Sept. 18 (Bloomberg) -- Lone Star Funds agreed to buy out Accredited Home Lenders Holding Co. for $296 million, ending a two-month dispute with the mortgage lender over terms of an acquisition soured by the worst U.S. housing slump in 16 years.

Lone Star agreed to pay $11.75 a share for San Diego-based Accredited, said a statement released today by both companies. That's less than its initial offer price of $15.10 a share on June 4 and higher than the $8.50-a-share offer made in August after Accredited sued Lone Star for trying to withdraw. Accredited said today it agreed to halt its lawsuit.

More than 110 companies have halted some mortgage operations or left the business entirely since the start of 2006. Foreclosures set a record in the second quarter and overdue payments on U.S. subprime mortgages rose to the highest level in five years, according to the Mortgage Bankers Association. That's made investors who buy mortgages reluctant to bid, and bankers have cut off credit lines to home lenders.

In today's statement, Dallas-based Lone Star also offered Accredited an additional $49 million to pay debt and provide capital. Accredited, in a bid to outlast the crisis, said Aug. 22 that it would close more than half its operations and fire 1,600 employees. The following day, Chief Financial Officer John Buchanan resigned.

Ed Trissel, a spokesman for Lone Star, declined to comment on today's offer. Accredited spokesman Rick Howe didn't return a telephone message seeking comment. Accredited had 25.2 million shares outstanding as of Aug. 31, according to Bloomberg data.

Subprime Loans

Accredited offered subprime loans, which 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. Among last year's 20 largest subprime lenders ranked by Inside Mortgage Finance, more than half have been sold or left the business.

Accredited fell 50 cents, or 4.9 percent, to $9.78 in Nasdaq Stock Market composite trading today before the statement was released. The stock has declined 64 percent this year.

To contact the reporter on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net.

Last Updated: September 18, 2007 22:53 EDT