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New Century Posts Loss for Quarter, Year

Lending: Chairman says talks to sell the Irvine company are on hold. Shares gain nearly 10%.

February 02, 2001|From Times Staff and Wire Reports

Irvine subprime home loan provider New Century Financial Corp., buffeted by a $45.8-million adjustment for revalued mortgage-backed securities, said Thursday it posted a fourth-quarter and annual loss.

The company's chairman, meantime, said talks to sell the firm, which makes home loans to those with poor or little credit, have been put on hold.

"Right now, our intent is to stay independent. Plus, with lower interest rates, we see very good opportunities over the next year or two," Robert K. Cole said in an interview.

New Century posted a fourth-quarter loss of $26.4 million, or $1.84 a share, compared with a profit of $7 million, or 36 cents a share, a year ago, when it had a $10-million adjustment. Revenue plummeted to $10.4 million from $60.7 million.

For the year, the company reported a loss of $23 million, or $1.76 a share, which included a $67-million adjustment. It earned $39.5 million, or $2.11 a share, the previous year when it had a $23-million adjustment. Annual revenue fell to $163.9 million from $233.9 million.

The company's shares gained nearly 10% Thursday to close at $10.56, up 94 cents, in Nasdaq trading.

New Century typically packages its loans and sells them to Wall Street firms, which use the pool as a base for securities they sell. The company still bears a risk of losses, though, if the loans default or get repaid earlier than expected.

One particular security pool had a unique provision that allowed it to be restructured, resulting in a lower overall value that caused much of New Century's quarterly adjustment. The company also set aside funds for future loan losses and for early loan repayments because of an expected increase in refinancings.

Without the adjustments, the company earned $5.1 million, or 26 cents a share, for the quarter, and $22.9 million, or $1.19 a share, for the year.

New Century said it anticipates earning $1.10 to $1.20 a share this year.

Last year, the company trimmed employment by 12% to about 1,500 workers from 1,770, and generally has decreased operating costs while increasing efficiencies and loan production, the company said.

It reported noncash restructuring charges of $2.4 million for the latest fourth quarter and year, relating to employee separation expenses and write-off of certain assets.

In recent months, the company tightened credit underwriting guidelines as interest rates began to rise and the economy worsened. Cole said its recent partnering with Fairbanks Capital Corp. to help service its $6-billion loan portfolio will help reduce delinquencies.

Last summer, the subprime lender retained PaineWebber Inc., a unit of UBS Securities, to help it explore strategic alternatives, including the sale of the company.

But in December, the company concluded its use of PaineWebber as a financial advisor. At about the same time, the New Century board voted to remain independent and ended its pursuit of other alternatives.

These options included the sale of certain assets, raising new debt and restructuring certain liabilities, Cole said. He declined to say if New Century had received any buyout offers.

One analyst believes the company will be sold.

"Once this company starts throwing off cash, I'd bet 20-to-1 that you'll see the sale of this company in the next few years," said Otis Bradley, analyst with Gilford Securities in New York.

Dow Jones Newswires contributed to this report.

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