Will Crunch Undo Accredited/Lone Star Deal?

The acquisition of Accredited Home Lenders Holding Co., San Diego, by Lone Star Fund V (U.S.) LP, Dallas, may be the next victim of the mortgage industry crunch.On Aug. 10, Lone Star filed a statement with the Securities and Exchange Commission stating that "in light of the drastic deterioration in the financial and operational condition of [Accredited], among other things, as of today, [Accredited] would fail to satisfy the conditions to the closing of the tender offer. Accordingly, [Lone Star] does not expect to be accepting shares tendered as of the end of the current offer period," which expires at midnight Eastern time on Aug. 14. In response, Accredited has filed a lawsuit against Lone Star in the Delaware Court of Chancery to compel it to close the transaction, stating that the terms of the deal say Lone Star cannot back out because of a deterioration of the business. Lone Star responded that it "believes the facts will fully support its position." In its statement, Accredited said the failure to close the deal is not an event of default under its warehouse lines. It has $1.6 billion in facilities for U.S. loan originations and C$150 million to do loans in Canada. Lone Star was to pay $15.10 per share for Accredited. As of 11:32 a.m. on Aug. 13, Accredited's stock was trading at $6.07 per share, down $2.32 from the previous close.