Blood on the Street at New Century

[wndysrf]

Shorty should come on down to California and visit Orange County.

 

No doubt, local call girl prices have probably dropped by 50% and local seafood restaurants on PCH are now running "all-you eat" specials.

 

Yet another story about New Century hitting the skids in the Wall St. Journal today.

 

This time, a story about how the PigMen decided to cut off New Century after racking up huge profits by lending them money and securitizing all their garbage.

 

Milk their biggest clients dry, then dump them and leave them for dead.

 

Yet another example of how Wall St. loves to eat its own if it means earning a profit.

 

 

How Street Hit Lender 'Subprime' King New Century Was Down but Not Quite Out;

Then, Banks Shut Cash Spigot

 

By GREGORY ZUCKERMAN

 

On a March 6 conference call, New Century Financial Corp. Chief Executive Brad Morrice seemed hopeful.

 

Increased defaults were hammering loans the company had made to less-creditworthy home buyers, and its lenders were preparing to declare it in default. But Mr. Morrice told bankers from Citigroup Inc., Goldman Sachs Group Inc. and its nine other Wall Street lenders that he had a plan to secure new financing so he could keep his mortgage business going. He just needed a little time.

 

Hours later, the bankers began formally terminating lending agreements that had provided $8 billion to New Century -- pushing the nation's second-largest mortgage lender to risky "subprime" borrowers (behind HSBC Holdings PLC's HSBC Finance Corp.) to the brink of bankruptcy.

 

By extending generous credit to subprime lenders, Wall Street firms financed the borrowing binge that helped fuel the housing boom. Those firms now are turning off the money spigot. They see more borrowers having trouble paying off those mortgages in a slowing economy, which has made investors less willing to pour money into the sector.

 

Though banks make money lending to subprime companies, packaging the bonds produces hefty fees -- an estimated $2.3 billion last year, up from about $500 million five years ago, according to Thomson Financial data. Fees for other services added to the windfall.

 

Before things fell apart recently, Wall Street's relationship with subprime lenders was close. New Century executives spoke at conferences hosted by Wall Street firms, including a Morgan Stanley gathering in New York City last June.

 

At a January industry conference in Las Vegas, New Century executives tried to calm investors. They "stressed that they're making better loans now," a person who met them says. "They were reassuring everyone."

 

In February, New Century mortgages that had been worth $8 billion fell by more than $300 million within days, someone familiar with the matter says. The result: More lenders demanded additional collateral, also called margin, from New Century, including Goldman and Credit Suisse, people familiar with the matter say. Banks also invoked terms allowing them to demand that the company buy back loans if borrowers failed to make payments.

 

The company's cash was dwindling quickly. Adding to the company's woes were revelations about accounting problems, plans to restate 2006 earnings and post a fourth-quarter loss, and a Securities and Exchange Commission inquiry.

 

New Century was running out of options. It was unable to get new financing and in violation of its existing lending agreements, in part because it was low on cash. So the company convened the March 6 conference call with its 11 lenders. Mr. Morrice, the CEO, was joined on the call by New Century board member David Einhorn, who runs Greenlight Capital, a New York hedge fund that owned 6% of the company's stock, which by then had fallen 70% in two weeks.

 

Mr. Morrice informed the bankers that New Century's available cash had dropped to $40 million, down from the $100 million he had reported to some of the bankers a day earlier and from $350 million at year end, a participant on the call said.

 

The CEO told the bankers he was working with Mr. Einhorn and Bear Stearns Cos., another Wall Street firm, on a plan to stabilize the company's operations. The banks were holding New Century mortgages as collateral for $8.5 billion worth of loans. Under the plan, the banks would return those collateral mortgages to New Century so it could cobble them together into new bonds that would be sold to raise money.

 

The proceeds would allow the company to repay the 11 lenders and continue generating new mortgages.

 

Mr. Einhorn told the bankers that his firm would consider buying the riskiest of the new bonds, which otherwise might have few takers given the sinking subprime market. The Bear Stearns bankers expressed hope that they could make the plan work.

 

That night, Citigroup moved forward with a decision to declare New Century in default. Others followed. The next day, Mr. Einhorn resigned from New Century's board. Though Morgan Stanley agreed to a $265 million loan, it demanded as collateral a loan portfolio worth even more, and reversed course a few days later and cut off additional financing.

 

On March 12, New Century announced that it couldn't pay its creditors and that all lenders had halted financing. The New York Stock Exchange suspended trading in New Century shares as a filing for protection from creditors in federal bankruptcy court started to seem inevitable.

 

........................................

