Irvine-based New Century Financial Corp. said on Thursday it would see a $46 million loss from a deal it struck with Barclays PLC that released the subprime lender from buying back $900 million in loans.
New Century said in a filing with the Securities and Exchange Commission that Barclays agreed to release it from an obligation to buy back the mortgage loans that had gone bad, in exchange for the lender giving up its rights to the loans.
The deal might buy some time for embattled subprime lender New Century, which analysts speculate is on the brink of bankruptcy.
Barclays had demanded last week that New Century buy back all the mortgage loans it had funded under the agreement,an impossibility considering New Century said at the time that it had less than $60 million of cash on hand.
As part of the deal, New Century must transfer to Barclays an unspecified amount of money related to the loans, according to the filing.
The deal also could be terminated by Barclays if New Century secures more favorable settlements or agreements with its other lenders.
The reprieve surely is welcome news for New Century, though it’s a drop in the bucket. The lender could have to buy back some $8 billion in loans if investors demand it.
