PURCHASE OF LENDER AMBIGUOUS.Byline: Deborah Adamson Daily News Staff Writer The purchase of mortgage lender PacificAmerica Money Center by a large insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. has hit a bump in the road, sending its stock price plunging plunge v. plunged, plung·ing, plung·es v.tr. 1. To thrust or throw forcefully into a substance or place: 37 percent on Monday. The buyer, Fremont General Corp. of Santa Monica Santa Monica (săn`tə mŏn`ĭkə), city (1990 pop. 86,905), Los Angeles co., S Calif., on Santa Monica Bay; inc. 1886. Tourism and retailing are important, and the city has motion-picture, biotechnology, and software industries. , has changed the terms of the deal by setting performance standards for PacificAmerica to meet before it will pay the agreed-upon $10 per share, or $55 million, announced in September. PacificAmerica shares dropped $2.6875 to $4.50, giving back some of the 49 percent gain on Sept. 11 when both companies announced news of the purchase. Fremont lost $5.125, or 10 percent, to close at $44. Wall Street ``does not like uncertainty,'' said Walter Fitzgerald, an analyst at Brean Murray in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . ``The final payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. is unknown.'' Originally, Fremont said it would pay $10 a share, with a quarter of the payment in stock and the rest in cash. But Fremont has revised the terms, making a lower purchase price possible. Fremont now is offering $6 a share in cash at the close of the deal. Fremont also would pay up to $4 a share within two years if PacificAmerica meets certain targets in the sale of its loans, without identifying those target levels. But if the sale of PacificAmerica's interest-only strip Interest-only strip (IO) A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero. receivables are less than the amount they both agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy , then the difference will be subtracted from the $6 a share purchase price. The strips are assets that represent the spread between the interest on loans homeowners pay PacificAmerica and the amount it pays to investors who buy bonds and notes collateralized by these mortgages. Wayne Bailey, chief executive officer of Fremont, said the insurer sought to buy PacificAmerica because of its distribution channels. However, the volatile subprime residential mortgage market and capital markets have made it riskier for Fremont to take over certain assets of PacificAmerica. ``There are risks we're not willing to assume,'' he said. |
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion