Accredited Home Lenders Holding said Monday it had sued private equity firm Lone Star Funds seeking to force it to complete the $400 million takeover of the money-losing subprime mortgage lender.
Lone Star said on Friday it would not go through with the $15.10-per-share buyout, citing a "drastic deterioration in the financial and operational condition of the company."
But San Diego-based Accredited said the merger agreement "expressly provides that Lone Star may not refuse to honor its obligations based on any deterioration in the business." It said that if shareholders tender more than half of Accredited shares by Tuesday, all merger conditions will be met.
Shares of Accredited fell $2.79, or about 31 percent, to $6.12 in morning trading on the Nasdaq.
Like many rivals, Accredited has struggled with investor unwillingness to buy loans it makes, causing it to be stuck with losses.
Last week, Accredited projected a second-quarter net loss of $40 million to $60 million. It said it had made 59 percent fewer loans than a year earlier, the delinquency rate among loans it serviced had tripled, and its work force had shrunk to 2,600 as of June 30 from 4,200 at year-end 2006.
The company also said it had ended July with $175 million of liquidity, down from $240 million at the end of June.
Earlier this month, Accredited said its survival was in doubt and a bankruptcy filing was a possibility.
A copy of the lawsuit was not immediately available.
Accredited did not immediately respond to requests for comment and a copy of the complaint. Lone Star and an outside spokesman for the firm also did not immediately respond to requests for comment.