Accredited Rallies on Lone Star Extension

Lone Star extended the deadline for Accredited Home Lenders to meet the conditions necessary for Lone Star to finalize its $400 million offer for the ailing subprime lender. The news comes one day after Accredited filed suit against Lone Star for failure to consummate the purchase agreement originally brokered by the firms earlier this year. From the AP:

Private equity firm Lone Star Fund V LP said late Tuesday it will extend its tender offer for embattled subprime lender Accredited Home Lenders Holding Co. until Aug. 28 due to a request by the company.

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Lone Star said Accredited Home still doesn’t satisfy all of the conditions necessary to close the tender offer, but noted it is required to extend the offer period for no more than 10 business days if Accredited Home requests an extension.

This is the second time Lone Star has extended its tender offer to buy the Calabasas, Calif.-based mortgage lender for $15.10 per share, or $400 million.

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Accredited Home has cautioned that if the Lone Star deal does not go through, it may face bankruptcy as well.

I can think of two reasons that Lone Star would extend the offer to Accredited:

1. They want to appear to have shown good faith to Accredited should they pull out of the deal; citing Accredited’s inability to meet the conditions of the sale.  This would provide a very strong argument in court should Lone Star finalize its plans to back out.
2. They don’t have a strong case against Accredited and are using the extension to stay the legal proceedings while they formulate legal and/or business strategy to address the suit.

As news breaks on this we’ll keep you posted.  Anyone with information regarding the sale feel free to email us.

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