New Century franchise largely destroyed-analyst
NEW YORK, March 28 (Reuters) - New Century Financial Corp.'s NEWC.PK franchise value has largely been destroyed, and the subprime lender has gone too far down the bankruptcy path to reverse course, according to a Merrill Lynch & Co. analyst.
Kenneth Bruce, who rates New Century "sell," said potential acquirers of all or part of New Century are likely to be scared away as the Irvine, California-based lender's loans get sold and amid a flurry of regulatory and legal actions.
New Century this month stopped making loans, and has been blocked by several states from making new mortgages. Federal prosecutors in California are investigating accounting errors and trading in the company's shares.
"The business is broken," Bruce wrote. "New Century has gone too far down the path of bankruptcy to reverse course. The value of its franchise was largely destroyed, once it failed to close loans in its pipeline."
Investors are better off selling their shares, Bruce added.
New Century had been the largest independent U.S. subprime mortgage lender. Like many rivals that also made loans to people with poor credit, New Century saw its difficulties mount as delinquencies and defaults increased.
The New York Times on Wednesday said New Century might file for Chapter 11 bankruptcy protection as soon as the end of this week. The report quoted people briefed on the company's plans.
New Century is trying to line up financing that would let it reorganize or sell itself through a prepackaged bankruptcy, but hopes for a buyer appear to be dimming, the newspaper said. A New Century spokeswoman declined to comment to the paper.
Barclays Plc (BARC.L), Morgan Stanley (MS.N) and other banks that provided $17.4 billion of credit lines to New Century have this month been taking possession of or selling billions of dollars of New Century loans.
Shares of New Century fell 25 cents to $1.16 in morning trading on the Pink Sheets. For more about the subprime mortgage crisis, see [ID:nN16195443]
