S&P drops New Century

Standard & Poor's said it lowered its counterparty credit rating on New Century Financial Corp. to BB- from BB and placed it on CreditWatch with negative implications.

The rating actions reflect concerns about declining earnings and deteriorating asset-quality metrics as net charge-offs have been rising and there has been a significant acceleration of loan repurchases that were sold with recourse, the agency said.

The agency added that this situation creates the potential for higher credit losses and lower profitability.

According to S&P, the ratings are remaining on CreditWatch negative to reflect the uncertainty relative to the potential impact of the restatement on capital and the possibility of a breach in New Century's primary warehouse line covenants, which would pose a liquidity challenge.

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