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Lone Star tries to cut Accredited price by $175m

Lone Star said in a letter to Accredited Home Lenders today that it would loosen the closing conditions of the deal if Accredited agrees to cut its price from $400 million to $225 million.

In the latest chapter of the Accredited Home Lenders saga, Texas-based private equity firm Lone Star has sent a letter to the subprime mortgage company offering to loosen the financial conditions upon which the deal’s closure depends, if Accredited agrees to reduce the price of the deal from $400 million (€293 million) to $225 million.

Lone Star agreed to buy Accredited for $15.10 per share in June. But on 10 August the private equity firm said the company would fail to satisfy conditions of the agreement, citing “drastic deterioration in the financial and operational condition of the company”.

Accredited then sued to force Lone Star to complete the buyout, claiming that trouble in the US subprime market that has not “disproportionately affected” the company did not enable Lone Star to walk away from the deal.

In Lone Star’s latest letter, the private equity firm said that it believes Accredited will still not be able to meet the deal’s conditions by the extended deadline of 12 September, or at any point in the future should Lone Star extend the offer further. Lone Star then said it would modify the offer so that Accredited need only meet minimal conditions to close the deal, in exchange for a reduction in its offer price from the original $15.10 per share to $8.50 per share.

Accredited has not yet responded to the letter. The company said last week it would lay off 1,600 of its 2,600 employees, and that it has has stopped originating new loans. Accredited also said it would close “substantially all” of its retail lending business, shutting down 60 branch locations and 5 retail support locations.