Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2002
|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 0-24175
ATEL Capital Equipment Fund VII, L.P.
(Exact name of registrant as specified in its charter)
California 94-3248318
- ---------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
235 Pine Street, 6th Floor, San Francisco, California 94104
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 989-8800
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X|
No |_|
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
2
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
BALANCE SHEETS
MARCH 31, 2002 AND DECEMBER 31, 2001
(Unaudited)
ASSETS
2002 2001
---- ----
Cash and cash equivalents $ 793,447 $ 936,189
Accounts receivable, net of allowance
for doubtful accounts of $418,067
in 2002 and $118,067 in 2001 4,121,588 5,759,540
Other assets 40,016 108,015
Investments in leases 130,654,904 129,049,875
------------------ --------------------
Total assets $135,609,955 $ 135,853,619
================== ====================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $8,214,688 $9,971,225
Other long-term debt 44,044,000 38,540,000
Lines of credit 4,000,000 4,100,000
Accounts payable:
General Partner 287,088 580,916
Other 767,376 510,598
Accrued interest expense 283,987 355,458
Interest rate swap contracts 1,081,885 1,323,006
Unearned operating lease income 1,020,697 976,565
------------------ --------------------
Total liabilities 59,699,721 56,357,768
Partners' capital 75,910,234 79,495,851
------------------ --------------------
Total liabilities and partners' capital $135,609,955 $ 135,853,619
================== ====================
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
---- ----
Revenues:
Leasing activities:
Operating leases $ 6,710,984 $ 8,292,884
Direct financing leases 403,680 278,843
Loss on sales of assets (47,336) (80,962)
Interest 6,117 22,392
Other 2,111 2,574
------------------ --------------------
7,075,556 8,515,731
Expenses:
Depreciation and amortization 4,423,512 5,592,378
Interest expense 889,598 1,110,475
Other 303,022 426,046
Provision for doubtful accounts 300,000 -
Equipment and incentive management fees to General Partner 282,352 326,986
Cost reimbursements to General Partner 564,026 195,377
Professional fees 93,529 54,290
------------------ --------------------
6,856,039 7,705,552
------------------ --------------------
Net income $ 219,517 $ 810,179
================== ====================
Net income:
General Partner $ 296,307 $ 214,901
Limited Partners (76,790) 595,278
------------------ --------------------
$ 219,517 $ 810,179
================== ====================
Net income per Limited Partnership Unit $ (0.01) $ 0.04
Weighted average number of Units outstanding 14,996,050 14,996,050
See accompanying notes.
4
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD ENDED
MARCH 31, 2002
(Unaudited)
Accumulated
Other
Comprehensive
Limited Partners General Income
----------------
Units Amount Partner (Loss) Total
Balance December 31, 2001 14,996,050 $ 80,818,857 $ - $(1,323,006) $ 79,495,851
Distributions to partners (3,749,948) (296,307) - (4,046,255)
Unrealized decrease in value of
interest rate swap contracts - - 241,121 241,121
Net income (76,790) 296,307 - 219,517
----------------- ------------------ ----------------- ------------------------------------
Balance March 31, 2002 14,996,050 $ 76,992,119 $ - $(1,081,885) $ 75,910,234
================= ================== ================= ====================================
See accompanying notes.
