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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): April 2, 2001
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Silverleaf Resorts, Inc.
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(Exact Name of Registrant as Specified in Its Chapter)
Texas
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(State or Other Jurisdiction of Incorporation)
1-13003 75-2259890
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(Commission File Number) (IRS Employer Identification No.)
1221 River Bend Drive, Suite 120, Dallas, Texas 75247
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(Address of Principal Executive Offices) (Zip Code)
214-631-1166
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(Registrant's Telephone Number, Including Area Code)
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ITEM 5. OTHER EVENTS
(a) Summary of Certain Events Occurring since the Filing of the
Company's Current Report on Form 8-K Dated February 27, 2001.
On February 27, 2001, Silverleaf Resorts, Inc. ("Company" or
"Silverleaf") filed a Current Report on Form 8-K addressing liquidity and going
concern issues. Specifically, the Company disclosed that negotiations for
expansion and extension of certain credit facilities with a principal lender as
well as negotiations with other financing sources had proven unsuccessful and
that the Company did not then have sufficient financing in place to sustain its
operations at existing levels. Consequently, the Company announced that it was
reducing its sales and marketing operations in an attempt to conserve cash and
downsize its business to a sustainable level. The Company also disclosed that it
would explore funding alternatives with its principal lenders and prospective
investors to provide adequate capital resources for a reduced level of
operations. The Company further disclosed in its February 27, 2001 Form 8-K that
uncertainties associated with the Company's proposed downsizing and related
curtailment of sales and marketing operations would delay completion of the
audit of its financial statements for the year ended December 31, 2000. On March
1, 2001, the Company announced that it had engaged UBS Warburg LLC ("UBS
Warburg") as its exclusive financial advisor to assist with the Company's
downsizing and financial restructuring and to review other strategic
alternatives.
In connection with its planned downsizing, the Company has to date
reduced the total number of its employees from approximately 2,653 to 2,118. The
approximately 535 employees affected by this reduction in workforce were located
at the Company's facilities in the states of Texas, Missouri, Georgia, Illinois
and Massachusetts. Additionally, the Company has closed one of its five
marketing call centers, slowed most new construction at its resorts, and reduced
general and administrative expenses in all departments. Silverleaf also
presently plans to close a second marketing call center during April or May
2001. The Company does not expect implementation of its downsizing plans to
adversely impact the continued use of its resorts and related amenities by
Silverleaf vacation interval owners.
Since the downsizing was announced, the Company's three principal
secured lenders have continued to advance funds on a week to week interim basis
under the Company's existing loan agreements with these three lenders. A fourth
secured lender whose credit facility was due to mature has not advanced
additional funds but has agreed to extend the maturity date of its facility
through February 2002. Silverleaf and its financial advisor, UBS Warburg are
continuing to negotiate with the Company's existing secured lenders and the
holders of Silverleaf's 10.5% Senior Subordinated Notes due 2008 ("Subordinated
Notes"). Silverleaf has asked each of its three principal secured lenders for an
expansion and extension of the Company's existing credit facilities and for a
waiver or forbearance agreement involving defaults occurring under these
existing credit facilities. Although no definitive agreements to modify
Silverleaf's credit facilities have been reached with these three principal
lenders, negotiations are proceeding and the lenders have continued to fund on a
weekly basis. The Company's lenders have not yet agreed to enter into waivers or
forbearance agreements regarding defaults. Additionally, the Company is
exploring alternative sources of financing and considering other options and
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strategic alliances in consultation with representatives of its financial
advisor. The Company's ability to secure either adequate additional financing or
viable strategic alliances may be dependant in part upon the willingness of the
holders of the Subordinated Notes to restructure the Company's indebtedness to
them. There can be no assurances that the Company will be successful in its
negotiations with its existing lenders or that it will be able to obtain
financing from new sources or that viable strategic alliances will be available
to the Company. If the Company is unsuccessful in obtaining additional sources
of funding from either new or existing lenders or in identifying viable
strategic alliances, the Company will not have sufficient working capital for
its operations. In this event, the Company may need to seek protection from its
creditors under applicable laws in order to continue its operations.
