New Century Financial Corp. said late Thursday that because of "constrained funding capacity," it has stopped accepting loan applications.
The Irvine, Calif., subprime lender said it "has only been able to fund a portion of its loans this week," and that it has received $150 million in margin calls, of which it has satisfied $80 million. However, the company also said one of its lenders has agreed to provide $265 million of secured financing and to refinance a $710 million facility that another lender has terminated.
New Century said it "expects to resume accepting applications as soon as practicable." But it warned that "there can be no assurance that" it will be able to do so.
The company said it has yet to secure any of the waivers it is seeking from five creditors that would let it keep its financing arrangements with them even though it has violated profitability covenants.
On Wednesday, David Einhorn, the principal of Greenlight Capital LLC, resigned from New Century's board just one year after management gave him the seat to forestall a proxy fight.
Greenlight held a 6.3% stake in New Century, according to an SEC filing.
Bose George, an analyst with KBW Inc.'s Keefe Bruyette & Woods Inc., said that there was some speculation that the resignation might be a prelude to a larger maneuver.
"The most logical thing is that the investment didn't work out and he's exiting his position," he said. "I think there are people who are trying to see it in a more positive light — that he's interested in somehow taking a position in the company as a whole."
New Century's shares opened trading Thursday 8.3% above their closing price Wednesday but reversed course and closed down 25%.
Mr. Einhorn had threatened to stand for election, along with two of his associates, to New Century's board last year.
This year New Century's stock has lost almost 90% of its value. The company is in the process of restating earnings because of errors associated with high credit costs. It is the subject of a criminal investigation into its accounting and the trading in its shares.
Mr. Einhorn "came in to try to get them to focus more on profitability and less on volume," Mr. George said. "Once he came in, there wasn't a whole lot of time to materially impact things before things took a downturn at the end of last year."
New Century's devastated market value of about $215 million puts it in reach of many potential buyers, though there would be tough hurdles to such a transaction, Mr. George said.
"It would be a very complicated story right now," he said. "Whoever gets it has to make sure the [credit] lines won't get pulled, unless it's a big parent" that has a warehouse operation itself.
Greenlight declined to comment through Abernathy MacGregor Group Inc., a public relations firm. New Century did not return a phone call by press time.
