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New Century Lands $265 Million in Financing from Lender

Mortgage lender New Century Financial, the subject of bankruptcy rumors on Thursday, said it had received $265 million in financing.

New Century disclosed the financing after a day in which its shares plunged 25% on the New York Stock Exchange after activist hedge fund manager David Einhorn quit the company's board.

The financing was provided by Morgan Stanley and secured by New Century's mortgage-investment portfolio and other certain assets, The Wall Street Journal reported, citing a person close to the matter.

The net proceeds of the financing would be used to refinance or satisfy some of the company's existing obligations, New Century said in a filing with the U.S. Securities and Exchange Commission. The lender was not disclosed.

"This lender has also provided financing to the company to refinance the remaining balance of approximately $710 million in mortgage loans currently financed through another lending facility," New Century said.

New Century said effective immediately it was not accepting loan applications from prospective borrowers.

Thursday's decline comes two days after the subprime lender's stock fell 69% following disclosure of a federal criminal probe into securities trading and accounting.

Einhorn is a principal at New York's Greenlight Capital, which owns a 6.3% stake in New Century, a Thursday filing with the U.S. Securities and Exchange Commission shows.

Joined Last March

The 3.49 million share stake as of Wednesday had fallen by about $142 million in value since Einhorn joined the board last March. Greenlight is New Century's second-largest shareholder, according to Thomson ShareWatch, and invests about $4 billion.

Einhorn declined further comment, according to Mary Beth Grover, an outside spokeswoman for Greenlight. The resignation letter was not immediately available. New Century spokeswoman Laura Oberhelman did not immediately return a call seeking comment.

In January, Einhorn demanded the ouster of management at business financing company Allied Capital Corp. in the wake of a probe that led to 19 people being charged with fraud, including a former executive at an Allied unit.

Einhorn joined New Century's board after dropping a proxy fight to oust three directors. Greenlight also won the right to double its then current New Century stake to 19.6%.

"Self-Inflicted Actions"

Before the resolution, Einhorn argued that New Century shares were depressed "due to a history of capital misallocation, market anticipation of future capital misallocation and a number of other self-inflicted actions."

In Thursday's filing, Greenlight said it had not sold New Century shares in the previous 60 days, a period in which the shares fell 83%.

Asked if Greenlight might bid for New Century, Fox-Pitt Kelton's Howlett said, "It's a possible scenario, but it's unlikely."

Einhorn sat on the 10-person board's finance committee and its public and community affairs committee, according to New Century's Web site.

According to ShareWatch, Los Angeles-based Hotchkis and Wiley Capital Management is New Century's largest shareholder, with a 7.1% stake. An outside spokesman did not immediately return a call seeking comment.