Accredited Home Lenders Still Has Hopes Of Merger, But… (LEND)

LSF5 Accredited Investments, LLC, the subsidiary of Lone Star Fund V that had offered in June to acquire Accredited Home Lenders Holding Co. (Nasdaq: LEND), announced that it is extending its tender offer for all outstanding shares of common stock until 12:00 midnight on September 14, 2007, in accordance with Lone Star’s obligations under the merger agreement with the Company.  If you read the press release, you’ll see right away that this is not a done and final deal as far as Lone Star is concerned, although it is still not as dead as fears of the subprime meltdown led to in August.

Lone Star may extend the tender offer for additional periods, and ifLone Star decides to extend it will issue a press release announcingsuch extension not later than 9:00 AM EST on the next business dayafter the day the tender offer is scheduled to expire. Lone Star saysit expressly reserves all of its rights and privileges under the mergeragreement with the Company, including its right to allow the tenderoffer to expire to terminate the merger agreement under certaincircumstances, as permitted by the merger agreement.  In other words,it still says it can walk away if it chooses.

Lone Star currently anticipates that the Company may make requests forfurther extensions of the tender offer and subject to and conditionedupon the merger agreement being in full force and effect and theCompany’s satisfaction of the conditions therein, Lone Star expectsthat further extensions of the tender offer may be made as and whenrequired by the merger agreement.  So it doesn’t seem likely that thiscloses tomorrow.

Here is the background and the out part for the company: On August 10,2007, Lone Star filed with the SEC an amendment to its Tender OfferStatement in which it indicated that, as of that date, the Company hadnot satisfied all of the conditions to the closing of the tender offer.As of today, Lone Star continues to believe that the conditions toclosing under the merger agreement remain unsatisfied. Pursuant to themerger agreement, so long as one or more conditions to the closing ofthe tender offer remain unsatisfied, the Company may request Lone Starto extend the tender offer, which Lone Star shall do for a period of nomore than ten business days.

As of the close of business on September 11, 2007, Lone Star hasreceived a number of tendered Company shares, subject to withdrawal,representing approximately 18,448,957 of the outstanding shares of thecompany. The shares tendered at that time included approximately 73.44%of the outstanding shares of the Company’s common stock.  Piper Jaffray& Co. is acting as Dealer-Manager for the tender offer.

Accredited Home Lenders shares are up almost 4% on thin volume as anytime there is an "extended tender period" shareholders interpret thisas "it’s not totally dead" on the merger hopes.  In early August,shares were trading under $5.00 because the merger looked entirely deadand the future of the company was at risk if it had to run on entirelyon its own.

Jon C. Ogg
September 13, 2007

Jon Ogg can be reached at [email protected]; he produces the 24/7Wall St. Special Situation Investing Newsletter and he does not ownsecurities in the companies he covers.