SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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CAPITAL ALLIANCE INCOME TRUST LTD.,
A REAL ESTATE INVESTMENT TRUST
(Name of Subject Company)
CAPITAL ALLIANCE INCOME TRUST LTD.,
A REAL ESTATE INVESTMENT TRUST
(Name of Person(s) Filing Statement)
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Common stock, $.01 par value
(Title of Class of Securities)
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13971R108
(CUSIP Number of Class of Securities)
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Thomas B. Swartz
Capital Alliance Income Trust Ltd.,
A Real Estate Investment Trust
50 California Street, Suite 2020
San Francisco, California 94111
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
Copy to:
-----------------------------------------------------------
Richard S. Chernicoff
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
(213) 489-4060
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Item 1. Subject Company Information.
(a) The name of the subject company is Capital Alliance Income Trust Ltd.,
A Real Estate Investment Trust, a Delaware corporation. The address of our
principal executive offices is 50 California Street, Suite 2020, San Francisco,
California 94111. The telephone number for our principal executive offices is
(415) 288-9575.
(b) This statement relates to our common stock, $.01 par value, per share.
As of March 31, 2001, there were 1,484,740 shares of our common stock
outstanding of which 92,479 were held in the Trust's treasury.
Item 2. Identity and Background of Filing Person.
(a) Our name and address is set forth in Item 1(a) above and we are the
person filing this statement.
(b) This statement relates to the tender offer by Sutter Opportunity Fund
2, LLC, to purchase up to 296,948 shares of our common stock at a purchase price
equal to $4.50 per share (less any distributions declared prior to the
expiration of the offer), upon the terms and subject to the conditions set forth
in Sutter's offer to purchase, dated April 9, 2001, and in the related letter of
transmittal.
The offer is disclosed in a Tender Offer Statement on Schedule TO, dated
April 9, 2001, filed by Sutter with the Securities and Exchange Commission. The
Schedule TO states that the address of Sutter's principal executive offices is
595 Market Street, Suite 2100, San Francisco, California 94105.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
(a)Except as described below, there are no material agreements,
arrangements, or understandings, or any actual or potential conflicts of
interest between us or our affiliates and (1) our executive officers, directors
or affiliates or (2) Sutter or any of its executive officers, directors or
affiliates.
(1) Capital Alliance Advisors, Inc is our manager and provides
management and advisory services to us along with mortgage origination and loan
servicing services. Additionally, CAAI owns all of the voting common stock and a
1% economic interest in Capital Alliance Funding Corporation ("CAFC"), our
mortgage conduit subsidiary. CAAI has the power to elect all of the directors of
CAFC and the ability to control the outcome of all matters for which the consent
of the holders of the common stock is required. Some of our officers and
directors are also officers and directors of CAAI. These officers and directors
are compensated separately for their duties to each of us, CAFC and CAAI.
(2) CAFC offers us the opportunity to purchase all non-conforming
mortgage loans and home equity loans meeting our investment criteria and
policies. We are obligated to purchase the loans from CAFC upon the terms and
conditions specified in any commitment made to CAFC to acquire the loans.
(3) We provide secured warehouse financing facilities to our
strategic partners and loan correspondents as well as to CAFC.
(b) If any of our directors or executive officers were to tender their
shares in the offer, they would receive the offered price for their shares on
the same terms and conditions as are applicable to any tender made by you.
Item 4. The Solicitation Or Recommendation.
(a) At a meeting of our board of directors held on April 17, 2001, our
board of directors carefully considered our business, financial condition,
business strategy and prospects, the terms and conditions of the offer and
related matters, including a presentation by its legal advisor and current
conditions in the equity capital markets. At the meeting, our board of directors
unanimously determined, among other things, that the offer is inadequate to you
and not in the best interests of the company or you, our loyal stockholders.
Accordingly, our board of directors recommends that you reject the offer and not
tender your shares pursuant to the offer.
A form of letter communicating our board of directors' recommendation to
you, a letter our board of directors sent to Sutter rejecting the offer and a
press release relating to that recommendation to reject the offer are filed as
Exhibits (a)(2), (a)(3) and (a)(4) to this document and we incorporate them by
reference.
(b) In reaching the conclusions referred to above, our board of directors
took into account numerous factors, including, but not limited to, the
following:
(1) The board's familiarity with our business, assets, financial
condition and future prospects, the strategic direction of our business, current
conditions in our business and the historical and current market prices for our
common stock.
(2) The opinion of our management that the terms of the offer are
inadequate to you. Management's opinion was based on its knowledge of our
business, its views as to the long-term business plan and future prospects and
its judgment as to the value of the our assets.
(3) The board's belief that the acquisition of up to 20% of our
common stock by Sutter as contemplated by the offer could have an adverse effect
on our REIT status.
