The meltdown of Irvine subprime lender New Century Financial Corp. likely is the quickest and steepest downfall ever for an Orange County company.
As of last week, New Century had lost 95% of its market value since Feb. 7. That’s a staggering $1.5 billion in market value, or $320 million a week for the past five weeks.
Of course, OC has seen companies lose virtually all of their market value before.
During the technology meltdown earlier this decade, Newport Beach chipmaker Conexant Systems Inc. made a dramatic fall from its peak during the boom. Conexant actually lost 99% of its value from 2001 to 2002. But it took a year and a half to get to that point.
More recently, Anaheim circuit board maker DDi Corp. lost 96% of its value over a two-year period ending in 2005. That’s glacial time compared to New Century’s crash.
New Century’s collapse is remarkable even by the standards of the volatile subprime sector. During the late 1990s subprime crash, auto financier Consumer Portfolio Services Inc. of Irvine lost 90% of its value from 1997 to 1999 after investors soured on riskier lenders.
For all the pain of the early 1990s recession, it too was drawn out compared to New Century’s fall. Few of the hardest hit local companies,homebuilders and aerospace companies,were public at the time. But one real estate proxy, Santa Ana-based title insurer First American Corp., lost half of its value from 1989 to 1990.
On a broader scale, you might have to go back to the stock crash of 1987 or the savings and loan crisis of the late 1980s to find a remotely comparable meltdown.
The S & L; crisis shares a similarity with New Century in that bad loans also were at the heart of the meltdown.
One big difference: the government ended up footing most of the $150 billion bill to bail out failed thrifts. At New Century, shareholders,from hedge fund Greenlight Capital LLC and Morgan Stanley to employees,are taking the hit.
,Michael Lyster
