Luminent continues slide after backers demand payment; Midwest reconsiders AirTran takeover bid

By Sheri Kasprzak

New York, Aug. 14 - Luminent Mortgage Capital Inc. can't seem to catch a break.

The investment firm's stock continued its freefall on Tuesday after receiving demands for payment to the tune of $1.6 billion from its repo lenders.

So far, eight of Luminent's lenders have cried default on the company's loans, according to a filing from the Securities and Exchange Commission.

In other news, AirTran Holdings, Inc. put the pressure on Midwest Air Group for its proposed takeover bid. AirTran revised its acquisition offer, upping its price to $16.25 per share from $15.75.

TPG Capital, LP, a private equity firm, made an offer of $16.00 per share over the weekend to acquire Midwest.

Midwest's stock was little changed by the news.

One analyst said, on condition of anonymity, that the move would likely not be the best for Midwest.

"They have their own brand, their own specific customer base and this move by AirTran would dissolve them, ultimately," he said. "Being acquired by a private equity firm [TPG] would be the best possible situation because they're not another airline holding company."

Luminent's woes continue

Moving back to Luminent Mortgage Capital, the San Francisco-based REIT continued to get hit by bad news in the mortgage-lending sector.

The company received notice from its repo lenders demanding payment of $1.6 billion in loans.

By 10:39 a.m. ET, the stock had already given up 39.8%, or 39 cents. By the end of the session, the stock had gone on to lose 56.12%, or 55 cents, to close at $0.43 (NYSE: LUM).

The company's stock has fallen from $9.52 on July 13 to $0.98 on Aug. 13.

Still, traders and analysts alike said they were waiting for the company to sell off some of its assets and bankruptcy rumors were still rampant.

"I've been hearing a lot of talk that they may go out of business," said one sellside trader.

Another trader said the company would probably be better off filing for bankruptcy and selling off assets.

"As it is now, investors are jumping ship," he said. "They'd probably feel a little more confident if they at least knew they [Luminent] were making some effort to pay off their lenders - selling off some assets or something like that."

Yet another trader went as far as saying Luminent's stock might actually improve when and if they announce their plan of action.

"No one likes being left in the dark," he added.

Luminent, however, is remaining mum about any specific plans for repairing the damage.

"Luminent has no additional comment about its 8-K filing other than to note that, as previously stated, it is exploring all alternatives with respect to its liquidity and the preservation of its portfolio and assets," said a spokesman for the company in a phone interview Tuesday.

Luminent's other troubles

Last week, Luminent announced that it would be unable to pay dividends because of its liquidity problems.

Analyst Steven DeLaney with JMP Securities said last Wednesday that he felt that the company would be announcing a bankruptcy announcement soon.

When the company announced it would be unable to make its dividend payments, the stock plummeted by more than 75%.

AirTran's back again

Elsewhere, Milwaukee's Midwest Airlines is considering a new acquisition bid from AirTran after rejecting its previous $15.75 per share bid last week.

AirTran came back on Tuesday with a $16.25 per share offer.

On Monday, TPG Capital, a private equity firm, made an all-cash offer at $16.00 per share. Northwest Airlines is a passive investor in the TPG offer.

Midwest's stock dipped by 4 cents on Tuesday to close at $13.96 (Amex: MEH). In after-hours activity, the stock gained 7.66%, or $1.07 to $15.03. On Monday, after TPG made its offer, the stock gave up 23 cents to close at $14.00.

AirTran's stock edged up by 3 cents to close at $10.35 but lost 2 cents after-hours.

"Owners of Midwest recognize the overwhelming benefits of forming a truly national, low-cost efficient carrier that will add flights, increase jobs and lower fares," said AirTran chief executive officer Joe Leonard in a statement released Tuesday.

"Midwest's shareholders are concerned that the acquisition of Midwest by a private equity firm, along with Northwest Airlines, will block competition, raise fares, reduce employment levels and reduce service."

Lone Star seen having to buy Accredited

Accredited Home Lenders Holding Corp. watched its stock drop again on Tuesday, a day after it said it is taking Lone Star Fund V and two affiliates to court to close their tender offer and settle their merger.

One sell-sider said Tuesday that he doesn't feel Lone Star really has a leg to stand on. Lone Star is trying to back out of its merger agreement with Accredited, claiming the mortgage company's financials have sustained drastic "deterioration."

"Everything I've read about them indicates there is no clause of the sort," the trader said Tuesday when asked about a clause Lone Star alleges exists that it may back out of the merger deal if Accredited's financials deteriorate drastically.

On Tuesday, Accredited Home Lenders' stock fell by 5.5%, or 32 cents, to close at $5.50 (Nasdaq: LEND), but put on 3.64%, or 20 cents, in after-hours trading. The stock sank by 34.64%, or $3.08, to close at $5.82 on Monday.

Lone Star released a statement on Monday claiming it did not feel it was obligated to complete its merger with Accredited.

"...In light of the drastic deterioration in the financial and operational condition of the company, among other things, the conditions to the closing of the tender offer for shares of Accredited would not be satisfied," said the Lone Star statement, in part.

Accredited released its own statement Monday, disputing those charges.

"The agreement and plan of merger between Accredited and Lone Star expressly provides that changes generally affecting the non-prime industry in which the company operates which have not disproportionately affected the company do not provide a basis for Lone Star to fail to honor obligations," said the Accredited statement.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.