$400 Million for LEND ?!?
Disclaimers: I have no stake in LEND other than CAPS and Forbes' stock picking game. And, there's plenty I don't know about crunching through a balance sheet.
Lone Star V LP, a private equity firm, agreed to purchase Accredited Home Lender's (LEND) for $400 million, or $15.10 per share. Interesting transaction given rumors of LEND's financial status.
Let's dig a little deeper - oops, we can't - the most recent public financial report filed by LEND is for the quarter ended 30 Sep 2006. Apparently, the only way you can learn about the company's financial status is if you're willing to lend them money (Farallon) or make an offer (Lone Star). So, if you're an ordinary shareholder or interested party, there's no simple way to do any kind of analysis to see if this is a good offer.
We do know that as of Sep '06, LEND claimed $644 million of net assets. We also know that since Sep '06, the subprime market has been quite troubled. We also know that in Mar '07 Farallon Capital Management loaned LEND $230 million at 13% and got 3.3 million warrants for shares with an excercise price of $10.
It's reasonable to assume LEND's balance sheet wasn't in great shape in March if the only way to get financing was under the terms they got from Farallon. If we assume the loan portfolio value deteriorated between Sep '06 and Jun '07 and factor in the $230 million Lone Star will need to fork over to Farallon to repay the loan, a $400 million buyout price doesn't make much sense. (No doubt I'm missing something, but as noted above, apparently you need to be a hedge fund or private equity firm to get access to LEND's current financial status.)
Call me a skeptic, but this deal looks a little fishy. At a minimum, it doesn't seem right that a company that hasn't been able to report its financials to shareholders for over six months is able to provide enough information to a private buyer for them to come up with a bid price.
If you're a financial news junky (and why would you be reading an obscure blog if you're not), keep an eye on this one - this story could get interesting before it's all over.