IndyMac Dividend Faces Pit Stop

IndyMac Bancorp(IMB Quote - Cramer on IMB - Stock Picks) tumbled more than 6% Thursday morning after it said it expects to record a loss for the fourth quarter and may further cut its dividend in order to raise capital.

The Pasadena, Calif.-based lender, which had specialized in riskier so-called Alt-A loans, said it was considering a "variety of capital-raising alternatives." Options include a dividend cut, the sale of convertible debt or a preferred offering that is privately placed with one or more investors, or shrinking the balance sheet, according to a Securities and Exchange Commission filing.

The filing and response were made in conjunction with a shareholder suggestion on IndyMac's blog that the company should buy back shares as a way to "send an even stronger message, not just about the viability of [IndyMac] but about how it feels about itself as a sound investment."

IndyMac's "business model is in the eye of this storm," CEO Michael Perry said in the filing. "Our business model is solely focused on financing USA homes, and we sell most of our loans into the secondary market (and not only is the private secondary market virtually closed ... now the [government sponsored entities] have their own issues and are raising rates and cutting product guidelines)."

"In this environment ... maintaining strong capital and liquidity levels is paramount," Perry said.

As a result of declining home sales, rising delinquencies and the freezing of the secondary market, the lender now expects to post a net loss in the fourth quarter, but "likely a significantly reduced one in relation" to the third quarter, Perry said in the filing. He added that the company is likely to record losses for the first and second quarters of next year, as well.

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