Accredited Sues Lone Star

The companies' merger plan "expressly provides that changes generally affecting the non-prime industry in which the company operates which have not disproportionately affected the company do not provide a basis for Lone Star to fail to honor its obligations," Accredited added.

Valentin wrote in a note that Accredited's financial condition is no worse than that of any other subprime lender.

In a separate filing late Friday, Accredited reported preliminary second-quarter financial results in which it said it anticipates a net loss of $40 million to $60 million.

The company had originated $1.7 billion worth of loans in the second quarter, down 59% from in the year-earlier quarter. Accredited had total liquidity worth $240 million at the end of the quarter, but $175 million at the end of July.

The mortgage industry has been struggling to find footing this year as loan to customers with poor credit are seeing increases in payment delinquencies and defaults. The market to securitize the loans -- a process whereby lenders sell mortgages to banks and brokers that are then packaged into securities and then re-sold to investors -- has seized up in recent weeks.

Dozens of lenders have been put out of business this year, while others such as Accredited have sought strategic partners.

Last week alone, American Home Mortgage(AHMIQ Quote) filed for Chapter 11 bankruptcy protection, and Luminent Mortgage Capital(LUM Quote) got notices of default from lenders.