Weak cash flow could force NovaStar into bankruptcy - Kansas City Business Journal:

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Kansas City-based NovaStar (Pink NOVS) said in an SEC filing late Wednesday that it will be forcer to file bankruptcy if cash flows from its mortgage securities are less than expected and ifit can’ t invest in profitable operations or restructurse its contractual obligations. “Therw is substantial doubt that we will be able to continue as a goingconcern and, therefore, may be unable to realize our assetxs and discharge our liabilities in the normalk course of business,” NovaStar stated in the The company said its LLC subsidiary is “currentlhy not producing positive cash flow.
” NovaStar said it continues developingf the business and thinks StreetLinksa is situated to take advantage of growth opportunities in the residential appraisal market. NovaStar said the values of mortgage loans held in its portfoliokdecreased significantly. “The credit quality of the portfolio continuewto worsen, and delinquenciews have increased dramatically duringv the past two years,” NovaStart said in the filing. “Therefore we significantluy increased the allowance for lossess onthese loans.” The company said its provision for losses increasedr to $776 million as of Dec. 31, up from $230.1 millio the previous year. The compant had $30.
8 million in liquidity on Dec. 31, down 10.3 percentt from a year earlier. As of May 27, NovaStar had $23.4 million in liquidity. NovaStar also said it receiverd $3 million during 2008 that was returnef from surety bonds held against obligations relatesd to itsformer mortgage-lending operations. The company expecte to receive anadditional $6 millionb from surety bonds but said the timing is