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Wednesday, September 19, 2007

Accredited Home Lenders Settles for $11.75 a share

The press release says it all.  This was expected (and only mere hours after the Fed Rate cut -- funny how that happens).  But still, from a law professor perspective, a trial would have been nice to settle issues on the interpretation of MAC clauses generally and the disproportionality standard in particular.  While not providing any legal precedent, this is a very good omen for Sellers who arguably do not set a very firm liquidated damages cap on a Buyer's ability to breach by trumping up a MAC claim.  Expect to see a turn towards this model and against reverse termination fees in private equity deals. 

Accredited Home Lenders Settles for $11.75 a share:  Includes $11.75 Per Share Tender Price, Minimal Conditions to Closing Beyond Tender of Majority of Shares, and Resolution of Delaware Lawsuit

SAN DIEGO & DALLAS--(BUSINESS WIRE)--Sept. 18, 2007--Accredited Home Lenders Holding Co. (NASDAQ:LEND) ("Accredited" or "Company"), a nationwide mortgage company specializing in non-prime residential mortgage loans, and Lone Star Fund V (U.S.) L.P., through its affiliate Lone Star U.S. Acquisitions, LLC ("Lone Star"), today announced that they have amended their June 4, 2007 merger agreement to settle the pending lawsuit between the companies and reduce the price at which Lone Star agrees to acquire all of the common stock of the Company to $11.75 per share.

The acquisition remains structured as an all-cash tender offer for all outstanding shares of Accredited common stock to be followed by a merger in which each remaining untendered share of Accredited will be converted into the same $11.75 cash per share price paid in the tender offer. The outstanding 9.75% Series A Perpetual Cumulative Preferred Shares, par value $1.00 per share, of Accredited Mortgage Loan REIT Trust (NYSE: AHH.PrA) will remain outstanding.

Lone Star has deposited approximately $295 million with The Bank of New York Mellon, as escrow agent, to fund payment of the amended tender offer price for all outstanding shares of the Company's common stock. The funds are distributable to Computershare Trust Company, N.A., the depositary for the tender offer, upon Accredited's delivery to the escrow agent of certifications regarding satisfaction of the closing conditions.

The amended merger agreement eliminates most of the original merger agreement's conditions to closing the amended tender offer. The primary remaining conditions to closing are the valid tender without withdrawal of more than 50% of Accredited's outstanding shares (the "Minimum Condition") and the absence of any injunction or similar order preventing the closing.

Lone Star's obligation to close the amended tender offer is not subject to any conditions related to the accuracy of representations or warranties made by Accredited, to the absence of a material adverse change, or to the compliance by Accredited with negative covenants, other than limited negative covenants specifically identified in the amended merger agreement.

The amended tender offer will be extended so that the scheduled expiration date will be 12:00 midnight, New York City time, on the tenth business day following the date on which Accredited files an amendment to its Solicitation/Recommendation Statement on Schedule 14D-9 setting forth the basis for the Board of Directors' recommendation of the amended merger agreement (the "14D-9/A") with the Securities and Exchange Commission ("SEC"). Lone Star will generally have the right to terminate the amended merger agreement if the Minimum Condition has not been satisfied at any scheduled expiration date after the 20th business day following the date of filing of Accredited's 14D-9/A.

In addition, Lone Star has agreed to provide to Accredited financing of $49 million, approximately $34 million of which will be applied to extinguish outstanding debt from one of the Company's creditors, leaving approximately $15 million of additional liquidity for the Company.

Accredited and Lone Star have agreed to an immediate stay of the lawsuit filed by the Company in the Delaware Chancery Court. The lawsuit will be dismissed with prejudice immediately upon the payment for shares pursuant to the amended tender offer or the termination of the merger agreement in accordance with its terms. The dismissal with prejudice can occur even if the Minimum Condition is not satisfied, so long as Lone Star does not materially breach any of its obligations under the amended merger agreement.

James A. Konrath, chairman and chief executive officer of Accredited, said, "This new agreement fairly settles our dispute and will expedite the completion of the merger with Lone Star. We will now turn to the business of rebuilding Accredited for a brighter future with Lone Star."

Accredited's Board of Directors has unanimously approved the amended merger agreement and unanimously recommends that holders of Accredited's common shares tender their shares. The basis for the Board of Directors' recommendation will be set forth in Accredited's 14D-9A filed with the SEC.

http://lawprofessors.typepad.com/mergers/2007/09/accredited-ho-2.html

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