Accredited Home Lenders shareholder: Lone Star can't terminate deal based on company's performance

By Lisa Kerner

Charlotte, N.C., Sept. 11 - Accredited Home Lenders Holding Co. investor Stark Investments urged the company's board of directors to continue to pursue all available remedies under its June 15 merger agreement with Lone Star Fund V (U.S.), LP and its affiliates.

Stark's request was made in a Sept. 7 letter included as part of a schedule 13D filing with the Securities and Exchange Commission. The investor and its affiliates hold some 8.2% of Accredited Home Lenders' stock, making it the company's second-largest shareholder.

Lone Star had offered to reduce its purchase price to $8.50 from $15.10 per share in order to resolve pending litigation between Lone Star and Accredited Home Lenders.

"We believe that this offer is nothing more than an attempt to divert attention from the inherent weakness in Lone Star's litigation position under the agreement. Based on our review of the agreement, it is evident that Accredited endeavored to obtain, and did successfully negotiate, unambiguous terms preventing Lone Star from terminating the agreement based upon the changes in Accredited's operations or financial condition that have occurred since execution of the agreement," Stark's letter said

The shareholder encouraged the board to "continue to make decisions consistent with the strength of Accredited's legal position."

"Given that the trading price of Accredited's common stock on the New York Stock Exchange has been materially in excess of $8.50 since the announcement of Lone Star's offer on Aug. 30, we believe the market also recognizes the weakness of Lone Star's position and is anticipating a recovery" in excess of Accredited Home Lenders' Sept. 7 closing price of $10.14, the letter stated.

Stark sold 24,944 shares of Accredited Home Lenders stock between July 19 and Aug. 13 priced between $5.03 and $12.99 each, according to the SEC filing.

Accredited Home Lenders is a San Diego mortgage company.

Lone Star is a Dallas private equity firm.

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