U.S. 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): DECEMBER 21, 2004
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PERFORMANCE CAPITAL MANAGEMENT, LLC
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(Exact name of registrant as specified in its charter)
CALIFORNIA 0 - 50235 03-0375751
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(State or other (Commission (I.R.S. Employer
Jurisdiction File Number) Identification No.)
of incorporation)
222 SOUTH HARBOR BLVD., SUITE 400
ANAHEIM, CALIFORNIA 92805
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 502-3780
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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:
[ ] 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))
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
We have a credit facility with Varde Investment Partners, L.P. ("Varde"), that
provides for up to $25 million of capital (counting each dollar loaned on a
cumulative basis) over a five-year term ending in July 2009. We have previously
reported our entry into this facility in a Form 8-K filed with the Securities
and Exchange Commission on July 29, 2004. Please see this Form 8-K filing for
more information about the Varde agreement generally. On December 21, 2004, our
wholly-owned subsidiary Matterhorn Financial Services LLC ("Matterhorn")
borrowed approximately $938,000 under the facility in connection with our
purchase of certain charged-off loan portfolios. This obligation has a two-year
term expiring in December 2006 and bears interest at a rate of 12% per annum.
The timing of payments of principal and interest depends on the collection
performance of the portfolios Matterhorn purchased using the funds. Varde has a
first priority security interest in all the assets of Matterhorn securing
repayment of its loans and payment of its interest in excess profits.
Performance Capital Management, LLC, our parent operating company, has
guarantied certain of Matterhorn's operational obligations under the loan
documents. Varde may exercise its rights under its various security interests if
an event of default occurs. These rights include demanding the immediate payment
of all amounts due to Varde, as well as liquidating the collateral. A failure to
make payments when due, if not cured within five days, is an event of default.
Other events of default include:
- - Material breaches of representations and warranties;
- - Uncured breaches of agreements having a material adverse effect;
- - Bankruptcy or insolvency of Performance Capital Management or Matterhorn;
- - Fraudulent conveyances;
- - Defaults in other debt or debt-related agreements;
- - Failure to pay judgments when due;
- - Material loss or damage to, or unauthorized transfer of, the collateral;
- - Change in control of Performance Capital Management;
- - Termination of Performance Capital Management as the Servicer under the
Servicing Agreement; and
- - Breach of Varde's right of first refusal to finance portfolio acquisitions.
The assets of Matterhorn that provide security for Varde's $938,000 loan (as
well as other loans previously advanced by Varde) include charged-off loan
portfolios purchased at a cost of approximately $1.25 million on December 21,
2004, as well as other portfolios owned by Matterhorn. The fair value of these
encumbered assets likely exceeds their cost basis because new portfolios
generally have a fair value in excess of their cost basis. Following this
borrowing, the remaining availability under the credit facility was
approximately $23.3 million.
Except for the historical information presented in this document, the matters
discussed in this Form 8-K or otherwise incorporated by reference into this
document contain "forward-looking statements" (as such term is defined in the
Private Securities Litigation Reform Act of 1995). These statements can be
identified by the use of forward-looking terminology such as "believes,"
"plans," "expects," "may," "will," "intends," "should," "plan," "assume" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and
uncertainties. The safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933,
as amended, apply to forward-looking statements made by Performance Capital
Management, LLC. You should not place undue reliance on forward-looking
statements. Forward-looking statements involve risks and uncertainties. The
actual results that we achieve may differ materially from any forward-looking
statements due to such risks and uncertainties. These forward-looking statements
are based on current expectations, and we assume no obligation to update this
information. Readers are urged to carefully review and consider the various
disclosures made by us in this report on Form 8-K and in our other reports filed
with the Securities and Exchange Commission that attempt to advise interested
parties of the risks and factors that may affect our business.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PERFORMANCE CAPITAL MANAGEMENT, LLC
DECEMBER 28, 2004 By: /s/ David J. Caldwell
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(Date) David J. Caldwell
Its: Chief Operations Officer