Lone Star Seeks Lower Accredited Price

Lone Star agreed in June to pay $15.10 per share, or $400 million, for Accredited. But late Thursday, Lone Star told the mortgage lender that it wanted to pay $8.50 per share.

In exchange for the reduced price, Lone Star offered to let Accredited seek other buyers.

But Friday afternoon, Accredited said it had a deal two weeks ago when 97 percent of the company's shares were tendered at $15.10 apiece. Accredited said it would continue pursuing a lawsuit it filed this month in a Delaware court to try to force the equity firm to complete the deal.

Accredited shares rallied Friday, rising $2.74, or 43 percent, to $9.05. The shares had traded above $30 late last year but tumbled in March and remained depressed.

The Lone Star-Accredited deal is the latest in a string of buyouts that are in trouble or being renegotiated.

Dallas-based Lone Star has been trying to back out of the transaction, arguing that there had been "drastic deterioration" in Accredited's financial and operating health. Accredited was active in the subprime mortgage lending business and has run into financial trouble.

Some analysts say San Diego-based Accredited faces bankruptcy if the deal falls through. Lone Star played on that fear in a letter Thursday to Accredited's board.

"We believe, and apparently (Accredited) also believes based on its previous public statements, that under current conditions, the company may suffer further declines in value and have a difficult time surviving as a going concern," Lone Star Vice President Marc L. Lipshy said in the letter.

Lone Star proposed to drop some conditions of the earlier sale agreement, dismiss the lawsuits, and let Accredited seek a better offer from other buyers -- but Lone Star would have the right to match other offers.

Lone Star said its reduced offer was still a 35 percent premium to Accredited's closing stock price of $6.31 per share on Thursday.

Lone Star extended its latest offer until Sept. 12, its fourth extension.

Accredited did not immediately return a call for comment on Friday.

Problems in the credit markets have led to price reductions in other recent acquisitions.

On Thursday, Home Depot Inc. closed the sale of its wholesale distribution business to a group of private equity firms for $8.5 billion, down from the original price of $10.3 billion in June. H&R Block Inc. agreed to sell its money-losing subprime mortgage division to Cerberus Capital Management for $300 million less than the value of the unit's assets -- a figure yet to be determined because of continuing uncertainty in the mortgage market.

Accredited, which makes home loans in the United States and Canada, has struggled with rising delinquencies among high-risk borrowers.

Last week, the company stopped taking new U.S. loan applications and said it would lay off more than 60 percent of its workers and close its retail lending business and half its wholesale division.

Lone Star raises investment money from pension funds, universities and other large investors. It has more than $13.3 billion under management.