurchase credit facilities, asset-backed commercial paper facility and its equity.
Terms of the sale include a holdback reserve of approximately $40 million to satisfy all future claims against the loans, including early payment defaults.
Claims in excess of the reserve will have no recourse against the company.
The sale is expected to be completed over the next couple of days.
The sale of its loans held for sale will provide additional liquidity to Accredited, thereby facilitating its efforts to continue its previously announced intention to explore various strategic options.
The company estimates that this discounted loan sale will result in a pre-tax charge of approximately $150 million.
Accredited will retain approximately $120 million of loans held for sale in its warehouse facilities, comprised mostly of loans originated since March 7, 2007.
The company also said it will not file its annual report on form 10-K by March 16, 2007.
Accredited said it was continuing to seek waivers and extensions of waivers of certain financial and operating covenants.