New Century auctions loan servicing unit for $188 million
Published May 17th, 2007
Private investment firm Carrington Capital Management LLC and an affiliate won a bankruptcy auction of New Century Financial Corp.’s loan servicing business, agreeing to purchase the core asset from the collapsed subprime mortgage lender for $188 million, New Century said late Wednesday.
Carrington and affiliate Carrington Mortgage Services LLC bested an unspecified number of bidders at an auction held in New York earlier in the day.
Carrington’s offer was 35 percent higher than the $139 million bid the firm made when New Century sought Chapter 11 protection last month, New Century said.
In a statement, New Century President and CEO Brad A. Morrice said the proposed sale to Carrington is “the right and responsible action for us to take, given the circumstances.â€
U.S. Bankruptcy Court Judge Kevin J. Carey, who is presiding over New Century’s case in Wilmington, Del., has scheduled a hearing to rule on the transaction for May 21.
If approved by the court, the deal is expected to close by the end of June, New Century said.
New Century had been the second-largest provider of home loans to high-risk borrowers, but it collapsed after a spike in mortgage defaults led its lenders to pull funding and demand that it buy back bad loans.
The company stopped trying to make new home loans in March due to lack of funds.
It has since laid off more than 5,000 employees, retaining less than 1,000 to handle the process of liquidating its assets.
The company failed to receive any bids for its mortgage loan origination business earlier this month, but it sold some of its mortgage loans and residual interests in securitization trusts to Ellington Management Group LLC for $58 million.
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