Compiled by Alisha Gomez
TOP STORIES
Irvine-based subprime lender New Century Financial Corp.’s stock was pummeled last week on speculation a bankruptcy filing is imminent. New Century’s shares are down 80% this month and are off 90% since early February. The lender said it stopped making loans after investment banks halted lines of credit. The move stands to have a crippling effect if New Century doesn’t line up more financing. New Century refinanced $710 million of loans but hasn’t been able to come to terms with other lenders. “We feel it is likely that New Century just used up its last option to avoid collapse, and believe a bankruptcy filing or liquidation may well be announced in the next week or two,” wrote JPMorgan analyst Andrew Wessel. Merrill Lynch & Co.’s Kenneth Bruce went further in saying New Century faces “likely liquidation in bankruptcy.” Meanwhile, David Einhorn, president of New York-based activist hedge fund operator Greenlight Capital Inc., resigned last week as a director of the company. Greenlight is the second-largest shareholder with a 6.3% stake.
A federal jury found that two former executives of Irvine-based computer maker Gateway Inc. manipulated earnings so it would appear the company met Wall Street expectations. The Securities and Exchange Commission began taking action in 2003 when the company still was based in San Diego. Jurors found former chief financial officer John Todd and former controller Robert Manza violated anti-fraud and record-keeping laws and made false statements. A judge will determine sanctions. No date has been set.
Los Angeles-based landlord Maguire Properties Inc., fresh off one of the biggest local office buys, last week said it plans to sell 11 office properties in Orange County, totaling roughly 3 million square feet. That’s about one-third of Maguire’s existing local portfolio, based on square footage. Those 11 offices, along with an additional 1.7 million square feet of office space in Glendale and San Diego, should raise more than $2 billion for the real estate investment trust. The deal’s set to be completed in the second quarter, Maguire officials said. The company plans to use the money from the sales to help finance its $2.9 billion buy of Equity Office Properties Trust’s OC and Los Angeles portfolio from Blackstone Group LP.
Brea-based subprime mortgage lender ResMae Mortgage Corp. said Chicago hedge fund Citadel Investment Group LLC beat out Credit Suisse Group with a $180 million bid for the company. Citadel offered $20 million for ResMae’s lending operations and 98.5 cents on the dollar for the company’s $160 million in loans, according to Bloomberg. The deal is subject to bankruptcy approval. In February, ResMae filed for bankruptcy protection and planned to accept an offer from Credit Suisse of $19.1 million for the lending operations and 98 cents on the dollar for the $160 million loan portfolio.
Santa Monica-based Fremont General Corp. is in talks with “five or six companies” interested in buying its troubled Brea-based subprime mortgage business, the Santa Monica company said last week. Final presentations were being made to interested investors last week, a company spokesman said. But Fremont warned there’s no guarantee of a deal. Employees of its shuttered subprime lending unit are on paid leave during the talks.
Irvine-based mortgage buyer Impac Mortgage Holdings Inc. saw its stock drop nearly 25% in trading last week after it said it wouldn’t be able to file its annual financial report on time, citing a “material weakness” in its cash-flow reporting for mortgage loan sales and purchases. The company, which recently moved to its newly constructed headquarters on Jamboree Road, has lost nearly two-thirds of its value since the summer. It now counts a market value of about $334 million.
Anaheim-based teen retailer Pacific Sunwear of California Inc. reported a worse than expected fall in February sales at stores open at least a year. The company’s same-store sales fell 5.7% last month, steeper than Wall Street’s projected 3.7% decline. Same-store sales at the company’s dominant surfwear chain PacSun fell 3.5%. Demo, a smaller chain selling urban fashions, continued its slump with a 14.7% drop. The company said it saw a lack of clearance sales last month.
Foothill Ranch-based aluminum parts maker Kaiser Aluminum Corp., which emerged from four years under bankruptcy reorganization in July, posted big gains for the fourth quarter. Net income for the quarter was $12 million, versus a $1.14 billion loss a year earlier. At that time, Kaiser saw more than $1 billion in charges related to its reorganization. Sales for the quarter rose 23% from a year earlier to $336 million. The company said it had better results this year because it was able to raise prices and pass on higher costs for metal. Kaiser also ramped up its shipments.
