Farallon Capital Management LLC disclosed talks to buy Accredited Home Lenders Holding Co. before extending it a loan, joining rival hedge funds in the hunt for mortgage assets at bargain prices.
Farallon said in a regulatory filing today that takeover talks occurred “within the last 10 days” and may be resumed. Separately, Citadel Investment Group LLC, which bought bankrupt ResMae Mortgage Corp. two weeks ago, disclosed that it holds a 4.5 percent stake in Accredited.
Hedge funds are striking deals with subprime lenders as Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. cut off credit and demand more protection from mortgage defaults. Fremont General Corp., the California thrift ordered by federal regulators to stop subprime lending, said today it will sell $4 billion of loans at a discount to reduce the risk of more losses.
“Many of the subprime lenders appear to be trading at a fraction of book value as investors are concerned about the underlying credit of their assets,” said Steve Neimeth, who manages about $900 million at AIG SunAmerica Asset Management Jersey City, New Jersey. “It appears that hedge funds, based on their due diligence, believe that credit isn’t as bad as the market is anticipating.”
