NovaStar clears Wachovia debt

NovaStar Financial Inc. has repaid all outstanding debt it owed to Wachovia Bank.

In a filing Tuesday with the Securities and Exchange Commission, Kansas City-based NovaStar (Pink Sheets: NOVS) said it had made payments to Wachovia on Friday of $4.4 million in short-term borrowings and accrued interest, and about $60,000 in associated expenses.

Also, NovaStar subsidiary NovaStar Mortgage Inc. paid Wachovia $275,000 to settle disputed claims related to mortgage loans that NovaStar Mortgage had sold to Wachovia.

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As a result, NovaStar said it owes no more short-term debt and has no further short-term borrowing facilities available, CFO Rodney Schwatken said in an interview.

NovaStar focused virtually all of its incoming revenue from securities held in-house to the task of paying back Wachovia, Schwatken said.

NovaStar reported March 24 that it owed Wachovia $18.9 million but was in violation of requirements to maintain at least $15 million in liquidity. Incoming revenue, Schwatken said, made up the difference between the company's cash on hand and the amount owed.

Schwatken declined to say how much liquidity the company has or what its plans are. Those issues will be covered in NovaStar's first-quarter earnings report, which is due by Monday.