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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) MARCH 4, 1996
AUTOMOBILE CREDIT FINANCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 33-41872 75-2387750
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
700 N. PEARL STREET
SUITE 400, L.B. 401
DALLAS, TEXAS 75201-7490
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 965-6000
NOT APPLICABLE
(Former name or former address, if changed since last report)
Index to exhibits is located on page
seven of the sequentially numbered
page system.
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
On August 14, 1995, each of Automobile Credit Fund 1991-III, Inc.,
Automobile Credit Finance, Inc., Automobile Credit Partners, Inc., Automobile
Credit Finance 1992-II, Inc., Automobile Credit Finance III, Inc., Automobile
Credit Finance IV, Inc., Automobile Credit Finance V, Inc., and Automobile
Credit Finance VI, Inc. (collectively "Debtors" and individually "Debtor") filed
a petition in the U. S. Bankruptcy Court in the Northern District of Texas,
Dallas Division ("Court") seeking protection under Chapter 11 of the United
States Bankruptcy Code ("Code") under Case Nos. 395-34981-RCM-11 through
395-34988-SAF-11. These Cases were consolidated for purposes of joint
administration under Case No. 395-34981-RCM-11. All of the Debtors are
subsidiaries of Search Capital Group, Inc. ("Search"). Search did not seek
protection under the Code.
Confirmation of Joint Plan. Search and the Debtors filed, on December
22, 1995, as co-proponents, their Third Amended and Supplemental Joint Plan of
Reorganization (the "Joint Plan") for all of the Debtors. On March 4, 1996,
the Court entered an order (the "Confirmation Order") confirming the Joint Plan
as to all of the Debtors. Confirmation by the Court occurred after a vote of
the holders ("Noteholders") of outstanding notes issued by the Debtors
("Notes"). The Notes and the Noteholders constituted essentially all of the
indebtedness and creditors, respectively, of the Debtors. The Noteholders of
each Debtor were entitled to vote for or against the Joint Plan, with respect
to claims represented by their Notes, as a separate creditor class. The final
date for voting on confirmation of the Joint Plan occurred in late January
1996. Sufficient affirmative votes for confirmation of the Joint Plan were
received from the Noteholders of each Debtor. The effective date of the Joint
Plan is March 15, 1996 (the "Effective Date"). The following discussion
summarizes the terms and provisions of the Joint Plan, but reference is made to
Joint Plan itself for the full terms and provisions of the Joint Plan.
Plan Options for Secured Claims of Noteholders. The Joint Plan provides
that Noteholders voting to accept the Joint Plan could choose one of two options
(the "Plan Options"). Under one of the Plan Options (the "Search Equity
Option"), the Noteholders receive with respect to the secured portion of their
claims the issuance by Search of a combination of shares of Common Stock and New
Preferred Stock (as defined below) and the cash dividends accrued on their New
Preferred Stock from July 1, 1995 to the Effective Date of the Joint Plan. Under
the other Plan Option (the "Collateral Option"), the Noteholders receive with
respect to the secured portion of their claims distributions of the proceeds of
the continued collection or the sale of the motor vehicle receivables securing
their Notes. The selection of either Plan Option was made by each Noteholder
except that those Noteholders who voted against the Joint Plan were not entitled
to select between the Search Equity Option and the Collateral Option but receive
treatment under the Search Equity Option. Any purchaser of a Noteholder's claim
could change his transferor's election of a Plan Option so long as the change
occurred prior to the Effective Date.
Search Equity Option. Under the Search Equity Option, the pro rata
portion of the assets of the Debtors attributable to Noteholders electing the
Search Equity Option is transferred to Search on the Effective Date. Search
will ultimately issue to the Noteholders receiving the Search Equity Option
treatment, subject to adjustment, 0.2823 shares of New Preferred Stock and
0.3109 shares of Common Stock for each $1.00 of a Noteholder's secured claim.
The number of shares to be issued may be adjusted by agreement of the financial
advisors of Search and the official Creditors Committee of the Debtors as of
the Effective Date of the Joint Plan or, if no agreement can be reached, by
the Court. Such adjustment will be made to the extent necessary so that the
Noteholders will receive New Preferred Stock and Common Stock equal, on a fully
diluted basis, to 75% of the value of all shares of New Preferred Stock, Common
Stock, 12% Preferred Stock, Warrants (as defined below), other warrants, stock
options and rights then outstanding, or agreed to be issued by Search (with
certain exceptions), as if all of the Noteholders had elected the Search Equity
Option.
