Lone Star seeks to amend offer; Accredited Home Lenders says no thanks, will solve matter in court

By Lisa Kerner

Charlotte, N.C., Aug. 31 - Lone Star Fund V (U.S.), LP subsidiary LSF5 Accredited Investments, LLC wants to amend its merger agreement with Accredited Home Lenders Holding Co.

Under the proposed changes:

• The offer price would be lowered to $8.50 per share from $15.10;

• Lone Star would waive all breaches that occurred prior to the date of the amendment; and

• Both Lone Star and Accredited Home Lenders would dismiss all claims and counterclaims in the current litigation in Delaware Chancery Court.

Lone Star said in a letter to Accredited Home Lenders that it would then extend the offer for a period of 10 business days following the filing of the revised offer documents. In addition, Lone Star is prepared to deposit with an escrow bank all of the funds needed to pay for tendered company shares immediately following commencement of the amended offer.

While the amended merger agreement is pending, Accredited Home Lenders would be free to "solicit and entertain acquisition proposals from third parties and to terminate the agreement" in favor of a superior offer, the letter stated.

According to Lone Star, it has extended its June 4 merger agreement four times, most recently to Sept. 12. "It is very clear to us that the company [Accredited Home Lenders] is unlikely to be able to satisfy the conditions to the offer prior to Sept. 12" if at all, Lone Star said.

Lone Star also questioned Accredited Home Lenders' ability to survive as a going concern.

Accredited Home Lenders responded in a separate statement, saying it would continue to pursue its lawsuit against Lone Star and its affiliates seeking to close the tender offer for $15.10 per share to complete the merger.

The company's board rejected Lone Star's proposal to amend the offer to $8.50 per share and did so because it is not in the best interest of Accredited Home Lenders' shareholders, according to the statement.

Accredited Home Lenders said it believes that all conditions to close the tender offer at $15.10 per share were satisfied when more than 97% of its outstanding common stock was tendered at the scheduled expiration of the offer on Aug. 14. The suit goes to trial beginning Sept. 26.

"Accredited has always believed that its case against Lone Star is very strong," Accredited Home Lenders chairman and chief executive officer James A. Konrath said in the company's news release.

"Discovery has been proceeding in the lawsuit, and nothing we have seen to date has altered our perception of the strength of our case."

It was previously reported that Accredited Home Lenders agreed to be acquired by the Lone Star Fund affiliate in an all-cash transaction valued at $400 million. The outstanding 9¾% series A perpetual cumulative preferred shares of Accredited Mortgage Loan REIT Trust will remain outstanding. The transaction is slated to close in the third quarter of 2007.

Accredited Home Lenders is a San Diego mortgage company, and Accredited Mortgage Loan REIT Trust is a Maryland real estate investment trust.

Lone Star is a Dallas private equity firm.

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