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Paragon's Shares Dive on Refinancing Problems

Shares in mortgage lender Paragon Group plummeted 46 percent in early trading Tuesday after it disclosed that it was having difficulties in securing new financing because of the impact of the subprime lending crisis in the United States.

Shares in Paragon Group of Companies were quoted at 111 pence (1.55 euros; $2.28) on the London Stock Exchange.

Paragon is Britain's third-largest company specializing in "buy-to-let" mortgages, for buyers who intend to rent rather than occupy a property.

Paragon said it had conducted extensive discussions with lenders for the renewal of a 280 million pound (392 million euros; $575 million) loan.

"Whilst terms for renewal have been offered in principle, they are not attractive for a variety of reasons, including the high cost of such facilities in the current market environment," the company said.

"The disruption of the capital and banking markets that has spread from difficulties in the United States subprime mortgage market has had a significant effect on the cost and availability of credit."

Paragon added that it had "no involvement in the U.S. mortgage market nor any investment, directly or indirectly, in U.S. subprime mortgage-backed securities, specialized investment vehicles, collateralized debt obligations or similar vehicles."

The company said it was not paying a dividend because of the possibility of a rights issue. "The board will reconsider the company's distribution policy once the funding position for the future is clarified," it said.

Paragon reported that full-year net profit fell 8.7 percent to 62.8 million pounds (88 million euros; $129 million) as higher tax charges more than offset a 10 percent gain in pretax operating profit.