The embattled subprime lending business took another blow as Southern Pacific Funding Corp., once a rising star, abruptly filed for a reorganization under bankruptcy.

The move, late Thursday, climaxed a week in which the company's top officials departed, its debt was downgraded, and its stock fell below $1 a share. Less than three months earlier, it was above $16.

"The thing is an absolute meltdown," said Reilly Tierney, an analyst at Fox-Pitt, Kelton, New York. "It's Chernobyl. I don't know if I've ever seen anything like this before."

The bankruptcy filing was the latest sign of distress in the once- booming business of lending to people with blemished credit histories. Subprime lenders have been reeling from intense competition, early repayments of home equity loans, and mounting concerns about credit quality.

Southern Pacific, based in Lake Oswego, Ore., said it filed because it was unable to renegotiate its warehouse lines of credit. Analysts said the company had $1.3 billion of lines, including $300 million from First Union Corp.

The bankruptcy filing listed Bank of New York Co. and Bank of New York Corporate Trust as the company's biggest creditors, with $575 million of loans. Imperial Credit Industries Inc., which is partly owned by Imperial Bancorp, Inglewood, Calif., and holds a stake in Southern Pacific, said its losses could reach $95 million.

A First Union spokesman said the company has a "policy of not commenting on customer relations, personal issues, or matters under litigation." Bank of New York officials could not be reached to comment.

Analysts said Southern Pacific's collapse could mark the beginning of a series of losses for banks with investments in subprime lending. That is because the companies increasingly turned to banks for funding as the stock market's enthusiasm dwindled.

"Now we have a whole new problem for banks," Mr. Tierney said.

Some observers said they were especially surprised to hear that banks supplying warehouse lines of credit had pulled back. "The situation must have been very dire," said one source.

Meanwhile, the nature of Bank of New York's exposure could not be determined. Loans as big as Bank of New York's are usually syndicated, often with as many as 30 banks sharing the risk, and listed with Securities Data Co., a market data firm owned by the same company as American Banker. But a spokesman for Securities Data said the loan was not listed in its data base.

Imperial Bancorp had already felt the heat. Southern Pacific is 47%- owned by Imperial Credit Industries Inc., and Imperial Bancorp has a 23% stake in Imperial Credit. The latter said Sept. 16 that it would take a $65 million to $75 million charge in the third quarter for the problems at Southern Pacific.

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