The Company has received a notice of default dated March 23, 2001 from
one of its principal secured lenders notifying the Company that the lender has
declared various events of default as a result of the Company's noncompliance
with certain covenants contained in loan agreements with that lender. The events
of default are not defaults in payments due to the lender. The lender has not
waived the noticed events of default, nor has it yet exercised any remedies
available to the lender, which remedies include the acceleration of the maturity
of the principal and interest outstanding under each agreement. Discussions with
this principal lender are presently continuing. The events of default noticed by
this lender could prompt other senior lenders to declare an event of default
under agreements with the Company, which actions would have a material adverse
effect on the Company. To date, the Company has not received a notice of default
from any of its other lenders but the Company believes it is in breach of
various covenants under its existing loan agreements with its other lenders.
As a result of the above referenced notice of default from a principal
lender, the Company has delivered a Payment Blockage Notice advising the Trustee
of the Subordinated Notes that the Company is not permitted by the terms of the
Indenture securing the Subordinated Notes to make an April 1, 2001 interest
payment due on the Subordinated Notes. Under the terms of the Indenture, the
Company will not be permitted to make any payments on the Subordinated Notes
until such time as the events of default noticed by the secured lender are cured
by Silverleaf or waived by the secured lender, or if the secured lender does not
accelerate the maturity of the debt, for a period of 179 days from the date of
the notice of default. The failure of the Company to make an interest payment on
or before the expiration of an automatic 30 day cure period after April 1, 2001
will constitute an event of default under the Subordinated Notes.
The Company is still in the process of assessing the impact of (i) the
Company's ongoing downsizing of its operations, (ii) the Company's inability to
date to obtain definitive agreements for adequate credit facilities to sustain
its downsized operations, and (iii) certain other factors, on its annual
financial statements and related disclosures for the year ended December 31,
2000. The outcome of this assessment could significantly impact the Company's
results of operations for the year ended December 31, 2000. Accordingly, Company
management has not finalized its accounting records and financial statements for
the year ended December 31, 2000, and the completion of the audit of the
Company's financial statements will be delayed. The Company anticipates that it
will record a substantial non-cash charge related to various items on its year
end balance sheet which will result in a loss for
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the fourth quarter and for the year ended December 31, 2000. Therefore,
information previously disclosed with regard to Silverleaf's 2000 projected
annual results and its projected 2001 outlook should not be relied upon.
(b) Notification of Late Filing of Annual Report on Form 10-K;
Postponement of Shareholder's Meeting.
On April 2, 2001, the Company filed a Notification of Late Filing on
Form 12b-25 concerning its Annual Report on Form 10-K for the period ended
December 31, 2000. The Company's annual meeting of shareholders which was
anticipated to be held in May 2001 will be delayed until the Company's financial
results are finalized, the audit of its financial statements can be completed,
its Annual Report on Form 10-K filed, and compliance can be achieved under
applicable proxy solicitation rules and regulations.
The preceding Current Report on Form 8-K contains forward looking
statements, which include the Company's present plans and other forecasts and
statements of future expectations. Although the Company believes these
statements are based on reasonable assumptions, actual results may differ
materially from those expressed in any of the Company's forward looking
statements due to, among other things, factors related to the Company's current
liquidity situation, actions that the Company's lenders may take as a result of
the Company's violations of debt related covenants and conditions, the Company's
ability to promptly obtain sufficient additional funding and credit facilities
to continue as a going concern, the success of the Company's restructuring
efforts and other factors identified in the Company's filings with the
Securities and Exchange Commission, including those set forth in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 and in the
Company's Current Reports on Forms 8-K filed in 2001.
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SIGNATURE
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.
Silverleaf Resorts, Inc.
By: /s/ HARRY J. WHITE JR.
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Name: Harry J. White Jr.
Title: Chief Financial Officer
Date: April 2, 2001