A New York investment fund's withdrawal of its buyout offer for a California subprime lender shows how out of favor the sector has fallen.

In fact, analysts said, Greenlight Capital Inc.'s bid for BNC Mortgage Inc. - announced Feb. 17 and withdrawn May 12 - may have an unsuccessful effort to get management to raise its own Feb. 4 bid. The management bid is still pending. Greenlight, the largest institutional shareholder of Irving-based BNC, had never before bought a whole company, the analysts said.

"I think they were mainly trying to encourage a higher bid from management or someone else," said Mike McMahon, an analyst with Sandler O'Neill & Partners. "I am surprised that they made an offer in the first place."

Michael Crawford, an analyst with B. Riley & Co., agreed. Greenlight "never did come forth with a complete bid," he noted. "They only made it in the letter."

No one seems to doubt that Greenlight had the financial wherewithal to follow through. Both analysts said it could have easily purchased BNC, without financing.

Greenlight's offer of $11 a share topped the Lehman Brothers-financed management bid by $1. The management bid was "inadequate to BNC shareholders," Greenlight said at the time.

The investment fund last reported that it owned 665,000, or 13%, of BNC's shares.

Greenlight withdrew its $55.4 million bid after examining BNC's books. Four days earlier BNC had reported a net loss of $1.1 million for the quarter that had ended March 31, but a Greenlight official said that was not the reason for the withdrawal. He refused to say what the reason was.

Mr. McMahon said he doubts that the fund's officials found anything surprising during the due diligence, noting that Lehman had performed its own review as part of its agreement to finance the management-led offer. "I've got to believe Lehman knows what they are doing," he said.

Analysts said the management bid, which remains on the table and is moving forward, represents a fair deal and is perhaps a shade more attractive than when it was first launched.

"The management offer at this point seems like a good thing," said Mr. Crawford, citing the difficulties in the subprime lending business, which has seen a major shakeout over the last year and half, as well as increasing scrutiny from government and the news media.

"I said it was at the low end of fair value, but now it's probably above the low end," said Mr. McMahon.

The management-led buyout is expected to be completed by July, according to a BNC official.

BNC was trading around $9.25 Tuesday morning.

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