Fremont Surges on Investment

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Shares in Fremont General Corp. got a big boost Wednesday after the lender-turned savings and loan drew a sizable investment from a group led by an investor who saw the subprime slide coming.


The fund, Harbinger Capital Partners, is a New York-based hedge fund that specializes in investing in distressed companies. It is run by former Barclays Capital junk-bond trader Philip Falcone, who earlier had bet against subprime-backed bonds.


Harbinger said in a filing Wednesday that it controls 7 million shares, or 9 percent, of Fremont as of the end of September.


“The risk/reward ratio with this move is pretty favorable given where the stock sits now,” Theodore Kovaleff, an analyst with New York-based Sky Capital LLC, said. “This is an opportunistic move on Falcone’s part.”


Shares in the Santa Monica-based company have plunged more than 70 percent this year started by the subprime slide and made worse after U.S. regulators told the company to stop taking new loan applications due to improper mortgage-lending practices.


The plunge continued after Texas billionaire and former Chief Executive of Golden State Bancorp., Gerald Ford, reneged last month on a proposed rescue plan for Fremont, which was announced in May. Ford has a respected reputation in the banking industry for resuscitating troubled banks.


Last year Fremont was the fifth-largest subprime lender in the nation and ran a budding commercial lending arm. It has since exited both industries and said it was going to focus on its retail banking business which runs 22 retail locations in the state.


Shares in Fremont surged 17 percent in afternoon trading to $4.38 Wednesday.

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