Subprime lender Accredited Home bought by Lone Star

By Jonathan Stempel

NEW YORK (Reuters) - Private equity firm Lone Star Funds said it completed its $296 million acquisition of Accredited Home Lenders Holding Co LEND.O on Friday, valuing the struggling subprime lender at $11.75 per share.

Dallas-based Lone Star had agreed on June 4 to pay $15.00 per share for Accredited, which at the time valued the San Diego-based company at about $400 million. It was able to cut the price after conditions for mortgage lenders deteriorated.

Lone Star also agreed to provide $49 million of financing, including $34 million to pay down debt.

The Accredited investment was one of several put in jeopardy as the U.S. housing slump and tighter credit markets forced companies to renegotiate with prospective suitors.

In early August, Lone Star tried to back out, prompting a lawsuit by Accredited. Later that month, Lone Star tried to cut the purchase price to $8.50 per share, but Accredited rejected that offer.

On Friday, Lone Star said it had appointed six representatives to Accredited's board. Two former Accredited directors, including Chief Executive James Konrath, remain on the board.

Dozens of subprime mortgage lenders have quit the industry this year, including more than a dozen that went bankrupt.

Fremont General Corp FMT.N, a Santa Monica, California subprime lender that stopped making home loans in March, said last month it had reopened talks on an $80 million infusion after an investor group led by billionaire and former thrift executive Gerald J. Ford threatened to pull out.

Late Friday, Moody's Investors Service cut Fremont's senior debt rating to "Caa3," a low junk grade, from "Caa2." It expressed concern about a lack of progress on talks, and said Fremont has "no sustainable franchise" without a new investor.

Accredited last month closed much of its operations and cut 1,600 of 2,600 jobs to help survive market turmoil. Its shares closed Thursday on Nasdaq at $11.76 and will be delisted.