5
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENT OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2002 AND 2001
2002 2001
---- ----
Operating activities:
Net income $ 219,517 $ 810,179
Adjustments to reconcile net income to cash provided by operating activities:
Loss (gain) on sales of assets 47,336 80,962
Depreciation and amortization 4,423,512 5,592,378
Provision for doubtful accounts (300,000) -
Changes in operating assets and liabilities:
Accounts receivable 1,937,952 1,349,027
Other assets 67,999 9,999
Accounts payable, General Partner (293,828) (330,704)
Accounts payable, other 256,778 (189,645)
Accrued interest expense (71,471) (69,727)
Unearned lease income 44,132 (43,271)
------------------ --------------------
Net cash provided by operations 6,331,927 7,209,198
------------------ --------------------
Investing activities:
Proceeds from sales of assets 240,881 447,351
Reduction of net investment in direct financing leases 809,865 466,134
Purchases of equipment on operating leases (3,959,522) (1,950,111)
Purchases of equipment on direct financing leases (3,059,140) (451,922)
Initial direct costs paid to General Partner (107,961) (16,726)
------------------ --------------------
Net cash used in investing activities (6,075,877) (1,505,274)
------------------ --------------------
Financing activities:
Repayments of other long-term debt (4,596,000) (4,940,000)
Borrowings under line of credit 9,700,000 4,500,000
Distributions to limited partners (3,749,948) (3,750,038)
Distributions to general partner (296,307) (214,901)
Repayments of non-recourse debt (1,756,537) (1,561,902)
Proceeds of other long-term debt 10,100,000 -
Repayments of borrowings under line of credit (9,800,000) -
------------------ --------------------
Net cash used in financing activities (398,792) (5,966,841)
------------------ --------------------
Net decrease in cash and cash equivalents (142,742) (262,917)
Cash and cash equivalents at beginning of period 936,189 1,321,417
------------------ --------------------
Cash and cash equivalents at end of period $ 793,447 $ 1,058,500
================== ====================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 961,069 $ 1,180,202
================== ====================
See accompanying notes.
6
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Organization and partnership matters:
ATEL Capital Equipment Fund VII, L.P. (the Fund), was formed under the laws of
the State of California on July 17 , 1996, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities.
Upon the sale of the minimum amount of Units of Limited Partnership interest
(Units) of $1,200,000 and the receipt of the proceeds thereof on January 7,
1997, the Partnership commenced operations.
The Partnership does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Balance Expense and Reclassi- Balance
December 31, Amortization fications and March 31,
2001 Additions of Leases Dispositions 2002
---- --------- --------- ------------- ----
Net investment in operating
leases $101,066,589 $ 3,959,522 $(4,369,855) $ (289,097) $ 100,367,159
Net investment in direct financing
leases 18,931,921 3,059,140 (809,865) (155,559) 21,025,637
Assets held for sale or lease 9,267,614 - - 156,439 9,424,053
Reserve for losses (504,227) - - - (504,227)
Initial direct costs, net of
accumulated amortization 287,978 107,961 (53,657) - 342,282
----------------- ------------------ ----------------- ------------------ --------------------
$129,049,875 $ 7,126,623 $(5,233,377) $ (288,217) $ 130,654,904
================= ================== ================= ================== ====================
7
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Balance Reclassi- Balance
December 31, fications and March 31,
2001 Additions Dispositions 2002
---- --------- ------------ ----
Transportation $ 80,788,684 $ - $ (180,106) $ 80,608,578
Marine vessels/barges 27,030,136 - - 27,030,136
Construction 22,831,963 - (417,700) 22,414,263
Manufacturing 9,702,801 - (28,868) 9,673,933
Mining 9,012,965 - - 9,012,965
Office automation 5,297,632 - (466,740) 4,830,892
Other 5,813,733 - (120,237) 5,693,496
Materials handling 5,265,654 3,959,522 - 9,225,176
Communications 4,387,819 - - 4,387,819
------------------ ----------------- ------------------ --------------------
170,131,387 3,959,522 (1,213,651) 172,877,258
Less accumulated depreciation (69,064,798) $(4,369,855) 924,554 (72,510,099)
------------------ ----------------- ------------------ --------------------
$101,066,589 $ (410,333) $ (289,097) $ 100,367,159
================== ================= ================== ====================
All of the property on leases was acquired in 1997, 1998, 1999, 2001 and 2002.
At March 31, 2002, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Operating Financing
Leases Leases Total
Nine months ending December 31, 2002 $ 14,809,827 $ 3,313,154 $ 18,122,981
Year ending December 31, 2003 14,488,289 3,953,273 18,441,562
2004 9,652,671 3,862,680 13,515,351
2005 6,430,497 3,791,411 10,221,908
2006 1,509,428 1,713,362 3,222,790
Thereafter 769,350 756,131 1,525,481
------------------ ----------------- ------------------
$ 47,660,062 $ 17,390,011 $ 65,050,073
================== ================= ==================
8
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
7.0% to 16.6%.
