Here’s a subprime lender that has found a way out. They are suing the firm that agreed to purchase them, even thuogh their company value has completely tanked.
Accredited Home Lenders Holding Co. (LEND.O) said on Monday it had sued private equity firm Lone Star Funds, seeking to force it to complete the $400 million takeover of the money-losing subprime mortgage lender.
Lone Star had agreed in June to pay $15.10 per share for San Diego-based Accredited. On Friday, however, Lone Star said it would not go through with the buyout, citing a “drastic deterioration in the financial and operational condition of the company.”
Accredited said on Monday that the merger agreement “expressly provides that Lone Star may not refuse to honor its obligations based on any deterioration in the business.” If shareholders tender more than half of Accredited shares by Tuesday, all conditions of the merger will be met, Accredited said.
Shares of Accredited were down fell about $3.21, or 36 percent, at $5.70 in premarket electronic trading.
Ouch. If the merger agreement states they can’t back out, even for “deterioration in the business”, that’s going to hurt.
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