8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 23, 2011
FRANKLIN CREDIT HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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0-17771
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26-3104776 |
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(State or other jurisdiction
of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.) |
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101 Hudson Street
Jersey City, New Jersey
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07302 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (201) 604-1800
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
As was previously disclosed by Franklin Credit Holding Corporation (the Registrant) in its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 as filed with the Securities and
Exchange Commission on May 12, 2011, on May 11, 2011, the Registrant and certain of its
subsidiaries (together, the Company) entered into a term sheet (the Term Sheet) with The
Huntington National Bank (the Bank) to amicably resolve the Banks allegation that a default had
occurred under the Companys legacy credit agreement with the Bank and its participating banks,
dated as of March 31, 2009, as amended (the Legacy Credit Agreement), due to a failure to make
certain payments under certain interest rate hedge agreements (the Interest Rate Swaps) with the
Bank (the Specified Default). On May 23, 2011, the Company entered into various agreements
implementing the transactions contemplated by the Term Sheet. These agreements are described below.
Settlement Agreement
On May 23, 2011, the Company entered into a settlement agreement with the Bank (in various
capacities), a subsidiary of the Banks parent, and the Banks lending participants covering the
surrender and transfer of the Companys investment in preferred stock and common stock of the
Banks REIT subsidiary (the REIT Securities) held by the Company (and pledged as collateral under
the Legacy Credit Agreement) in exchange for:
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a reduction of the outstanding balance of the Banks portion of tranche A debt
pursuant to the terms of the Legacy Credit Agreement by an amount equal to $478
million; |
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full satisfaction of indebtedness relating to the Interest Rate Swaps totaling
approximately $14.7 million; |
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an amendment to the Legacy Credit Agreement and associated pledge agreement (as
described below); |
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a discharge of the limited recourse guarantee of the Registrant under the Legacy
Credit Agreement; |
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a waiver of the Specified Default; |
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an amendment to the credit facility of the Registrant and its mortgage servicing
subsidiary, Franklin Credit Management Corporation (FCMC), dated as of March 2009,
as amended (the Licensing Credit Agreement) (as described below); and |
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a comprehensive release of claims by the Company in favor of the Bank and its
lending participants. |
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Contemporaneously with the execution of the Settlement Agreement, the Company surrendered the
REIT Securities to the Bank and entered into the agreements described below. As result of the
Company voluntarily surrendering and transferring to the Bank the REIT Securities, the Companys
principal source of cash flow to meet its obligations with respect to its approximately $778
million of outstanding indebtedness under the Legacy Credit Agreement remaining after the surrender
of the REIT Securities will be eliminated, resulting in accrued and unpaid interest being added to
the outstanding principal balance of the legacy debt that the Company will be unable to pay at the
maturity of the Legacy Credit Agreement on March 31, 2012 (or upon earlier termination under the
provisions of the Legacy Credit Agreement).
The Companys operating losses will increase commencing with the quarter ended September 30,
2011 and in the years 2012 and beyond due to the absence of dividend income on the preferred REIT
Securities.
Legacy Credit Agreement
The Legacy Credit Agreement was amended to (1) delete the Registrant as a guarantor, (2) waive
the Specified Default, and (3) permit the transfer to the Registrant of assets, amounting
principally to approximately $370,000 in cash, of Franklin Credit Loan Servicing LLC (FCLS), an
inactive limited purpose entity, and the subsequent dissolution or merger of FCLS into the
Registrant.
Pledge Agreement
The pledge agreement between the Registrant and the Bank dated March 31, 2009, as amended,
which was entered into in connection with the Legacy Credit Agreement (the Pledge Agreement), was
further amended to release the equity interest in FCLS that had been pledged by the Registrant to
the Bank. However, the Registrant shall remain a pledgor, other than with respect to the interests
of FCLS, under the Pledge Agreement (which includes a pledge of 100% of the equity interests in all
direct and indirect subsidiaries of Registrant other than FCMC).
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Limited Recourse Guaranty
The Limited Recourse Guarantee between the Registrant and the Bank dated March 31, 2009, which
was entered into in connection with the Legacy Credit Agreement, was released, cancelled and
discharged.
Licensing Credit Agreement
The term of the Licensing Credit Agreement between the Registrant and FCMC, on the one hand,
and the Bank and its participating lenders, on the other hand, dated March 31, 2009, as amended,
was extended to September 30, 2012, and the financial covenant that the Registrant and FCMC
maintain a minimum amount of net income before taxes was deleted.
The foregoing summaries are qualified in their entirety by reference to the complete copies of
the agreements filed as Exhibits 10.1 through 10.5 to this Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. |
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Description |
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10.1*
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Settlement Agreement, dated May 23, 2011, by and among The
Huntington National Bank, the Registrant, Franklin Credit
Asset Corporation, Franklin Asset, LLC, each other Borrower
listed on the signature pages to the Legacy Credit Agreement
or any schedule thereto, and Franklin Credit Management
Corporation. |
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10.2*
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Amendment No.3 to Amended and Restated Credit Agreement by and
among Franklin Credit Asset Corporation, Tribeca Lending
Corp., Franklin Asset, LLC and the Other Borrowers Party
thereto as Borrowers, the Financial Institutions Party thereto
as Lenders, and The Huntington National Bank, as
Administrative Agent, dated May 23, 2011. |
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10.3*
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Second Amendment to Amended and Restated Pledge Agreement,
dated May 23, 2011, by and between the Registrant and The
Huntington National Bank, as Administrative Agent. |
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10.4*
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Release, Cancellation and Discharge of Limited Recourse
Guaranty of Registrant dated May 23, 2011. |
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10.5*
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Amendment No. 4 to the Amended and Restated Credit Agreement
(Licensing), dated May 23, 2011, by and among Franklin Credit
Management Corporation, the Registrant, the Financial
Institutions Party thereto as Lenders, and The Huntington
National Bank, as Administrative Agent. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Franklin Credit Holding
Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
Date: May 27, 2011
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FRANKLIN CREDIT HOLDING CORPORATION
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By: |
/s/ Kevin P. Gildea
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Name: |
Kevin P. Gildea |
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Title: |
Chief Legal Officer and Secretary |
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