Future minimum payments of non-recourse debt are as follows:
Principal Interest Total
Nine months ending December 31, 2002 $ 4,000,535 $ 529,145 $ 4,529,680
Year ending December 31, 2003 3,261,507 288,853 3,550,360
2004 298,403 67,364 365,767
2005 322,838 42,927 365,765
2006 216,850 20,179 237,029
Thereafter 114,555 5,418 119,973
------------------ ----------------- ------------------
$ 8,214,688 $ 953,886 $ 9,168,574
================== ================= ==================
5. Other long-term debt:
In 1998, the Partnership entered into a $65 million receivables funding program
(the Program) with a receivables financing company that issues commercial paper
rated A1 by Standard and Poors and P1 by Moody's Investor Services. Under the
Program, the receivables financing company receives a general lien against all
of the otherwise unencumbered assets of the Partnership. The Program provides
for borrowing at a variable interest rate (1.78273% at March 31, 2002). As of
March 31, 2002, the program has been closed as to additional borrowings.
The Program requires the General Partner to enter into various interest rate
swaps with a financial institution (also rated A1/P1) to manage interest rate
exposure associated with variable rate obligations under the Program by
effectively converting the variable rate debt to fixed rates. As of March 31,
2002, the Partnership receives or pays interest on a notional principal of
$44,044,000, based on the difference between nominal rates ranging from 4.10% to
7.58% and the variable rate under the Program. No actual borrowing or lending is
involved. The last of the swaps terminates in 2009. The differential to be paid
or received is accrued as interest rates change and is recognized currently as
an adjustment to interest expense related to the debt.
9
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
5. Other long-term debt (continued):
Borrowings under the Program are as follows:
Original Balance Rate on
Amount March 31, Interest Swap
Date Borrowed Borrowed 2002 Agreement
------------- -------- ---- ---------
4/1/1998 $ 21,770,000 $ 3,047,000 6.220%
7/1/1998 25,000,000 4,989,000 6.155%
10/1/1998 20,000,000 8,333,000 5.550%
4/16/1999 9,000,000 2,972,000 5.890%
1/26/2000 11,700,000 8,007,000 7.580%
5/25/2001 2,000,000 1,692,000 5.790%
9/28/2001 6,000,000 5,201,000 4.360%
1/31/2002 4,400,000 4,230,000 4.100%
2/19/2002 5,700,000 5,573,000 5.490%
------------------ -----------------
$105,570,000 $ 44,044,000
================== =================
The long-term debt borrowings mature from 2004 through 2008. Future minimum
principal payments of long-term debt are as follows:
Rates on
Year ending Interest Swap
December 31, Principal Interest Total Agreements*
------------ --------- -------- ----- -----------
Nine months ending December 31, 2002 $ 10,498,000 $ 1,739,562 $ 12,237,562 5.859% - 5.879%
Year ending December 31, 2003 11,524,000 1,653,145 13,177,145 5.858% - 5.878%
2004 9,458,000 1,041,833 10,499,833 5.871% - 5.910%
2005 7,875,000 539,350 8,414,350 5.927% - 6.257%
2006 2,810,000 206,986 3,016,986 6.414% - 7.009%
2007 903,000 103,979 1,006,979 7.007% - 7.211%
2008 635,000 46,443 681,443 7.245% - 7.580%
2009 341,000 12,229 353,229 7.58%
------------------ ----------------- ------------------
$ 44,044,000 $ 5,343,527 $ 49,387,527
================== ================= ==================
* Represents the range of monthly weighted average fixed interest rates paid for
amounts maturing in the particular year. The receive-variable rate portion of
the swap represents commercial paper rates (1.78273% at March 31, 2002).
10
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
6. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The Limited Partnership Agreement allows for the reimbursement of costs incurred
by the General Partner in providing services to the Partnership. Services
provided include Partnership accounting, investor relations, legal counsel and
lease and equipment documentation. The General Partner is not reimbursed for
services where it is entitled to receive a separate fee as compensation for such
services, such as acquisition and management of equipment. Reimbursable costs
incurred by the General Partner are allocated to the Partnership based upon
actual time incurred by employees working on Partnership business and an
allocation of rent and other costs based on utilization studies.
