Delta Financial Corp., a Woodbury, N.Y.-based specialty consumer finance company involved with originating, securitizing and selling nonconforming mortgage loans, intends to file shortly for protection under the federal bankruptcy code, as well as suspend taking new mortgage loan applications until further notice.
Delta Financial adds that it previously entered into a letter of intent with an affiliate of Angelo, Gordon & Co. regarding the possible issuance of senior notes and common stock. However, because Delta Financial has been unable to complete a satisfactory loan securitization required for the transaction, it does not plan to proceed with the plan.
Additionally, the company has received reservation of rights notices from its warehouse lenders indicating that events of default have occurred under the warehouse facilities and the standstill agreement. Under these circumstances, Delta Financial says, its 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.