U.S. News

New Century Loan Servicing Unit Sells for $188 Million


New Century Financial , the largest U.S. subprime lender in bankruptcy, said hedge fund Carrington Capital Management LLC won an auction to buy its loan servicing unit for $188 million.

The price is $49 million, or 35 percent, more than Carrington originally offered, subject to the outcome of the auction. New Century late Wednesday night announced the results of the auction, which was held earlier in the day.

The loan servicing unit, which handles collections, was New Century's last major asset for sale. New Century had said it needed to sell major assets by mid-May while they still had value.

"We believe the proposed sale to Carrington is the right and responsible action for us to take given the circumstances," New Century Chief Executive Brad Morrice said in a statement.

Irvine, California-based New Century was one of the largest U.S. providers of home loans to people with poor credit histories before filing for Chapter 11 bankruptcy protection on April 2 amid the U.S. housing slowdown.

New Century failed to find a buyer for its lending unit, which had stopped making loans, and as a result fired 2,000 people two weeks ago. The company had fired an additional 3,200 people when it filed for Chapter 11 protection.

U.S. Bankruptcy Judge Kevin Carey in Wilmington, Delaware, is scheduled to consider approving the sale to Carrington at a May 21 hearing. New Century expects the sale to close by June 30. Carrington is based in Greenwich, Connecticut.

New Century shares closed Wednesday at 36 cents on the Pink Sheets.