A U.S. bankruptcy trustee opposes an auction of loans by Irvine’s New Century Financial Corp. because of a $1 million breakup fee with a key bidder and creditor.
New Century is set to pay $1 million to a Royal Bank of Scotland Group PLC unit if it doesn’t prevail with an expected $50 million opening bid for the loans, according to wire service reports.
Royal Bank of Scotland’s Greenwich Capital Financial Products Inc. is expected to open bidding on the auction of New Century loans.
Greenwich was a major backer of New Century and other subprime mortgage lenders. Along with CIT Group Inc., Greenwich has agreed to finance the bankruptcy wind-down of the company.
New Century filed for bankruptcy on April 2.
Greenwich Capital has a “strategic agenda” in positioning itself in the lead spot for the auction, said Joseph McMahon, a lawyer in the Office of the U.S. Trustee. The breakup fee is unnecessary, he said.
New Century plans to auction other assets. Next up is the company’s loan servicing business. Carrington Capital Management LLC is expected to lead the bidding.
The company’s loan origination business also could be put on the auction block.
