Calif. lender New Century could face cash crunch-analyst

NEW YORK, Feb 22 (Reuters) - Confidence in battered subprime lender New Century Financial Corp. NEW.N took another blow on Thursday after a Merrill Lynch analyst warned the company could face a cash crunch.

"We think investors need to consider that a major creditor could step away from (New Century) over the next few quarters," Merrill Lynch analyst Kenneth Bruce said in a research note. "If a major creditor were to close a facility, we would be concerned that others may follow."

New Century spokeswoman Laura Oberhelman noted that the company had about $350 million in available cash at the end of December.

Hammered by escalating loan defaults, Irvine, California-based New Century and other subprime lenders could get squeezed even harder if Wall Street banks pull funding for loans. New Century received what Bruce called a modest three-month extension on a credit facility from Goldman Sachs, compared to what has traditionally been a 12-month extension.

Subprime lenders make loans to people with shaky credit histories. Loose lending standards are being tightened, but subprimes are being forced to buy back soured loans.

New Century shares were down 5.5 percent at $16.58 in afternoon trading on the New York Stock Exchange.

Meanwhile, NovaStar Financial Inc. NFI.N shares continued their slide, falling 9.3 percent to $9.16. NovaStar warned on Wednesday that it may not generate taxable income from 2007 to 2011, and it may drop its tax-friendly real estate investment trust status next year. The stock fell 42.5 percent after that announcement.

Shares of Fremont General Corp. FMT.N and American Home Mortgage Investment Corp. AHM.N fell 3.61 percent to $12.83, and 4.16 percent to $29.52, respectively, in afternoon trading.

((Reporting by Tim McLaughlin, editing by Maureen Bavdek; Reuters messaging: tim.mclaughlin.reuters.com@reuters.net; +1 646 223 6033)) Keywords: SUBPRIME LENDERS/

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