NovaStar to discontinue retail, brokerage operations in order to save cash, reduce debt

By Lisa Kerner

Charlotte, N.C., Jan. 11 - NovaStar Financial, Inc. will eliminate some 170 positions as part of its disposal plan.

The reduction will not affect NovaStar's mortgage portfolio management operations.

NovaStar will have roughly 30 employees overall after the workforce reduction is completed.

The plan is expected to be completed by the end of the first quarter of 2008, according to a form 8-K filing with the Securities and Exchange Commission.

The board of director's audit committee committed to the plan on Jan. 8 as part of NovaStar's decision to discontinue its retail and brokerage operations.

The plan is designed to preserve cash and reduce debt in light of NovaStar's "inability to satisfy certain minimum licensing requirements" for the retail and brokerage operations.

NovaStar said discontinuing licenses and governmental authorizations could affect the company's ability to "recommence a mortgage origination and mortgage brokerage business if market conditions improve."

The estimated total pre-tax charge to earnings in conjunction with the plan will range between $1.3 million and $1.8 million, consisting mainly of severance costs and occurring primarily in the first quarter.

NovaStar is a Kansas City, Mo., specialty finance company.

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