Looks like Accredited may finally give up the ghost.  See below, from Bloomberg.com: 

Accredited May Face Bankruptcy, Merger in Doubt (Update3)

By Bradley Keoun

Aug. 2 (Bloomberg) -- Accredited Home Lenders Holding Co., the subprime mortgage company being acquired by Lone Star Funds, cast doubt on the sale and said bankruptcy is possible. The shares lost more than a third of their value.

``Several of our competitors have recently stopped originating loans or sought protection under bankruptcy laws,'' Accredited said in a regulatory filing today. ``We may suffer a similar fate.''

Wall Street firms and banks that finance the San Diego-based company's lending operations want more collateral to cover losses, Accredited said in its 2006 annual report, filed after a delay of more than four months. The filing said margin calls or a decision by creditors to cut off funds may destroy Accredited, which ranked among the 20 biggest subprime lenders last year.

More than 70 mortgage companies have sought buyers or halted operations since the start of 2006, unable to cope with a surge in overdue payments by borrowers. Lone Star agreed to buy Accredited in June for about $400 million in cash, or $15.10 a share. Accredited said today it intends to complete the sale during the current quarter.

Accredited's stock declined $2.90 to $5.31 at 4:30 p.m. New York time in Nasdaq Stock Market trading and sold for as little as $3.90. The shares are down 81 percent this year. Company spokesman Rick Howe didn't return a call seeking comment.

Merger Prospects

Investors may believe Lone Star Funds will seek to renegotiate terms of the purchase or abandon the deal altogether, said Theodore Kovaleff, an analyst at Sky Capital LLC in New York. He doesn't rate the shares.

``The merger price is somewhere in the neighborhood of three times the price of the stock,'' he said. ``This is not the normal arbitrage situation.''

While Lone Star would have to pay a termination fee to back out, Kovaleff said it would amount to ``a few bucks a share.'' That's better than paying more than $10 a share above current market prices to fulfill the original terms, Kovaleff said.

Squar, Milner, Peterson, Miranda & Williamson LLP, the company's auditor, said in the filing that Accredited's ``viability is uncertain'' if the sale to Lone Star isn't completed or if mortgage markets worsen. ``The ultimate outcome of the merger is not presently determinable,'' the filing said.

Michael Perry, chief executive officer of IndyMac Bancorp, said in an Aug. 1 e-mail to employees that the market for mortgage bonds has become ``very panicked and illiquid.'' Perry, who runs the ninth-biggest U.S. home lender, wrote that it's ``difficult'' for his Pasadena, California-based company to trade even AAA rated mortgage bonds that don't have backing from government-chartered Fannie Mae and Freddie Mac, or federal agency Ginnie Mae.

``The private secondary market is not functioning,'' he wrote.

Doubtful Auditors

Accredited disclosed in March that its auditor at the time, Grant Thornton LLP, was likely to express doubt about the company's survival. Grant Thornton quit later that month, and Accredited hired Squar Milner to complete the audit.

Subprime loans are made to borrowers with poor credit ratings or heavy debts. The mortgages often charge higher interest rates to compensate for the greater risk of default. Overdue payments on U.S. subprime mortgages rose to the highest level since 2002 during the first quarter of this year, according to the Mortgage Bankers Association.

The delinquencies have made investors reluctant to buy mortgages and securities tied to home loans. In turn, the falling prices for mortgages hurt profit at Accredited and its competitors. The company was the 14th-biggest U.S. subprime lender last year, according to trade publication Inside Mortgage Finance.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net .