New Century Financial Corp. is receiving less money from U.S. Bancorp this year than it has for the past two. Whether that indicates that the Minneapolis banking company has cooled to the Irvine, Calif., subprime lender or that New Century simply needs less money, is a matter of debate.

This much is certain: U.S. Bancorp has committed itself to invest only $20 million in New Century this year, down from $40.7 million last year and $25 million in 1998. And late last week, New Century said it had hired the investment bank PaineWebber Inc. to help it explore "strategic options," including a sale.

Some observers have read these facts to mean that U.S. Bancorp has shut off the spigot. But others contended that New Century needs less money from the banking company because it is selling more of its production as whole loans, rather than securitizing, which is costlier.

The Minneapolis banking company's investment of $85.7 million since late 1998 has been crucial for New Century, helping it survive and even prosper while the rest of the subprime sector imploded. But the form of its financial support has evolved - from purchases of $45.7 million of common and preferred stock in late 1998 and early 1999 to commitments for $40 million of subordinated debt from last year's third quarter to date.

Philip Heasley, president and chief operating officer of U.S. Bancorp, said Wednesday, "We can't discuss that relationship in any detail."

Robert K. Cole, New Century's chairman and chief executive, also would not comment on the relationship.

Even if U.S. Bancorp's enthusiasm for New Century is cooling, the banking company is nevertheless in a buying mode: Tuesday it announced a $155 million deal for San Diego-based Scripps Financial Corp. (See page 1.)

Analysts said U.S. Bancorp must still be considered a potential suitor for New Century. "I still believe that U.S. Bancorp has an interest in the company," said Michael McMahon, an analyst at Sandler O'Neill & Partners. "Subprime loans are here to stay. Someone has to provide that product, and it can be a profitable product if done correctly."

Considering the state of the industry, Mr. McMahon said, before U.S. Bancorp makes an offer, PaineWebber may have to drum up other bidders to demonstrate market interest. "It would be difficult for U.S. Bancorp to buy the company without finding out whether there is a demand for it," he said.

Several analysts, though praising the lender's performance in an extremely tough environment, were skeptical about its chances of raising more capital or finding a buyer.

"New Century's reputation seems to be sterling," said James R. Bradshaw, an analyst at D.A. Davidson & Co. Unlike many of its peers, he said, the lender has not been accused of predatory practices. "If you are interested in this space, New Century is probably an attractive target," he added.

However, he said, "subprime is just so out of favor right now that it's hard to imagine there's going to be more than a handful of interested suitors."

"They prudently managed their company as the environment continued to change," said Stephen G. Moyer, managing director of Imperial Capital in Beverly Hills, Calif. "But the manifest uninterest of investors in this sector, as illustrated by the failure of many now bankrupt companies to sell virtually any part of their operations, makes me less than optimistic that New Century will be able to structure a favorable alliance."

Recent events may make it especially tough for New Century to find any takers. First Union Corp., for example, said Monday that it would shutter the lending operations of its Money Store unit, the subprime lender it bought two years ago. And Conseco Inc. put its consumer finance unit on the block in March two years after buying it.

Yet Mr. Cole is optimistic. He said that the subprime business remains strong and that the bloodletting of the last two years only enlarges the opportunity for the surviving companies.

"We perceive an opportunity for those strong and viable companies that are still in business," he said. "The consumer is still there and still has the need, and there are fewer competitors in the pool to satisfy loan demand. It's a good time to enter the market."

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