(4) The superior positive performance of our common stock during
the most recent five quarters as compared to the Dow Jones, NASDAQ and S&P
indices - all of which were down - for the same period. The following chart
illustrates that performance:
[TOTAL RETURN PERFORMANCE GRAPH OMITTED]
(5) Our book value per share is $6.45 and our portfolio remains
robust.
(6) Our 20.4% increase in earnings for 2000 as compared to 1999.
(7) The reduction of the offer price to $4.415 due to our $0.085
distribution to you on April 16, 2001.
(c) To the best of our knowledge, none of our executive officers,
directors, affiliates or subsidiaries presently intends to tender shares of our
common stock which are held of record or beneficially owned by such persons.
Item 5. Persons/Assets, Retained, Employed, Compensated or Used.
Neither we nor any person acting on our behalf currently intends to employ,
retain or compensate any other person to make solicitations or recommendations
to you in connection with the offer. Our officers, directors and manager may
make solicitations with respect to the offer but they will receive no additional
compensation for their services.
Item 6. Interest in Securities of the Subject Company. No transactions in
shares of our common stock has been effected during the past 60 days by us or,
to the best of our knowledge, by any of our executive officers, directors,
affiliates or subsidiaries except as follows: Capital Alliance Advisors, Inc.,
the Trust's Manager, has acquired 72,352 shares, or five percent (5%) of the
Trust's Common Stock and the Trust's officers and directors have individually
acquired in the aggregate 100,166 shares or 12% of the Trust's Common Stock
during the last 24 months or more. Additionally, the Trust, as an initiative to
increase shareholder value, has as of March 31, 2000 acquired 92,479 shares of
the Trust's Common Stock pursuant to its Stock Purchase Plan to purchase up to
$400,000 in Common Stock.
Item 7. Purposes of the Transaction and Plans or Proposals.
We are not now engaged in any negotiations which are related to or would
result in our merger or reorganization, a purchase, sale or transfer of a
material amount of assets by us or any of our subsidiaries, a tender offer for
or other acquisition of securities by or of our company, or any material change
in our present capitalization or dividend policy.
Additionally, the previously approved 1 for 3 reverse stock split of our
common and preferred will be effective May 11, 2001.
Item 8. Additional Information.
Not applicable.
Item 9. Exhibits.
The following Exhibits are filed herewith:
Exhibit (a)(1) Our Press release issued on April 12, 2001
Exhibit (a)(2) Form of our letter to our stockholders,dated
April 19, 2001
Exhibit (a)(3) Our letter to Sutter, dated April 19, 2001
Exhibit (a)(4) Our press release issued on April 19, 2001
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
CAPITAL ALLIANCE INCOME TRUST LTD.,
A REAL ESTATE INVESTMENT TRUST
By: /s/ Thomas B. Swartz
------------------------
Thomas B. Swartz
Chairman and Chief Executive Officer
Dated: April 19, 2001
EXHIBIT INDEX
Exhibit (a)(1) Our press release issued on April 12, 2001
Exhibit (a)(2) Form of our letter to our stockholders, dated April 19, 2001
Exhibit (a)(3) Our letter to Sutter, dated April 19, 2001
Exhibit (a)(4) Our press release issued on April 19, 2001
Exhibit (a)(1)
CAPITAL ALLIANCE INCOME TRUST'S BOARD
URGES SHAREHOLDERS TO WAIT FOR ITS POSITION
ON TENDER OFFER BY SUTTER OPPORTUNITY FUND
BEFORE TAKING ANY ACTION
SAN FRANCISCO - (BUSINESS WIRE) - April 12, 2001 - Capital Alliance Income Trust
Ltd. ("CAIT"), (AMEX: CAA - news), a non-conforming specialty residential
finance company, announced today that on April 9, 2001, Sutter Opportunity Fund
2, LLC ("Opportunity Fund") commenced a tender offer to purchase for cash up to
20 % of CAIT's outstanding Common Shares for $4.50 per share (less future
distributions declared or paid) .
CAIT's Board currently has the tender offer under consideration and on or before
Friday, April 20, 2001, it will publish its position with respect to the tender
offer and the basis for its decision. CAIT's Board has not yet had time to fully
evaluate the offer, the application on CAIT's by-law restrictions on stock
ownership, or the applicable provisions of Delaware law.
Accordingly, at this time, CAIT's Board requests and suggests that CAIT's
shareholders DEFER THEIR DECISIONS ON WHETHER TO ACCEPT OR REJECT THE TENDER
OFFER OF THE OPPORTUNITY FUND UNTIL THEY HAVE BEEN ADVISED OF THE BOARD'S
POSITION.
