U.S. Bancorp Buys Stake in New Century Financial

In a move to expand its loan production, U.S. Bancorp, one of the nation’s largest bank holding companies, said Monday it bought a 16% stake in New Century Financial Corp. of Irvine for $20 million.

U.S. Bancorp, based in Minneapolis, said it will buy $20 million of New Century’s preferred stock. The preferred shares are convertible at any time into common stock at $7.34 per share, representing a 10% premium above the average price for five trading days before the agreement, U.S. Bancorp said.

If the deal passes regulatory approval, expected within 45 days, U.S. Bancorp would hold the third-largest stake in New Century, a provider of sub-prime mortgage loans to those with less than stellar credit. A group of four founding officers owns 27% of New Century, and Cornerstone Fund, a venture capitalist, controls 20%.

New Century’s stock closed at $8.69 per share, up $1.19, or nearly 16%. U.S. Bancorp’s stock finished at $41, up 6 cents a share, on the New York Stock Exchange.

“This alliance provides both companies with new capabilities and resources to increase loan production,” said Jack Grundhofer, president and chief executive officer of U.S. Bancorp.