New Century Crumbling

As of Friday, all of the lenders under New Century’s short-term repurchase agreements and aggregation credit facilities had discontinued providing financing or notified the company of their intent to do so, according to an 8-K filing with Securities and Exchange Commission. Some also terminated the company’s servicing rights.

The Irvine, Calif.-based real estate investment trust explained that each of the lenders with which it has financing agreements, which include Citigroup, Morgan Stanley and Bank of America, has the right to cease providing financing for the company and its subsidiaries during the pendency of an event of default.

New Century estimates that repurchase obligations of all outstanding mortgage loans financed under outstanding financing arrangements aggregate to about $8.4 billion.

However, New Century said that it does not have sufficient liquidity to satisfy outstanding repurchase obligations and may not have sufficient resources to pay for deficiencies that may arise if the liquidation lenders may seek for the mortgage loans or other assets they financed amounts to less than the contractual amount New Century agreed to for repurchase of the loans.

The nonprime lender said it is continuing discussions with its financiers and other third parties regarding refinancing and other alternatives to obtain adequate liquidity.

Citigroup Global Markets Realty Corp. issued a Notice of Maintenance Call, stating a margin deficit under a Master Repurchase Agreement executed last August, and demanding that New Century transfer about $80.3 million to Citigroup in “immediately available funds” on or before March 7. New Century satisfied the obligation, according to the filing.

To satisfy an additional $717 million Citigroup was demanding for repurchase obligations of all the outstanding mortgages it financed. On Thursday, Morgan Stanley Mortgage Capital provided New Century with $265 million in new financing as part of a December 2005 agreement that allowed the nonprime lender to pledge those additional assets.

A day later, however, Morgan Stanley notified New Century it would no longer provide financing for the company, demanded that the company pay repurchase obligations of the loans it financed under the agreement, and terminated the company’s servicing rights. New Century estimates these repurchase obligations aggregate to $2.5 billion.

However, New Century still owes Citigroup at least $31.9 million because one of its subsidiaries allegedly defaulted in a Servicer Advanced Financing Facility agreement. The default reportedly resulted from the downgrade on residential primary servicer ratings given last week by Fitch Ratings and Moody’s Investors Services and from New Century’s alleged breach of its covenant to maintain cash and cash equivalents at all times of at least $60 million.

Although Citigroup has not formally terminated its agreement, New Century said it does not expect that Citigroup will provide additional financing.

Bank of America, which alleges New Century failed to satisfy margin calls under certain agreements, intends to accelerate obligation to repurchase all the outstanding mortgage loans BoA financed, estimated at $0.6 billion, and to transfer to itself the servicing rights, according to the filing.

A letter by Barclays Bank PLC also purported the termination of servicing rights of certain loans of one New Century subsidiary, the filing said.

Credit Suisse First Boston Mortgage Capital LLC also purported to terminate servicing rights and alleges that New Century and certain of its companies have not met requirements of an agreement made last January by allegedly failing to make certain cash payments and defaults under certain other financing arrangements. New Century estimates aggregate repurchase obligations under the agreement with Credit Suisse is about $0.9 billion.

DB Structured Products notified that the company has defaulted in two agreements, one executed last April and the other in September 2005, by failing to satisfy alleged margin and collateral deficits, defaults under certain other financing arrangements, and profitability requirements. DB intends to reserve its rights and requested that New Century facilitate the establishment of a back up servicing arrangement.

Meanwhile, Goldman Sachs Mortgage Co. said New Century failed to comply with a margin call under an agreement executed last February, according to the filing. Goldman demanded repayment of aggregate repurchase obligation, estimated at $0.1 billion, and terminated servicing rights. Goldman additionally purported to offset mortgage loans it holds against the repurchase obligation.

New Century also received a Notice of Default and Reservation of Rights from IXIS Real Estate Capital Inc. for alleged failure to deliver certain financial statements, keep adequate books and records of account, maintain profitability requirements and make certain cash payments. In addition to termination of servicing rights, IXIS is seeking repayment of repurchase obligations, which New Century estimates aggregate to about $0.8 billion.