Collateral Option. Under the Collateral Option, a pro rata share of the
assets of the Debtors attributable to Noteholders electing the Collateral Option
will be transferred to a newly established trust (the "Noteholders Trust") to be
held for the benefit of such Noteholders. These assets consist primarily of
cash, motor vehicle receivables and repossessed
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motor vehicles. The transferred cash, net of a pro rata share of administrative
expenses, will be immediately distributed to the Noteholders. The trustee will
collect the motor vehicle receivables held by the Noteholders Trust and make
regular distributions to the Noteholders. In the alternative, the motor vehicle
receivables will be sold by the trustee to the highest bidder if the trustee
estimates that their sale proceeds would be greater than the present value of
the collection proceeds from the receivables. The net proceeds from the sale
will be distributed to the Noteholders.
Determination of Secured Claims of Noteholders. With respect to each
Debtor, the total amount of the allowed secured claims for the Noteholders of
that Debtor equals 120% of the present value (the "Present Value") of the
Debtor's "Net Cash Flow," using a 15% discount rate. The "Net Cash Flow" for
each Debtor is the estimated periodic cash distributions that would be made by
the Debtor to its Noteholders assuming it continued to collect its receivables
at the historical average collection rate experienced by Search and the Debtors
in the collection of their receivables. The Present Value was determined as of
August 1, 1995. The total Present Values for all Debtors is $44,367,048.
Unsecured Claims of Noteholders. The unsecured portion of the claims of
the Noteholders consists of the difference (i.e. $16,077,204) between total
principal and interest due the Noteholders of $69,317,661 and the amount of the
secured claims of $53,240,457. All Noteholders, with respect to the unsecured
portion of such Noteholders' claims, and any other holders of unsecured claims
against the Debtors, will receive from Search a pro rata share of five year
warrants to purchase an aggregate of 5,000,000 shares of Common Stock (the
"Warrants"). The exercise price of the Warrants will be $2.00 during the first
year and increase by $0.25 per year over the term of the Warrants. All Warrants
not exercised prior to expiration will be redeemed by Search at a price of $0.25
per Warrant.
The Joint Plan also requires the establishment of a trust (the "Litigation
Trust") for the benefit of the holders of unsecured claims against the Debtors,
including the Noteholders. The trust will be established with a total funding
of $350,000 to be supplied pro rata from the Debtors' assets. The Litigation
Trust will be authorized to pursue any claims and causes of action of each
Debtor and of any Noteholder who elected, or failed to elect not, to assign his
or her claims and causes of action to the Litigation Trust. Any proceeds will
be distributed pro rata to unsecured claim holders. The Litigation Trust will
automatically terminate if Search's Common Stock trades at an average price of
$2.50 per share for 30 consecutive trading days during the first year following
effectiveness of the Joint Plan.
Dissolution of Debtors. The Joint Plan requires Search to cause each of
the Debtors to be liquidated and dissolved as soon as possible after the
assignment of the Debtors' assets to the Noteholders Trust, the Litigation Trust
and Search.
Terms of New Preferred Stock. Search's Board of Directors is required to
establish a new series of its preferred stock for the purpose of effecting the
Joint Plan. The series is designated as the "9%/7% Convertible Preferred Stock"
(the "New Preferred Stock"). The Joint Plan specifies certain of the basic
preferences, rights and powers of the New Preferred Stock. The final terms of
the New Preferred Stock are established by the Board of Directors in the
Certificate of Designations filed with the Delaware Secretary of State. The
following summary describes only a few of the more significant terms of the New
Preferred Stock. Reference is made to the Joint Plan for a more detailed
summary of the required preferences, rights and powers of the New Preferred
Stock and to the Certificate of Designations for a complete statement of such
preferences, rights and powers.
The New Preferred Stock would have a liquidation preference of $3.50 per
share. The New Preferred Stock will receive quarterly dividends at a per annum
rate of (i) $0.315 (or 9% of $3.50) per share until the end of the twelfth
(12th) full calendar quarter following payment of the first dividend on the New
Preferred Stock ("9% End Date"), or (ii) $0.245 (or 7% of $3.50) per share after
the 9% End Date. Dividends accrue from July 1, 1995.
The New Preferred Stock will be convertible at any time into Common Stock,
at a conversion ratio of two shares of Common Stock for each share of New
Preferred Stock. The conversion ratio is subject to adjustment in certain
events.
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Up to 50% of the New Preferred Stock will be mandatorily converted into Common
Stock at the option of Search if Search's Common Stock trades (i) at a price of
$3.50 per share or higher on any 20 trading days for a period of 30 consecutive
trading days after the third anniversary of the Effective Date, or (ii) at a
price of $4.25 per share or higher on any 20 trading days in a period of 30
consecutive trading days between the second and third anniversaries of the
Effective Date. On the seventh anniversary of the Effective Date, all of the
New Preferred Stock will be mandatorily converted into Common Stock.
