Mego Completes Recap, Will Take 3Q Loss

Mego Mortgage Corp., Atlanta, has completed its recapitalization, but will take a third-quarter loss of $55 million.The company generated $87.5 million of new equity from various sources. City National Bank, Charleston, W.Va., and Sovereign Bancorp Inc., Wyomissing, Pa., have acquired $10 million in convertible preferred stock. Both have options to acquire $10 million of Mego common stock at $1.50 per share. City Mortgage Services, an affiliate of City National, has acquired the right to service approximately $536 million of mortgages now serviced by Mego and the exclusive right to service up to $1 billion of mortgages originated or acquired by Mego in the future. Another unnamed strategic investor has acquired $5 million in preferred stock, while other private investors have purchased $15 million of Mego's common stock at $1.50 per share. In addition, Mego exchanged $79 million of senior subordinated notes for $37.5 million of preferred stock and $41.5 million in new senior subordinated notes. Mego also announced that Champ Meyercord, formerly a senior investment banker with Greenwich Capital Markets, is the company's new chairman and chief executive. Mr. Meyercord will be heading up a company that will lose at least $55 million for its fiscal third quarter, which ended on May 31. This loss comes from additional reserves against loans held for sale, writedowns of capitalized fees and expenses resulting from the recapitalization, and a writedown in the carrying value of mortgage-related securities.