The San Diego-based mortgage company didn't name the buyer, but said the transaction includes substantially all of its loans held for sale that are currently funded out of its warehouse and repurchase credit facilities, asset-backed commercial paper facility, and its equity.
The news comes just a day after Accredited shares, which have plunged as the business of making loans to homebuyers with poor credit histories went sour, soared 60% on news that big brokers like
are seeing the sector's decline as an opportunity to buy assets.
Terms of the sale include a holdback reserve of approximately $40 million to satisfy all future claims against the loans, including early payment defaults. Claims in excess of the holdback reserve will have no recourse against the company. The sale is expected to be completed over the next couple of days.
The sale of its loans held for sale will provide additional liquidity to Accredited, thereby facilitating the company's efforts to continue its previously announced intention to explore various strategic options, including potentially raising additional capital. Accredited estimates that this discounted loan sale will result in a pre-tax charge of approximately $150 million. Accredited will retain approximately $120 million of loans held for sale in its warehouse facilities, comprised mostly of loans originated since March 7, 2007.
The company also will not file its Annual Report on Form 10-K by March 16, 2007 as previously announced on March 2, 2007. Accredited has determined that changes are required to the amount of goodwill established in its acquisition of Aames Investment in the fourth quarter of 2006. The previous goodwill estimate was based on the market price of the company's common stock as of the closing date of the transaction, which was Oct. 1, 2006. The company has determined that the goodwill should have been established based on the market price of the company's common stock on the announcement date of the transaction of May 25, 2006, resulting in total goodwill of approximately $130 million. Further, Accredited has determined that the entire amount of goodwill established has been impaired and will be charged-off in the quarter ended Dec. 31, 2006. This goodwill charge-off will not affect Accredited's operations, tangible book equity, cash, or liquidity. In addition, the company is still evaluating whether the deferred tax assets acquired in the Aames acquisition are realizable.
While the sale of the loans held for sale has substantially reduced the company's debt outstanding in its warehouse and repurchases facilities, Accredited is continuing to seek waivers and extensions of waivers of certain financial and operating covenants, including waivers relating to required levels of net income and requirements to file the Form 10-K by March 16, 2007. There can be no assurance that the company will be successful in receiving any of the required waivers.