Struggling subprime mortgage lender Accredited Home Lenders Holding on Tuesday said it agreed to sell $1 billion of home loans to an unnamed investor, a move it said would limit its exposure to margin calls.
Accredited shares rose as much as 9.8 percent, a day after private equity firm Lone Star Funds asked a Delaware judge for permission to back out of its $400 million agreement to buy the lender.
San Diego-based Accredited said it sold half of the loans last week, and expects to sell the rest by October. It has an option to buy the loans back in November, but that the investor may keep them under most circumstances if it does not.
"If the market improves to a rational level, our intention is to repurchase these quality loans by mid-November and sell or securitize them," Chief Executive James Konrath said.
Accredited on Aug. 11 sued Dallas-based Lone star in Delaware Chancery Court, seeking to force it to complete its buyout, which valued the lender at $15.10 per share. The shares now trade at less than half that level.
Lone Star, in response, said Accredited hasn't met conditions needed to close, and may be entitled by contract only to a $12 million breakup fee.
Accredited shares have lost about three-quarters of their value this year as losses mounted from rising homeowner defaults and credit market conditions tightened.
Accredited shares rose 51 cents to $6.95 in morning trading on the Nasdaq, after earlier rising to $7.07. The stock began the year at $27.35.