Sept. 19 (Bloomberg) -- Accredited Home Lenders Holding Co., the subprime mortgage lender that slashed its workforce and closed more than half its operations, ended a two-month dispute with suitor Lone Star Funds by agreeing to a lower bid.

The offer of $11.75 a share is worth $296 million based on San Diego-based Accredited's 25.2 million shares outstanding as of Aug. 31. That's 22 percent less than the private-equity firm's initial bid in June.

``This new agreement fairly settles our dispute and will expedite the completion of the merger with Lone Star,'' James A. Konrath, chairman and chief executive officer of Accredited, said in last night's statement released on Business Wire. ``We will now turn to the business of rebuilding Accredited for a brighter future with Lone Star.''

The deal comes amid the worst U.S. housing slump in 16 years and a financial crisis that has pushed more than a dozen lenders into bankruptcy. More than 110 companies have shut some mortgage operations or left the business since the start of 2006.

On June 4, Dallas-based Lone Star offered Accredited $15.10 a share after the lender's stock had fallen by about half for the year. A month later, Accredited said it may have to follow other subprime lenders into bankruptcy.

On Aug. 10, Lone Star announced it wanted out after Accredited's shares dropped by another 50 percent since the date of the first offer. Accredited sued Lone Star, and the private- equity firm countered by the end of August with an $8.50-a-share offer, 44 percent less than the initial bid price.

The latest offer, agreed to by both parties, will halt the lawsuit, according to last night's statement by Accredited. Ed Trissel, a spokesman for Lone Star, declined to comment on the offer. Accredited spokesman Rick Howe didn't return a telephone message seeking comment.

Additional Funds

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

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.

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.

Accredited fell 50 cents, or 4.9 percent, to $9.78 in Nasdaq Stock Market composite trading yesterday 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 19, 2007 00:11 EDT