Paragon doesn't see approaches

By Chris Wills

LONDON (Reuters) - Struggling mortgage lender Paragon thinks a takeover approach is unlikely while credit markets remain locked down, despite its share price being less than half its net asset value, its FD said on Monday.

"Most people looking at our type of operation would be looking to generate new flows of business rather than running down the value. They need to be satisfied that the capital markets are functioning fully before they are going to make that bet," Finance Director Nicholas Keen said by telePhone.

Paragon, which completed a $565 million (284.4 million pounds) emergency rights issue last month, has slashed the amount of new loans it makes to buy-to-let customers because it cannot get funding from the capital markets.

Without funding, growth is thwarted and it could be left having to run-off its book of existing mortgages.

There has been newspaper speculation Paragon could be taken over and given an injection of money for new business or run as a zombie fund which does not offer new policies.

Paragon lent half as much to new customers in the first six months of its financial year, to March 31, compared to a year ago, it said in a trading statement on Monday which was in line with market expectations, analysts said.

Keen expects new lending to fall even further in the next six months, though he is not certain by how much.

"I think that will fall as we go forward. The markets are so volatile month to month its quite hard to see what might be around the corner in six months time," said Keen.