UPDATE 1-Fremont General may sell itself amid capital woes

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NEW YORK, Feb 28 (Reuters) - Fremont General Corp FMT.N, a troubled California savings and loan that was one of the largest subprime mortgage lenders before ending that business last March, said on Thursday it is exploring options including a sale of the company, and is running low on capital.

The Brea-based parent of Fremont Investment & Loan said it is working with its advisers Credit Suisse and Sandler O'Neill & Partners LP to examine strategic alternatives, including raising capital, restructuring its senior debt and preferred securities, and seeking buyers.

Fremont ended September with $8.8 billion of assets. It had been trying to reposition its business after its agreement to obtain an $80 million infusion from an investor group led by billionaire Gerald J. Ford broke down last October.

Chief Executive Stephen Gordon told Reuters in November that his plan was "to turn the company around."

Fremont said on Thursday it is deferring indefinitely the scheduled interest payments on its 9 percent junior subordinated debt, but that this won't be enough to solve the company's cash flow problems or its "significant capital needs."

Fremont also said it may have to write down assets or add reserves for bad loans, which would erode the $448.6 million of equity capital it reported as of Jan. 30.

In addition, Fremont said it has "significant liquidity risk" because of limited sources of cash. It said it ended 2007 with $21.1 million of cash and equivalents.

As a result of the problems, Fremont said its auditors will be delayed in completing its year-end audit, causing an indefinite delay in the company's filing of its annual report with the U.S. securities regulators.

Fremont had been one of the 10 largest U.S. providers of subprime mortgages, which go to people with poor credit, before regulators last March ordered it to stop offering the loans.

Shares of Fremont closed Thursday down 28 cents at $2.36 on the New York Stock Exchange. (Reporting by Jonathan Stempel, editing by Phil Berlowitz)