Subprime Time: Lone Star Funds is Embroiled in Another Legal Battle
It's always something with Dallas-based Lone Star Funds. First there was that never-ending -- and ongoing? -- battle with South Korean officials over Lone Star's proposed sale of Korean Exchange Bank. Now, the Harwood Street-HQ'd company is gearing up for a legal battle over its proposed purchase of San Diego-based subprime lender Accredited Home Lenders Holding Co. That deal was to be done by midnight today; for the moment, at least, that ain't gonna happen.
As recently as June, Lone Star said it intended to buy Accredited Home Lenders for $400 million, or $15.10 a share. But then Accredited's share prices fell to a paltry $3.77 a share in the wake of the subprime scandal, and Lone Star wanted out: On Friday, Lone Star filed with the Securities and Exchange Commission a document in which it insisted that "in light of the drastic deterioration in the financial and operational condition of [Accredited], among other things, as of today, [Accredited] would fail to satisfy the conditions to the closing of the tender offer." Then Accredited sent to its employees a memo in which it insisted, "We want you to be the first to know that we disagree completely with Lone Star’s claim and intend to hold Lone Star to its obligations under our agreement with them." And now, Accredited has the lawsuit to prove its sincerity. --Robert Wilonsky
Update: This morning, Lone Star Funds issued this response to the lawsuit, in which it more or less reiterates its filing with the SEC.