New Century Gets Loans

A court approves a debtor-in-possession facility.
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New Century

(NEWC)

got funding to pursue its plan to sell itself in parts.

U.S. Bankruptcy Judge Kevin J. Carey approved a debtor-in-possession loan Tuesday. The bankruptcy judge said the beleaguered subprime mortgage lender can borrow up to $150 million from

CIT Group

(CIT) - Get Report

and Greenwich Capital.

A call to a bankruptcy court attorney handling New Century's case was directed to a spokeswoman in Washington, D.C., who did not immediately return a call.

Calls to bankers at CIT and Greenwich Capital were directed to representatives who were unable to comment or did not return calls. A spokeswoman at New Century also did not immediately respond to a call.

Irvine, Calif.-based New Century filed for a much-anticipated Chapter 11 bankruptcy protection on Monday and said it would lay off more than half of its staff.

New Century's planned asset sales will be a critical part of its attempt to extract value from its lending operation. The mortgage lender believes funds from its DIP won't last for more than 45 days. As a result, it has pushed to expedite the approval process for its credit agreement and its planned selloff.

It also has agreed to sell its servicing assets and servicing platform to Carrington Capital Management and its affiliate for approximately $139 million. Greenwich is attempting to purchase a portion of its mortgage assets as well. Any sale must win court approval.

The bankruptcy judge is expected to announce whether the court has approved sales agreements for some of New Century's assets, including those sought by Carrington and Greenwich. That will open the sales up to a public auction process in an effort to fetch the best price for the company's creditors.

New Century's DIP will be provided in two tranches: a working capital tranche A and tranche B component, which will be used, in part, to repay funds obtained from Citigroup Realty.

The debt is secured by various assets including a pool of mortgages with a face value of about $173 million, as well as mortgage-backed securities and about $113 million in state and federal income tax refunds New Century is hoping to get. Also included is a limited partnership interest in Carrington Investment Partners.

Rates on the tranche A portion of the DIP are London Interbank Offering Rate plus 2.75%, and they will jump up to 4.75% over LIBOR should New Century default on any payment. The mortgage lender also has to pay an additional rate of 2% if it opts to increase the debt package.

Shares fell 3 cents Wednesday to 98 cents.