New Century owes Barclays $900 million !!!

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Fears of subprime fallout as NYSE suspends New Century

 

By Ben White and Michael Mackenzie in New York and Eoin Callan,in Washington

Published: March 13 2007 02:00 | Last updated: March 13 2007 02:00

 

Trading was halted in New Century Financial yesterday with the second-largest US subprime lender teetering on the edge of bankruptcy, sparking fresh fears about whether turmoil in the sector could spread and damp US economic growth.

The trading stoppage, ordered by the New York Stock Exchange, came after New Century said its banks had either cut off credit or signalled their intention to do so, increasing the likelihood of an imminent bankruptcy filing or asset liquidation.

 

The rapid decline of New Century, the latest in a wave of problems at US subprime lenders, raised concerns that problems could spread in the $8,000bn (£4,000bn) mortgage industry and other parts of the capital markets.

 

 

Market reaction was muted yesterday, as stocks edged slightly higher. But US government bonds rallied. Traders said investors were shifting cash from stocks, which initially moved lower, to the safety of Treasuries.

Shares in large investment banks, down more than 10 per cent in recent weeks, fell further amid concern about their exposure to New Century and the wider subprime market.

 

 

Market participants were also braced for the possibility that if New Century collapsed, it could lead to broad investigations into practices across the subprime lending market.

 

 

Some economists also fear the collapse in subprime loans could trigger wider house price falls. "The return of the housing market to equilibrium is proceeding very slowly. Meanwhile, we don't know how many homes are going to be dumped back into the market by homeowners who default on subprime loans," said Ethan Harris, chief economist at Lehman Brothers.

In a filing with the Securities and Exchange Commission yesterday, New Century said lenders including Bank of America, Barclays, Citigroup, Credit Suisse, Goldman Sachs and Morgan Stanley had issued letters saying the company was in default.

New Century also said lenders had demanded that it accelerate its obligation to buy back outstanding mortgages financed under the lending arrangements.

 

 

New Century said if its bankers demanded accelerated repurchase of all outstanding mortgages it would cost the company $8.4bn, an amount it did not have. That could lead the lenders to force a liquidation of New Century's mortgage portfolio. New Century said such a liquidation might not generate enough capital to meet the banks' demands

 

 

 

unlucky barstewards

 

 

As of September 30, New Century had used $1.5bn each of credit facilities provided by Morgan Stanley and UBS, $1.3bn of a facility provided by Bank of America and $217m of a $1bn $1 bn $1 billion facilityfacility from Barclays. Other lenders include Bear Stearns, Credit Suisse, and Deutsche Bank.

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http://www.consumeractiongroup.co.uk/forum/hfc-household/67028-hfc-desperate.html

[redstef]

Could be a tough year for Barclays then, cos they owe me money. Shame profits might dip this year