Delta Financial Corp - Subprime

Update - 2007-12-16: Former worker sues Delta Financial -- According to Newsday.com:

"A former employee of shuttered Delta Financial Corp., the Woodbury-based sub-prime lender heading to bankruptcy court, filed a lawsuit on behalf of herself and fired co-workers this week, charging the company had failed to provide proper advance notice of layoffs since August."

Click here to read the entire article.

Original Article - 2007-12-6: According to a Company Press Release today:

"The Company presently intends to file shortly for protection under the federal bankruptcy code. The Company intends to continue to operate its business as a "debtor in possession" as provided under the bankruptcy code; however, it intends to suspend taking new mortgage loan applications until further notice."

According to Newsday, the harsh reality looked like this:

"Starting around noon, the laid-off workers streamed into the parking lot, carrying boxes, plants and refrigerators. A few lingered, laughing and sharing a final cigarette. But by 1 p.m. the lot was quiet.

"Everybody's gone today," one employee said."

The negotiations with Angelo Gordon fell apart after Delta's default with it's warehouse lenders.

"Under these circumstances, the Company's financial obligations under these agreements may be accelerated, and it may be subject to substantial payment obligations, as well as incurring cross-default claims from its other creditors."

"The Company presently intends to file shortly for protection under the federal bankruptcy code."

Update - 11-16-07: Delta continues to fight for its survival. Just over a week after the layoffs, on Nov. 16th they announced their contingency plan:

"SAN FRANCISCO (MarketWatch) -- Delta Financial Corp. said on Friday that it's working on a deal with Angelo Gordon & Co. that could leave the hedge fund firm owning more than two-thirds of the subprime mortgage lender.

Delta said it's borrowing $100 million from a special situations fund affiliated with Angelo Gordon. The company also cut the exercise price of warrants that the firm owns, giving it the right to buy 10 million Delta shares at $1 each.

Angelo Gordon, already a big shareholder, could end up owning 61.4% of the company, if the deal closes as planned, Delta said. If the firm exercises all its warrants, it could own 66.5% of Delta.

Delta Financial shares fell 13% to $1.56 during afternoon trading on Friday. The stock has slumped more than 80% so far this year."

Delta said that it's deal with Angelo Gordon depends on the company pricing a securitization of roughly $500 million mortgages, or arranging other financing for the loans.

Delta is hoping to close the deal on or before Dec. 14, 2007.

Update - 11-8-07: Media sources confirm the multiple reports we have been receiving about additional layoffs and office closures at Delta Financial that were announced on Thursday, November 8th, 2007. Per a short email sent to workers by CEO and President Hugh Miller:

"While it was our expectation that the reduction in force we experienced this past August would be sufficient, the recent and unexpected turmoil in the subprime and securitization sectors is having a further and significant adverse impact on our business."

Of an estimated 1,056 employees, 470 were laid off. Read the whole story at Newsday or Reuters.

Per a 11-08-07 news release on the company website:

"The Company intends to continue to originate loans through its wholesale and retail channels utilizing more restrictive underwriting guidelines, including more robust income documentation programs, and higher mortgage rates. In connection with the workforce reduction, the Company expects to incur a restructuring charge of approximately $7.5 million, of which approximately $1.4 million will be paid immediately in severance."

Locations still listed on the site confirm one tipster's report that Delta has "closed 4 of 11 national retail branches (Las Vegas, Dallas, Chicago, and Phoenix".

Update - 2007-08-22: We've been hearing numerous reports that Delta Financial Corp has reduced its staff. Per a press release linked to from Delta Financial's website:

WOODBURY, N.Y.--(BUSINESS WIRE)--

Delta Financial Corporation (NASDAQ: DFC) today announced it has reduced its staffing to align its operations with current market conditions.

"The rapid deterioration of the credit markets has caused issues in our sector that are beyond our control" explained Hugh Miller, president and chief executive officer. "As we continue to make the necessary rate increases and program cuts in order to address the changing business environment, the result in the near term is a likely reduction in loan production. Accordingly, it is with sadness that we must reduce our workforce to address the anticipated decrease in originations. We deeply regret having to take this action, but it is the fiscally responsible decision to make at this time. We are extremely grateful to all those in the Delta family for their dedication to the Company."

The Company has eliminated approximately 300 jobs, resulting in an approximate 20% reduction in its nationwide workforce. The majority of the reductions will result from the closing of the organization's satellite wholesale offices in Florida, Texas, and California, and the elimination of certain positions involved in the originations process. The Company expects that the centralized structure of its wholesale operations will help limit disruption of normal business activities.

The Company expects to take a pre-tax charge of approximately $2.0 million to $2.5 million this quarter as a result of the workforce reductions and related expenses.

"This workforce reduction is an unfortunate byproduct of the current times we are in," continued Mr. Miller. "Delta remains committed to weathering this current market downturn and taking advantage of the reduced number of competitors when the market stabilizes."

We are continuing to gather additional information on Delta Financial Corp. If you have any information regarding their continuing status, please let us know!