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Current DateTime: 04:22:59 11 Nov 2009
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Current DateTime: 04:22:59 11 Nov 2009
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Current DateTime: 04:22:59 11 Nov 2009
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Fremont General Plummets on Loan Covenant Worries
By: AFX | 04 Mar 2008 | 10:39 AM ET
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Shares of Fremont General plunged to an all-time low on Tuesday after the real estate lender said it didn't believe it would be compliant with a loan covenant because of write-downs in its fourth quarter.

The company said it had received notice of covenant default from two unnamed parties who had purchased a total of $3.15 billion in residential sub-prime mortgage loans in March 2007. The covenant said that for two years following the sale of the loans, Fremont's tangible net worth wouldn't be allowed to fall below $250 million.

Fremont said it may need to record additional asset write-downs in its fourth quarter, which could require it to lower its regulatory capital. The company said that because of this, it couldn't confirm that it was compliant with the covenant, though it didn't believe it would be.

The stock [FMT  Loading...      ()   ] plunged more than 25 percent. Earlier in the trading session, the shares hit 46 cents, an all-time low. The shares are down almost 90 percent over the past 52 weeks.

Fremont said it was in discussions with the parties to seek a waiver of its guaranty requirement, but that if the discussions weren't successful, the purchasers could file a lawsuit against Fremont.

If litigation is pursued and Fremont isn't successful in defending itself, it said, it may not be able to continue to conduct business.

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