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Fremont General adopts rights plan

Wall Street Roundup

October 24, 2007|From Times Staff and Wire Reports

Santa Monica banking company Fremont General Corp. said Tuesday it had adopted a shareholder rights plan to preserve some tax benefits and discourage investors from accumulating large amounts of its stock.

The company, which regulators ordered in March to stop offering sub-prime mortgages, said the plan was not a response to any takeover effort. Shareholder rights plans are designed to make hostile takeovers prohibitively expensive.

This month investment firms Harbinger Capital Partners and Amalgamated Gadget disclosed they held stakes of 9% and 8.3%, respectively, in Fremont, the parent of Brea-based Fremont Investment & Loan.

Fort Worth-based Amalgamated also called on Fremont to auction itself and end "unproductive" takeover talks with an investor group led by Texas billionaire Gerald J. Ford.

Ford's group announced in May an $80-million infusion to help ensure Fremont's survival. But Fremont said in late September that the group might back out.

Fremont said it adopted the rights plan because U.S. tax law limits its ability to use net operating losses to offset taxable income when there is a change in ownership.

Last week Fremont reported an $856-million net loss for the first half of 2007.

Before it stopped offering sub-prime mortgages, Fremont had been one of the 10 largest U.S. providers of the home loans, which go to people with poor credit.

Dozens of mortgage lenders have contracted, quit the industry or filed for bankruptcy protection this year.

A spokesman for Fremont declined to comment.

Fremont disclosed its shareholder rights plan after the stock market closed. Earlier, it rose 1 cent to $3.37. The stock is down 79% this year.

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