CAIT is a specialty residential mortgage lender which invests in high-yielding,
non-conforming and conforming residential mortgage loans on one-to-four unit
residential properties located primarily in California and other western states.
It also originates non-conforming and conforming loans for sale to investors,
including Freddie Mac, on a whole loan basis for cash through its mortgage
banking subsidiary, Capital Alliance Funding Corporation.
Certain oral and written statements of the management of CAIT included in this
press release may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. The accuracy of the statements cannot be guaranteed, as
they are subject to a variety of risks and contingencies.
- ---------------------------
Contact:
Capital Alliance Income Trust Ltd.
Thomas B. Swartz, CEO - 415/288-9575
Exhibit (a)(2)
CAPITAL ALLIANCE INCOME TRUST LTD.,
A REAL ESTATE INVESTMENT TRUST
April 19, 2001
Dear Fellow Stockholder:
As you may know, on April 9, 2001, Sutter Opportunity Fund 2, LLC began
an unsolicited tender offer for up to 20% of our shares of common stock at a
price of $4.50 per share, less the amount of our dividend distribution made on
April 16, or $4.415 as of today.
Your board of directors, after careful consideration of the Offer, by
unanimous vote, determined that the offer is inadequate and recommends that you
reject the offer.
In making its determination about the offer, your board of directors
considered many factors, among them:
o Historic and current prices for shares of our common stock.
o The book value of CAIT's common stock of $6.45 per share.
o Our belief that if you accept the offer, Sutter - an
opportunistic bidder - will be rewarded for opportunistically
taking advantage of short term volatility and mispricing in the
equity markets. Why would Sutter make an offer at $4.415 per
share - ostensibly for investment purposes - unless it thought
our common stock was worth much more?
o Your board's determination that the offer and the current trading
price of our common stock do not reflect the real intrinsic value
of the company's common stock.
o Your board's belief that the acquisition of up to 20% of our
common stock by Sutter as contemplated by the offer could have an
adverse effect on our REIT status.
o The superior positive performance of our common stock during the
most recent five quarters as compared to the Dow Jones, NASDAQ
and S&P indices - all of which were down substantially - for the
same period.
o Our 20.4% increase in earnings for 2000 as compared to 1999.
o The fact that Sutter believes that purchasing our common stock at
the offer price represents an attractive investment opportunity
depriving any stockholder who accepts the offer of the
opportunity to realize the long term value of holding our common
stock.
The enclosed Schedule 14D-9 describes your board of directors'
recommendation in more detail. We urge you to read it carefully in its entirety.
Please be assured that my fellow directors and I will continue to act in
what we believe are the best interests of the company and you, our stockholders.
Sincerely,
Thomas B. Swartz
Chairman and Chief Executive Officer
50 California Street, Suite 2020 San Francisco, CA 94111 (415) 288-9575
fax: (415) 288-9590
Exhibit (a)(3)
CAPITAL ALLIANCE INCOME TRUST LTD.,
A REAL ESTATE INVESTMENT TRUST
April 19, 2001
Mr. Robert Dixon
Managing Member
Sutter Capital Management, LLC
595 Market Street, Suite 2100
San Francisco, California 94105
Dear Mr. Dixon:
The board of directors of Capital Alliance Income Trust Ltd., a Real
Estate Investment Trust ("CAIT") met today to consider the April 9, 2001 offer
made by Sutter Opportunity Fund 2, LLC ("Sutter") to purchase shares of CAIT's
common stock. CAIT's board of directors is committed to seeking opportunities
that are in CAIT's stockholders' long term best interests. The CAIT board
carefully considered the terms of Sutter's offer. The CAIT board was pleased to
see that Sutter believes that purchasing CAIT common stock at $4.50 per share
represents an attractive investment opportunity. The CAIT board believes that
holders of CAIT stock will in the long run receive significantly more than $4.50
both on an absolute basis and on a present value basis. Sutter obviously agrees
with this analysis, otherwise it would be unwilling to purchase the CAIT shares
at the offered price.
Attached you will find a copy of the Solicitation/Recommendation
Statement on Schedule 14D-9 filed by CAIT in response to Sutter's offer. This
document reveals the careful analysis undertaken by CAIT's board of directors in
evaluating the offer.
CAIT has begun incurring significant legal and other costs as a
result of Sutter's unsolicited offer. I note that Sutter did not approach the
CAIT board to determine whether a strategic acquisition of CAIT shares could be
negotiated before it commenced its hostile offer. If you or Sutter have
proposals for means of increasing the long term value recognized by CAIT's
stockholders, the CAIT board of directors is more than willing to discuss these
matters with you. In the interim, CAIT's board of directors urges you to
withdraw your offer and save the CAIT stockholders the cost of continuing to
respond to Sutter's inadequate offer.
