Cityscape Financial Corp. said Wednesday it has a definitive agreement to sell its troubled U.K. operations to distressed-asset specialist Ocwen Financial Corp. for $477 million.

The announcement was included in the company's fourth-quarter results. In 1997, it took a net loss of $418.9 million, or $12.60 a share, primarily from writedowns associated with its U.K. operation.

City Mortgage Corp., the U.K. unit, has been on the block for months, since an Office of Fair Trade crackdown on loan charges considered excessive.

"The company took so long (to sell) people were starting to get nervous," said a bond trader. "There's a real sigh of relief" about the viability of Cityscape bonds.

But Ocwen investors weren't pleased. Shares of Ocwen fell nearly 12% by midday, to $24.50, on the news. West Palm Beach, Fla.-based Ocwen's acquisition includes Cityscape's U.K. loan portfolio, residuals, and its origination and servicing business there.

The sale should net Elmsford, N.Y.-based Cityscape about $86 million in cash, Cityscape said.

Cityscape has also been fined $50,000 by the New York State Banking Department for failing to make financial information available, according to the company's yearend filing with the SEC.

Cityscape's stock has gone from a high of $32 a share in the first quarter of 1997 to a low of 25 cents in the fourth quarter, and many observers expect the company to file for bankruptcy. But some executives in the industry say they believe former Cityscape chief executive Robert Grosser is intent on salvaging the company.

At last week's National Home Equity Mortgage Association conference in West Palm Beach, Fla., Mr. Grosser would not comment on his plans.

Cityscape said in its fourth-quarter statement that its future depends on its ability to complete a sale of its U.K. operations, gain access to loan warehouse or purchase facilities, sell loans in the whole-loan market, streamline its U.S. operations, and retain employees. The company noted that it could give no assurances it would be able to achieve those objectives.

The company also said its independent auditors have issued a "disclaimer of opinion" about the company's ability to survive the net loss and net capital deficiency.

The company's one- to four-family residential loan originations fell to $165.8 million in the fourth quarter, from $252.5 million a year earlier, while originations of its high-loan-to-value product have increased. Defaults totaled 5.6% of all loans at yearend, up from 2.2% a year earlier.

Neither Cityscape nor Ocwen officials were available to comment by press time.

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