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): SEPTEMBER 21, 2004
FIRSTCITY FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 033-19694 76-0243729
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER
IDENTIFICATION NO.)
6400 IMPERIAL DRIVE
WACO, TEXAS 76712
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (254) 751-1750
(905) 319-1237
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On September 21, 2004, FirstCity Financial Corporation ("FirstCity") and certain
of its subsidiaries entered into a definitive agreement to sell a 31% beneficial
ownership interest in Drive Financial Services LP and its general partner, Drive
GP LLC, to IFA Drive GP Holdings LLC ("IFA-GP"), IFA Drive LP Holdings LLC
("IFA-LP") and Drive Management LP ("MG-LP") for a total purchase price of
$108.4783 million in cash, which will result in distributions and payments to
FirstCity and FirstCity Consumer Lending Corporation ("CLC") in the aggregate
amount of $86.8 million in cash, from various sources.
DESCRIPTION OF THE TERMS OF THE TRANSACTION
The Agreement. FirstCity, CLC, FirstCity Funding L.P. ("Funding") and
FirstCity Funding GP Corp. ("Funding GP"), have entered into a Securities
Purchase Agreement dated as of September 21, 2004 (the "Securities Purchase
Agreement"), with IFA-GP, IFA-LP, MG-LP, Drive Management GP LLC ("MG-LLC"),
Drive Holdings LP ("Drive Holdings"), Drive GP LLC ("Drive-GP") and Drive
Financial Services LP ("Drive"). The Securities Purchase Agreement is attached
hereto as Exhibit 10.1 and is incorporated herein by this reference. The press
release announcing the execution of the Securities Purchase Agreement is
attached hereto as Exhibit 99.1 and is incorporated herein by this reference.
The summary and description contained in this report does not purport to be
complete and is qualified in its entirety by reference to the Securities
Purchase Agreement.
Fee Payable to BoS (USA) Inc. In connection with a $16 million loan made
by BoS (USA) Inc. ("BoS (USA)") in December 2002 more fully described below,
FirstCity and CLC agreed to pay a contingent fee to BoS (USA) equal to 20% of
amounts received by CLC upon any sale of CLC's 20% beneficial interest in Drive
and Drive-GP or any receipt of distributions from Drive related to such 20%
ownership interest, once such payments exceed $16 million in the aggregate. The
fee payable as a result of this sale will be $8 million. FirstCity and CLC will
receive payments and distributions from the sale of the Drive and Drive-GP
interests in the aggregate amount of $86.8 million. The amount of the
distributions received by CLC related to the 20% beneficial interest in Drive
and Drive-GP is $56 million (64.51% [20/31] of the distributions).
Use of Proceeds; Reduction of Debt. The proceeds of the sale of the
ownership interests in Drive and Drive-GP will be applied to pay the
aforementioned fee to BoS (USA) in the amount of $8 million, to pay expenses
related to the sale and to reduce outstanding indebtedness to Bank of Scotland
and BoS (USA) (collectively, the "Senior Lenders") and other lenders. FirstCity
currently anticipates that at least $67 million will be applied toward debt owed
by FirstCity.
RELATIONSHIP WITH IFA-GP, IFA-LP AND MG-LP
IFA-GP and IFA-LP are wholly-owned subsidiaries of BoS (USA) (formerly
known as IFA Incorporated) a wholly-owned subsidiary of the Bank of Scotland.
FirstCity has had a significant relationship with Bank of Scotland or its
subsidiaries since September 1997. FirstCity has entered into loan agreements
with the Senior Lenders from time to time since 1997.
In December 2002, in connection with an exchange offer to the holders of
FirstCity's New Preferred Stock and recapitalization of FirstCity, BoS (USA)
provided a non-recourse loan in the amount of $16 million to FirstCity, which
was used to pay the cash portion of the exchange offer to the holders of the New
Preferred Stock, to pay expenses of the exchange offer and recapitalization, and
to reduce FirstCity's debt to the Senior Lenders. The $16 million loan is
secured by a 20% interest in Drive (64.51% of FirstCity's remaining 31% interest
in Drive) and other assets of CLC as are necessary and only to the
extent to allow the Senior Lenders to realize the security interest in the 20%
beneficial interest in Drive. In connection with the $16 million loan, FirstCity
agreed to pay a contingent fee to BoS (USA) equal to 20% of all amounts received
by FirstCity upon any sale of FirstCity's 20% interest in Drive or any receipt
of distributions from Drive related to the 20% ownership interest, once such
payments exceed $16 million in the aggregate.