 

 

No doubt, the same Racketeers who threw New Century into BK will then scrape the carcass, park the loans somewhere for a few months, then re-sell them for Vast Profits when things stabilize.

 

Most likely, the buyer of such mortgages will be yet another HedgeFund, one of their own clients, who they can then milk and burn later.

[wndysrf]

A 'nudder new record closing high.

 

 

 

 

[Drano]

Wndy, I apologize.

 

I thought you were making up all that stuff about Iranian plastic surgeons and their model girlfriends etc.

 

Now I turn on the TV to get the news, and what do I get instead?

 

Dr. Phil interviewing a plastic surgeon named "Sanjay" (Indian, probably) and his model girlfriend, about how they met on the internet. His ad said, creepily, that he "truly enjoys being the 'Daddy' " and hers talked about how she would "network" with anyone who would "spoil" her, to advance her "career."

[I_Am_Madness]

Mark might be on to something.

JNJ might look good for a bounce here.

[Drano]

I'm watching in horrid fascination.

 

The plastic surgeon met his 18 year old girlfriend on Sugardaddie.com

 

:lol:

 

:P :P

[crazy_ate]

A 'nudder new record closing high.

 

 

 

That's the run to the "relative safety" of the utes. They offer a divi and I doubt energy consumption will ever decrease in the US, although the rate of increase each year may decline if the economy misses a beat {edit: when the economy misses a beat]....that would be the first derivative of the rate increase curve, correct?

 

I want to buy some of these or a good ute mutual fund, but this ain't time.

[elh]

Anybody know the results of Morgan Stanley's subprime auction results?

 

Despite the powerbone on their earnings announcement last week, turns out they are the most heavily exposed of the PigMen to subprime risk despite denials from the CEO & CFO last week.

 

 

_________________________

 

http://www.Crapvision.com/id/17784320

 

Morgan Stanley is in the process of holding an auction for $2.48 billion in mortgages from subprime lender New Century Financial, The New York Post reported Monday.

 

The loans represent the collateral given to Morgan Stanley

 

As New Century, of Irvine, Calif., sank deeper into financial trouble earlier this month, Morgan Stanley assured the market that the loans and repurchase agreements it had made to the company were in order.

 

The Post reports that it now appears that Morgan has less confidence in the health of the collateral.

 

Morgan Stanley, not wanting to draw attention, announced the sale of the 13,200 loans in a small public auction notice in a print ad Friday.

[crazy_ate]

Yet another story about New Century hitting the skids in the Wall St. Journal today.

 

This time, a story about how the PigMen decided to cut off New Century after racking up huge profits by lending them money and securitizing all their garbage. 

 

Milk their biggest clients dry, then dump them and leave them for dead.

 

Yet another example of how Wall St. loves to eat its own if it means earning a profit.

 

Cutting off liquidity is the financial equivalent of a Neutron Bomb.....all that is left are empty desks, empty parking lots, and empty buildings. Then the bankers can divi up the paper assets for pennies on the dollar in bankruptcy court and yet again....derive "vast fortunes" and "record bonuses"

[I_Am_Madness]

Bottom catching is a dirty business.

Entering buy zone for AMGN.

[Drano]

Bottom catching is a dirty business.

Entering buy zone for AMGN.

572249[/snapback]

Ya gotta pick'em just right.

[crazy_ate]

Looks like I may be able to get a position in DELL at an even greater discount......let's see what they f'd up in their accounting dept. first....or maybe I'll just hold off until later this year or next when it is selling in the low teens or high single digits

[Drano]

Dr. Phil is just reaming out the 18 year old ho'. She's sobbing. Asks 40 y.o. plastic surgeon if he wants someone who still has stuffed animals on her bed.

 

If it hasn't broadcast yet in your area.... :lol:

[Drano]

Looks like I may be able to get a position in DELL at an even greater discount......let's see what they f'd up in their accounting dept. first....or maybe I'll just hold off until later this year or next when it is selling in the low teens or high single digits

572251[/snapback]

Breaking News: Dell Accounting Misconduct

[Sudaca]

I'm watching in horrid fascination.

 

The plastic surgeon met his 18 year old girlfriend on Sugardaddie.com

 

:lol:

 

:P :P

572245[/snapback]

 

... sugardaddie.com... hmmm.... Alt-A (Favorites) - A (Add) - OK - Click - Done....

 

 

 

Woops... did I do that out loud ???

[I_Am_Madness]

DELL down 1.6 and falling fast in afterhours.

Surprise the futures aren't following it. I guess Dell is a company specific issue.