Substantially all employees of the General Partner record time incurred in
performing services on behalf of all of the Partnerships serviced by the General
Partner. The General Partner believes that the costs reimbursed are the lower of
(i) actual costs incurred on behalf of the Partnership or (ii) the amount the
Partnership would be required to pay independent parties for comparable services
in the same geographic location and are reimbursable in accordance with the
Limited Partnership Agreement.
The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
2002 2001
---- ----
Incentive management fees (computed as 4% of distributions of cash from
operations, as defined in the Limited Partnership Agreement) and equipment
management fees (computed as 3.5% of gross revenues from operating leases, as
defined in the Limited Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership Agreement). $ 282,352 $ 326,986
Costs reimbursed to General Partner 564,026 195,377
------------------ --------------------
$ 846,378 $ 522,363
================== ====================
11
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
7. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expired on April 12, 2002 and has been extended through June 30, 2002. The
General Partner is currently negotiating a new line of credit and anticipates
that the current line of credit will be replaced before its extended expiration
date. As of March 31, 2002, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ 4,000,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 15,300,000
--------------------
Total borrowings under the acquisition facility 19,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility 5,235,045
--------------------
Total outstanding balance $ 24,535,045
====================
Total available under the line of credit $ 62,000,000
Total outstanding balance (24,535,045)
--------------------
Remaining availability $ 37,464,955
====================
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of March 31,
2002.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first quarter of 2002 and 2001, the Partnership's primary activity
was engaging in equipment leasing activities.
In 2002 and 2001, the Partnership's primary source of liquidity was operating
lease rents. The liquidity of the Partnership will vary in the future,
increasing to the extent cash flows from leases exceed expenses, and decreasing
as lease assets are acquired, as distributions are made to the limited partners
and to the extent expenses exceed cash flows from leases.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expired on April 12, 2002 and has been extended through June 30, 2002. The
General Partner is currently negotiating a new line of credit and anticipates
that the current line of credit will be replaced before its extended expiration
date. As of March 31, 2002, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ 4,000,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 15,300,000
--------------------
Total borrowings under the acquisition facility 19,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility 5,235,045
--------------------
Total outstanding balance $ 24,535,045
====================
Total available under the line of credit $ 62,000,000
Total outstanding balance (24,535,045)
--------------------
Remaining availability $ 37,464,955
====================
Total available under the line of credit $ 62,000,000
Total outstanding balance (24,535,045)
--------------------
Remaining availability $ 37,464,955
====================
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
13
The Partnership anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners.
The Partnership currently has available adequate reserves to meet contingencies,
but in the event those reserves were found to be inadequate, the Partnership
would likely be in a position to borrow against its current portfolio to meet
such requirements. The General Partner envisions no such requirements for
operating purposes.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. There were no such commitments as of
March 31, 2002.
If inflation in the general economy becomes significant, it may affect the
Partnership inasmuch as the residual (resale) values and rates on re-leases of
the Partnership's leased assets may increase as the costs of similar assets
increase. However, the Partnership's revenues from existing leases would not
increase, as such rates are generally fixed for the terms of the leases without
adjustment for inflation.
If interest rates increase significantly, the lease rates that the Partnership
can obtain on future leases will be expected to increase as the cost of capital
is a significant factor in the pricing of lease financing. Leases already in
place, for the most part, would not be affected by changes in interest rates.
Cash Flows
In 2002 and 2001, the primary source of liquidity was rents from operating
leases. Cash from operating activities was almost entirely from operating lease
rents in both years.
In the first quarter of 2002 and 2001, the only sources of cash from investing
activities was proceeds from sales of assets and rents from direct financing
leases. In 2002, proceeds from sales of lease assets decreased compared to 2001.
Proceeds from such sales are not expected to be consistent from one year to
another. In 2002 and 2001 the primary investing uses of cash were the purchase
of assets on operating and direct financing leases.
In 2002, sources of cash from investing activities consisted of amounts borrowed
under the line of credit and under the other long-term debt facility. In 2001,
the only source of cash from investing activities was borrowings under the line
of credit. Repayments of other long-term debt have decreased only slightly as a
result of the offsetting effects of scheduled debt payments and additional
borrowings.