In connection with the December 2002 recapitalization, the Senior Lenders
refinanced the remainder of FirstCity's existing debt facilities into a term
debt facility ($37 million outstanding at June 30, 2004). Since December 2002,
the Senior Lenders have also provided an additional loan facility consisting of
a (i) a revolving acquisition loan facility providing for a maximum principal
balance of loans outstanding at any time of $45 million, and (ii) a revolving
loan facility in the maximum principal amount of $5 million for corporate
purposes. These loan facilities provide that the aggregate amount of all
outstanding loans under the loan facilities refinanced with the Senior Lenders
in December 2002, revolving acquisition loan facility and the related $5 million
revolving loan are limited to $77 million. These loan facilities are secured by
all of the assets of FirstCity and its wholly-owned subsidiaries.
BoS (USA) has a warrant to purchase 425,000 shares of FirstCity's voting
Common Stock at $2.3125 per share. BoS (USA) is entitled to additional warrants
in connection with this existing warrant for 425,000 shares under certain
specific situations to retain its ability to acquire approximately 4.86% of
FirstCity's voting Common Stock. The warrant will expire on August 31, 2010, if
it is not exercised prior to that date.
FirstCity through its subsidiary CLC is a 31% beneficial owner of Drive
and Drive-GP, and IFA-GP and IFA-LP, subsidiaries of BoS (USA), own an aggregate
49% interest in Drive and MG-LP owns an aggregate 20% interest in Drive and
Drive-GP.
Forward-looking statements
Certain statements in this report, which are not historical in fact, including,
but not limited to, statements relating to future performance, may be deemed to
be forward-looking statements under the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, without limitation, any statement
that may project, indicate or imply future results, performance or achievements,
and may contain the words "expect", "intend", "plan", "estimate", "believe",
"will be", "will continue", "will likely result", and similar expressions. Such
statements inherently are subject to a variety of risks and uncertainties that
could cause actual results to differ materially from those projected. In
particular, while the companies have executed the Securities Purchase Agreement,
there is no assurance that they will complete the transaction. The closing of
the sale is subject to the satisfaction of closing conditions which if not
achieved could result in the termination of the agreement. There can be no
assurance that the transaction will be completed as proposed or at all. There
are many important factors that could cause FirstCity's actual results to differ
materially. These factors include, but are not limited to, the failure of
certain contingencies or conditions to closing of the sale to be satisfied as
well as other risks and factors more fully discussed and identified under Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations," risk factors and other risks identified in FirstCity's Annual
Report on Form 10-K for the year ended December 31, 2003 and in FirstCity's
other filings with the SEC. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements. The
forward-looking statements in this release speak only as of the date of this
release. FirstCity expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statement to reflect
any change in FirstCity's expectations with regard thereto or any change in
events, conditions or circumstances on which any forward-looking statement is
based.
SECTION 7- REGULATION FD
ITEM 7.01 REGULATION FD DISCLOSURE.
On September 22, 2004, FirstCity issued a press release, the text of which is
attached hereto as Exhibit 99.1.
The information in this Item 7.01, including Exhibit 99.1, is furnished and
shall not be deemed "filed" for the purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities under
that Section and shall not be deemed to be incorporated by reference into the
filings of FirstCity under the Securities Act of 1933, as amended.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.1 - Securities Purchase Agreement dated as of September 21, 2004
by and among FirstCity Financial Corporation and certain affiliates
of FirstCity and IFA Drive GP Holdings LLC, IFA Drive LP Holdings
LLC, Drive Management LP and certain affiliates of those persons.
99.1 - Press Release, dated September 22, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRSTCITY FINANCIAL CORPORATION
Date: September 27, 2004 By: /s/ J. Bryan Baker
--------------------------------
J. Bryan Baker
Senior Vice President and Chief
Financial Officer
EXHIBIT INDEX
10.1 - Securities Purchase Agreement dated as of September 21, 2004 by and among
FirstCity Financial Corporation and certain affiliates of FirstCity and IFA
Drive GP Holdings LLC, IFA Drive LP Holdings LLC, Drive Management LP and
certain affiliates of those persons.
99.1 - Press Release, dated September 22, 2004.