Fremont Find Buyer for Loans,
May Also Sell Subprime Unit
By KEVIN KINGSBURY
April 16, 2007 9:05 a.m.
Fremont General Corp. announced it has found a buyer for $2.9 billion in subprime mortgage loans and said that same unnamed institution is in exclusive talks to buy most of Fremont's residential real-estate business and assets.
The news send Fremont's shares sharply higher in premarket trading, jumping to $8.90 from Friday's close of $7.05.
The price tag of the loan sale wasn't disclosed, though Fremont expects to record a pretax loss of about $100 million on the deal.
If the talks are successful, the buyer would acquire Fremont's subprime residential loan-servicing platform, some of its subprime origination platform, all mortgage-servicing rights, servicing advances, residual interests and mortgage-backed securities.
Fremont said both sides "are in the process of completing due diligence, finalizing terms and working towards the completion of a definitive agreement." The company added there's no guarantee a deal will be consummated.
Fremont has said it was talking to potential buyers of its residential loan business but intends to leave the business completely, whether it finds a buyer or not.
The firm added Monday its liquidity position "remains strong," as Fremont has nearly $1.5 billion in cash and short-term investments.
Fremont said last month its Fremont Investment & Loan industrial bank had agreements to sell at a discount about $4 billion of its subprime residential real-estate loans, resulting in a pretax loss of about $140 million. At the time, the Santa Monica, Calif.-based firm said it has received about $950 million in cash from the first sale installment under the agreements. No buyers were named.
Fremont, like other subprime mortgage lenders, have been suffering from surging default rates which has dried up investor demand for such loans. |
