New Century Financial Corp. filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware on Monday. The move also prompted New Century to sell its mortgage billing and collections unit to Carrington Capital Management for $139 million.
"The decision to pursue the sale of the company's assets and operations through the bankruptcy process was a difficult but appropriate decision for our board to make," says Brad A. Morrice, president and CEO. "This was a very hard step for me personally and clearly not the outcome I would have preferred. However, given the sudden and significant challenges facing our industry and New Century specifically, bankruptcy is the best means available to allow the company's assets and operations to be sold through an orderly process.
"The board and I particularly regret the impact that the bankruptcy filing will have on our dedicated associates. But after diligently exploring a variety of other potential solutions that would have enabled New Century to continue its operations, the Chapter 11 process provides the best means for selling our servicing and loan origination operations to financially sound parties. It is our hope that potential buyers will be in a stronger position than we are to employ many of our associates on an on-going basis."
The Irvine, Calif.-based company also laid off 3,200 employees, roughly 54 percent of its workforce and plans to sell most of its assets within 45 days through the Chapter 11 process.
"Although this is a difficult day for our associates, they can be proud of what they have accomplished over the years," Morrice continues. "Since the company's founding, the associates have generated approximately 1.4 million loans, totaling more than $225 billion. These loans have helped millions of Americans, many of whom might not otherwise have been able to access credit or realize the benefits of homeownership.
"The non-prime sector will remain an important part of the American economy, and we are hopeful that the platforms and operations that New Century has built will continue to be utilized to help support the growth of this critical segment of the mortgage industry," Morrice adds.
New Century's creditors represent a who's who of Wall Street banks, including Goldman Sachs, Credit Suisse, Morgan Stanley, Citigroup, and Lehman Brothers.