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In today's Wall Street Journal, Gregory Zuckerman has a great article on the decline and fall of New Century Financial:

In February, New Century mortgages that had been worth $8 billion fell by more than $300 million within days, someone familiar with the matter says. The result: More lenders demanded additional collateral, also called margin, from New Century, including Goldman and Credit Suisse, people familiar with the matter say. Banks also invoked terms allowing them to demand that the company buy back loans if borrowers failed to make payments.

The company's cash was dwindling quickly. Adding to the company's woes were revelations about accounting problems, plans to restate 2006 earnings and post a fourth-quarter loss, and a Securities and Exchange Commission inquiry.

New Century was running out of options. It was unable to get new financing and in violation of its existing lending agreements, in part because it was low on cash. So the company convened the March 6 conference call with its 11 lenders. Mr. Morrice, the CEO, was joined on the call by New Century board member David Einhorn, who runs Greenlight Capital, a New York hedge fund that owned 6% of the company's stock, which by then had fallen 70% in two weeks.

Mr. Morrice informed the bankers that New Century's available cash had dropped to $40 million, down from the $100 million he had reported to some of the bankers a day earlier and from $350 million at year end, a participant on the call said.

Posted by edelfenbein at March 29, 2007 8:34 AM