Cityscape Financial Corp. said yesterday that it would take about $200 million in writedowns for the fourth quarter of 1997.
The hit is larger than some analysts expected, and it may drive the company to insolvency, some said.
In a Securities and Exchange Commission filing Thursday, Cityscape said it is taking a $32.4 million charge to write off the unamortized portion of a commitment fee to Greenwich Capital.
Additionally, the value of Cityscape's U.K. servicing receivables will decrease by $100 million because it is changing its method of calculating prepayment fees there. Finally, the company is taking a $52.7 million charge to write off unamortized goodwill in conjunction with its U.K. operations.
Cityscape also said it would readjust the value of its U.S. residuals but did not disclose details. This adjustment is expected to take total writeoffs to at least $200 million.
Cityscape, once a high flier in the home equity industry, was hit this fall by capital shortages and by rising delinquencies and prepayments on its loans, in addition to regulatory problems in England.
The company's stock has traded at less than a dollar a share since then, off from a 1997 high of $31.50. The shares were moved to the Nasdaq SmallCap Market on Jan. 28.
In October 1997, the beleaguered Elmsford, N.Y.-based subprime firm announced that it had retained Bear, Stearns & Co. to help it "examine strategic alternatives," a phrase that often means a company is putting itself up for sale.
Cityscape has hired on CIBC Oppenheimer as a second strategic adviser, amid reports that Bear Stearns has been slow to find a buyer for its United Kingdom unit.
This year, Wilshire Financial Corp. has purchased residuals on $450 million of the company's loans, and about $25 million in nonperforming loans.
But the company's U.K. division, City Mortgage, has failed to find a buyer, despite reports that several subprime firms were window shopping.
Robert Grosser, Cityscape's acting chief executive, said that the company "did not fire Bear Stearns," but he confirmed that Cityscape has also retained Oppenheimer.
Officials from Bear Stearns said they are still working with Cityscape, contradicting a rumor that the firm has pulled a $300 million revolving debt line that it issued Cityscape on Sept. 10, 1997.
Mr. Grosser also confirmed reports that the company is scaling back its work force.
"Consistent with our previous announcements to scale down operations, we did let 160 people go this week," he said.
Several mortgage company executives in the New York area say they have been approached by Cityscape personnel looking for employment in recent weeks.
