Angels Come to Mego's Rescue

Atlanta-based Mego Mortgage Corp. has found three angels that will invest a total of $30 million in the troubled company.City Holding Co., a bank holding company in Charleston, W.Va., Sovereign Bancorp., a thrift holding company based in Wyomissing, Pa., and an unnamed private investor will each contribute $10 million of capital for convertible preferred stock. If these shares becomes common stock, each will own a 9% share of Mego. City Holding also has the option of purchasing an additional $10 million in Mego common stock over the next two years. As part of the deal, Mego will sell $604 million of mortgage servicing rights to City Mortgage Services for an undisclosed price. All of Mego's future originations will be serviced by City Mortgage. When Mego has provided $1 billion in servicing rights to City Mortgage, it will receive an option from City Holding to purchase 20% of the servicing operation if it should ever be spun off.