If you have any further questions regarding this matter, please do not
hesitate to call me or Richard S. Chernicoff of Brobeck, Phleger & Harrison LLP,
our legal counsel.
Very truly yours,
CAPITAL ALLIANCE INCOME TRUST
/s/ Thomas B. Swartz
----------------------
Thomas B. Swartz
Chairman and Chief Executive Officer
cc: Paul J. Derenthal
50 California Street, Suite 2020 San Francisco, CA 94111 (415) 288-9575
fax: (415) 288-9590
Exhibit (a)(4)
CAPITAL ALLIANCE INCOME TRUST LTD.
ANNOUNCES RECOMMENDATION OF ITS BOARD
THAT ITS SHAREHOLDERS REJECT INADEQUATE
TENDER OFFER OF SUTTER OPPORTUNITY FUND
SAN FRANCISCO - (BUSINESS WIRE) - April 19, 2001 - Capital Alliance Income Trust
Ltd. ("CAIT"), (AMEX: CAA-news), a non-conforming specialty residential finance
company, announced today that its board of directors voted unanimously to
recommend that CAIT stockholders reject the tender offer commenced by Sutter
Opportunity Fund 2, LLC to purchase shares of CAIT's common stock at $4.415 per
share as inadequate and not in the best interests of CAIT's stockholders.
Thomas Swartz, Chairman and Chief Executive Officer of CAIT, stated, "Our
Board's position remains clear and unanimous that Sutter Opportunity Fund's
tender offer is opportunistic and not in the best interest of our stockholders.
Our Board is committed to seeking opportunities that are in CAIT stockholders'
long term best interests and after careful consideration of the terms of
Sutter's offer, we believe that CAIT stockholders will benefit in the long term
by rejecting the tender offer of $4.415 per share and continuing to hold onto
their shares. We feel strongly that CAIT's common stock represents an attractive
investment opportunity. Sutter obviously agrees with this analysis - otherwise
why would it make an offer to purchase CAIT common stock at the $4.415 offer
price unless it thought CAIT's common stock was worth much more?"
Mr. Swartz also noted that Capital Alliance Advisors, Inc., the Trust's Manager,
has acquired over 5% of CAIT's common stock and CAIT's executive officers and
directors have acquired, in the aggregate, approximately 12% of CAIT common
stock during the past 24 months. He commented, "is there better evidence of our
belief in the intrinsic value of CAIT and its Common Shares than these purchases
and the fact that none of us currently intend to tender shares into this low
ball offer?"
In making its determination, CAIT's board of directors considered a number of
factors, including the following:
Historic and current prices for shares of CAIT common stock.
The book value of CAIT's common stock of $6.45 per share.
The board's belief that if CAIT stockholders accept the offer,
Sutter will be rewarded for opportunistically taking advantage of
short term volatility and mispricing in the equity markets.
The board's determination that the offer and current trading
prices of CAIT's common stock do not reflect the intrinsic value
of CAIT's common stock.
The board's belief that the acquisition of up to 20% of CAIT's
common stock by Sutter as contemplated by the offer could have an
adverse effect on the company's REIT status.
The superior positive performance of CAIT's common stock during
the most recent five quarters as compared to the Dow Jones, NASDAQ
and S&P indices - all of which were down substantially - for the
same period.
The 20.4% increase in CAIT's earnings for 2000 as compared to
1999.
The reduction of the offer price of $4.50 to $4.415 due to the
$0.085 dividend distribution made to CAIT's common stockholders on
April 16, 2001.
The fact that Sutter believes that purchasing CAIT common stock at
the offer price represents an attractive investment opportunity
for it depriving any stockholder who accepts the offer of the
opportunity to realize the long term value of holding CAIT's
common stock.
The full text of the Board's recommendation is contained in CAIT's Schedule
14D-9 which will be available on the SEC website at www.sec.gov.
CAIT separately announced that it previously approved a 1 for 3 reverse stock
split that will be effective for stockholders of record on May 11, 2001.
CAIT is a specialty residential mortgage lender which invests in high-yielding,
non-conforming and conforming residential mortgage loans on one-to-four unit
residential properties located primarily in California and other western states.
It also originates non-conforming and conforming loans for sale to investors,
including Freddie Mac, on a whole loan basis for cash through its mortgage
banking subsidiary, Capital Alliance Funding Corporation.
Certain oral and written statements of the management of CAIT included in this
press release may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. The accuracy of the statements cannot be guaranteed, as
they are subject to a variety of risks and contingencies.
- -------------------
Contact: Capital Alliance Income Trust Ltd.
Thomas B. Swartz, CEO
(415) 288-9575
50 California Street, Suite 2020 San Francisco, CA 94111 (415) 288-9575
fax: (415) 288-9590