NovaStar Hit on Filing Delay

The subprime lender is reviewing its tax policies.
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NovaStar Financial

(NFI)

took a pounding Friday on news that the subprime mortgage lender is delaying the release of its fourth-quarter earnings over concerns about its corporate tax policies.

In morning trading, NovaStar was down $3.51, or 11%, to $27.80.

The Kansas City, Mo.-based lender, which specializes in making mortgage loans to homebuyers with shaky credit histories, said it has "decided to obtain legal opinions to further support certain tax positions of the company." NovaStar made the announcement in a press release late Thursday.

The company did not provide any details about the tax issues about which it is seeking additional advice. NovaStar said it made the decision to retain a tax attorney after discussing the matter with its auditor, Deloitte & Touche.

NovaStar says that it expects to receive a legal opinion on its tax policies in the next two to four weeks, and that it will release its earnings soon after. The postponement comes just three weeks after NovaStar issued a press release saying it would announce fourth-quarter earnings on Feb. 9.

Before the earnings postponement, the Thomson Financial consensus estimate had NovaStar earnings at 90 cents a share in the fourth quarter.

The tax issues may have something do with NovaStar's organization as a real estate investment trust. To qualify as a REIT, NovaStar must return at least 90% of its taxable income in dividend payments to shareholders.

The firm's annual dividend payout is $5.60 a share.