The holders of outstanding New Preferred Stock will be entitled to one vote
per share of New Preferred Stock. The affirmative vote or consent of the
holders of more than 66-2/3% of all outstanding shares of New Preferred Stock,
voting as a separate class, will be required (i) to amend, alter or repeal any
provision of the Certificate of Designations establishing the New Preferred
Stock to adversely affect the relative rights, preferences, qualifications,
limitations or restrictions of the New Preferred Stock, or (ii) to effect any
reclassification of the New Preferred Stock. In any vote, a holder of New
Preferred Stock will have one vote for each share of New Preferred Stock held of
record by such holder. If Search defaults in the payment of the first two
quarterly dividends or any four consecutive quarterly dividends, the holders of
New Preferred Stock will have two votes per share and will be given the right to
elect two-thirds of the members of Search's Board of Directors.
The New Preferred Stock will not be subject to redemption by Search or at
the election of the holders thereof. The New Preferred Stock will not have any
preemptive or sinking fund rights.
Cancellation of Notes. As a condition to receiving any distributions
under the Joint Plan, Noteholders are required by the Joint Plan to surrender
the certificates for their Notes to the transfer agent of the Joint Plan. Under
the Joint Plan, the Notes and the indebtedness represented by the Notes are
deemed canceled when the Confirmation Order becomes final. The trust
indentures for the Notes, and all related restrictions, are also deemed
canceled.
Financial Information. As of February 29, 1995, the respective balance
sheets of the Debtors were as follows:
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DEBTORS' BALANCE SHEETS
Based Upon Debtors' Monthly Operating Reports
dated February 29, 1996
(Dollars in Thousands)
ACF-1991 ACF ACP ACF-1992 ACF-III ACF-IV ACF-V ACF-VI
-------- --- --- -------- ------- ------ ----- ------
Assets
Cash and Equivalents $130 $305 $134 $5,068 $6,307 $2,275 $2,138 $789
Net Contracts Receivable 67 77 70 1,650 3,816 4,587 14,343 8,646
Allowance for Credit Losses (30) (35) (31) (715) (1,581) (1,676) (5,163) (3,030)
---- ---- ---- ------ ------ ------ ------ ------
Net Contracts Receivable after
Allowance for Credit Losses 37 42 39 935 2,235 2,911 9,180 5,615
Other Assets (8) (20) (21) (30) (145) (227) (988) (559)
---- ---- ---- ------ ------ ------ ------- ------
Total Assets $159 $327 $152 $5,973 $8,687 $5,413 $12,306 $6,963
==== ==== ==== ====== ====== ====== ======= ======
Liabilities & Shareholders' Equity
Secured Debt (Liabilities
Subject to Compromise) 590 1,506 610 10,173 15,275 10,171 20,163 10,832
Other Liabilities
(Not Subject to Compromise) 1 2 1 49 29 47 74 47
---- ---- ---- ------ ------ ------ ------ ------
Total Liabilities 591 1,508 611 10,222 15,304 10,218 20,247 10,879
Shareholders' Equity
(Capital Deficit ) (432) (1,181) (459) (4,249) (6,617) (4,805) (7,931) (3,916)
---- ------ ---- ------ ------ ------ ------- ------
Total Liabilities &
Shareholders Equity
(Capital Deficit) $159 $327 $152 $5,973 $8,687 $5,413 $12,306 $6,963
==== ==== ==== ====== ====== ====== ======= ======
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not Applicable
(b) PRO FORMA FINANCIAL INFORMATION.
Not Applicable
(c) EXHIBITS.
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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2.1 Third Amended Joint Plan of Reorganization
2.2 Modification to Third Amended Joint Plan of Reorganization
2.3 Order Confirming Third Amended and Supplemented Joint Plan, Pursuant
to 11 U.S.C. Section 1129
2.4 Chapter 11 Post-Confirmation Order
2.5 Order Regarding Entry Date of Order Confirming Third Amended and
Supplemented Joint Plan Pursuant to 11 U.S.C. Section 1129
2.6 Order Granting Second Motion for Technical, Non-Material Modification
to the Third Amended and Supplemented Joint Plan of Reorganization
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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.
AUTOMOBILE CREDIT FINANCE, INC.
By: /s/ Robert Idzi
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Robert Idzi, Chief Financial Officer
Dated: March 21, 1996
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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2.1 Third Amended Joint Plan of Reorganization
2.2 Modification to Third Amended Joint Plan of
Reorganization
2.3 Order Confirming Third Amended and Supplemented Joint
Plan, Pursuant to 11 U.S.C. Section 1129
2.4 Chapter 11 Post-Confirmation Order
2.5 Order Regarding Entry Date of Order Confirming Third
Amended and Supplemented Joint Plan Pursuant to 11 U.S.C.
Section 1129
2.6 Order Granting Second Motion for Technical, Non-Material
Modification to the Third Amended and Supplemented Joint
Plan of Reorganization
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