plunged 22% after an investor group led by Gerald J. Ford said it is looking to get out of its original agreement to invest $80 million in the troubled company.
The Santa Monica, Calif.-based company said it had been advised by Ford that "in light of certain developments" pertaining to the company and its retail bank, "he is not prepared to consummate the transactions contemplated" by the agreement both groups entered in May.
Fremont, which earlier this year consented to a cease-and-desist order from the Federal Deposit Insurance Corp. that forced it out of residential subprime lending, agreed in May to sell its commercial loan business to
for $1.9 billion in cash. In conjunction with the deal, the company said that an investor group led by Ford would take control of the company and its retail bank.
The investor group agreed to purchase $80 million in preferred stock and warrants for additional common stock of the company. Ford used to run Golden State Bancorp before the West Coast thrift was sold back in 2004 to
Fremont previously said that it was selling its residential real estate business to Ellington Capital Management.
Fremont said that "while it does not necessarily agree with the factual positions taken by Mr. Ford, it is in discussions with Mr. Ford concerning revised terms under which an entity controlled by Mr. Ford would proceed with an $80 million investment," Fremont said in a release.
But there can be "no assurances as to whether or when the parties may reach an agreement with respect to revised transaction terms," it added.
An outside spokesman for Fremont was not immediately available for comment.
Fremont also said that it expects to file its 2006 annual report with the
Securities and Exchange Commission
Subprime lenders such as Fremont, New Century and
Accredited Home Lenders
have been crushed by rising delinquencies and defaults from borrowers with shaky credit histories as well as a seize-up in the secondary mortgage markets.
were unable to get funding for future mortgages and have scaled back their operations while others, such as New Century, have shut down completely.
Both Fremont and Accredited agreed to strategic buyouts earlier this year, but as the mortgage industry deteriorated even further this summer, buyers have been looking to amend the deals or back out of them altogether.
Last week after suing private-equity buyout firm Lone Star for trying to back out of its own deal, Accredited agreed to a reduced deal price.
Lone Star agreed to acquire the San Diego lender for $11.75 a share in cash, or $295 million. That's a 22% discount to its original June offer of $15.10 a share, but well above the $8.50 a share Lone Star offered at the end of August after the deal threatened to collapse.
Shares of Fremont fell $1.13 Wednesday to $4.