Fremont stock off 25% as investor backs out of $80 million financing deal to save former subprime mortgage lender

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Fremont General, who pulled the plug on their subprime mortgage unit back in March under scrutiny from the FDIC, said today that a deal worth $80 million in cash to the beleaguered S&L is off as their billionaire investor has backed out. Neither party specified the reasoning behind the last-minute cancellation of the deal; but the company is working on securing financing from other sources.

From Yahoo! Business News:

Shares of Fremont fell as much as 23.6 percent.

The group led by billionaire investor and former thrift executive Gerald J. Ford had agreed to buy preferred stock and warrants in Fremont, for an initial 16 percent stake.

Fremont, though, said that “in light of certain developments pertaining to the company” and its Fremont Investment & Loan unit, the Ford group was not prepared to invest. The company did not identify the developments.

Santa Monica, California-based Fremont said “it does not necessarily agree” with Ford’s position, but is in talks concerning a revised $80 million investment. It said there is no assurance an agreement will be reached.

I’m going to have to agree with Ford on this one. The company is still under regulatory scrutiny, exiting the business of subprime lending does not exonerate them of findings from past business activities. Further, the uncertainty surrounding the banking and credit industries makes a failing bank less attractive. We’ve seen numerous deals reworked in light of the mortgage backed securities market capitulation.