The Housing Chronicles Blog: IndyMac now considered a hopeless case

Tuesday, July 8, 2008

IndyMac now considered a hopeless case

In the aftermath of the IndyMac meltdown, analysts now think rescuing it from the financial abyss is pretty much impossible. IndyMac was a pretty big player in the new housing industry, and was prominent as a sponsor at many industry shows and functions, so it'll be interesting to see if Prospect Mortgage, which has offered to hire many laid-off IndyMac employees, will take its place. From an L.A. Times story:

A day after IndyMac Bancorp's decision to sharply curb its lending and lay off 3,800 employees, the mortgage company's shares tumbled toward oblivion Tuesday, with at least two analysts warning that no value remained for shareholders.

IndyMac, which specialized during the housing boom in loans for borrowers who didn't document their incomes, has been inundated by defaults.

It announced after the stock market closed Monday that regulators no longer considered it well capitalized. It said it would shut all home lending except for reverse mortgages, which help older people access their home equity, and refinancings for current customers...

Prospect Mortgage Co., a 2-year-old company backed by Chicago private equity firm Sterling Partners, said it would take over 60 to 75 of the Pasadena savings and loan's retail offices, putting about 750 IndyMac employees on its payroll.

The deal's terms weren't disclosed, but it wasn't expected to generate significant cash for IndyMac.

Earlier Tuesday, Paul Miller, an analyst at Friedman, Billings, Ramsey & Co., cut his price forecast for IndyMac stock from $1 to zero, citing the thrift's statement that it had failed in an effort to raise new capital.

"Next Stop, Receivership," was the headline on a note from Jason Arnold, an analyst at RBC Capital Markets who also reduced his price target to zero, from $1.50.

IndyMac "will not survive without a material capital injection," Arnold wrote, calling the prospect of one unlikely because regulatory restrictions and mounting losses had left IndyMac's business model "arguably in shambles."

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