Results of operations
Operations resulted in a net income of $219,517 in 2002 compared to 810,179 in
2001. The Partnership's primary source of revenues is from operating leases.
This is expected to remain true in future periods. Depreciation expense is the
single largest expense of the Partnership. Depreciation is related to operating
lease assets and thus, to operating lease revenues. Operating lease revenues and
depreciation expense have decreased over the last year as a result of net asset
dispositions.
Losses recognized on sales of assets have decreased from $80,962 in 2001 to
$47,336 in 20021. Gains and losses are not expected to be consistent from one
period to another.
14
Equipment management fees are based on the Partnership's rental revenues and
have decreased in relation to decreases in the Partnership's revenues from
leases. Such fees decreased from $311,703 in 2001 to $311,703 in 2002. Incentive
management fees are based on the levels of distributions to limited partners and
the sources of the cash distributed. Such fees have decreased from $15,283 in
2001 to zero in 2002.
The decrease in interest expense is related to the reduction of total
outstanding debt as the result of scheduled payments.
In 2001, the amounts of costs reimbursed to the General Partner were limited by
provisions of the Agreement of Limited Partnership. Costs which were incurred by
the General Partner in 2001, but which were not allowed in that year, have been
included in the first quarter of 2002. The costs amounts to approximately
$274,000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No material legal proceedings are currently pending against the Partnership or
against any of its assets. The following is a discussion of legal matters
involving the Partnership, but which do not represent claims against the
Partnership or its assets.
Applied Magnetics Corporation:
In January 2000, Applied Magnetics Corporation filed for protection from
creditors under Chapter 11 of the U.S. Bankruptcy Code. The Partnership had
assets with a total net book value of $8,048,095 leased to Applied Magnetics
Corporation at the bankruptcy filing date. On January 31, 2000, the General
Partner was appointed to the Official Committee of Unsecured Creditors and
currently serves as the Chairperson of the Committee. Procedures were quickly
undertaken for the liquidation of the Partnership's leased equipment, which
proceeds resulted in recoveries of $1,773,798 or 21.7% of original equipment
cost. As of November 1, 2000, liquidation of the assets was completed.
The debtor filed a Plan of Reorganization (the "Plan"), which was approved by a
vote of the creditors of the debtor in October 2001. The Plan provided that the
Debtor change its name to "Integrated Micro-Technology", and enter into a new
line of business, the manufacture and production of "micro-machines". As part of
the Plan, the Partnership, along with the other unsecured creditors, receives a
proportionate share of their unsecured claims, in the form of ownership shares
and warrants in the newly formed business. The success of this new business plan
is highly uncertain.
On February 13, 2002, the reorganized Debtor filed a notice of objection to the
Funds claim due to duplication and an improper liquidated damages provision,
which the Funds intend to dispute.
The Partnership anticipates additional amounts may be recoverable through its
equity interests in the reorganized lessee's business, however, any recoveries
above the amounts received upon liquidation of the Partnership's equipment are
highly uncertain and speculative.
Pioneer Companies, Inc.:
On July 31, 2001, petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code were filed by the Pioneer Companies, Inc., et al. The
Partnership's Proof of Claim was timely filed on October 14, 2001, with the
Bankruptcy Clerk in Houston. The Partnership is the successor in interest to
First Union Rail Corporation (FURC) under four (4) tank car lease schedules for
36 tank cars with Pioneer Chlor-Alkali Company, Inc. n/k/a Pioneer Americas,
Inc. (together, the "Lease"). FURC manages the Lease for the Partnership. The
Order Confirming Debtor's Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code ("Plan") was entered on November 28, 2001. The Effective Date,
as defined in the Plan, was December 31, 2001. Pursuant to Schedules 6.1(a)(x)
and 6.1(a)(y) of the Plan, the Lease was rejected by the debtor.
15
Although the equipment was to be returned to FURC by December 31, 2001, the
debtor has continued to use and pay for the equipment under the lease on a
month-to-month basis. A letter agreement has been forwarded to executed by the
debtor to formalize an understanding for debtor's continued use of the equipment
under the terms of the Lease at least until March 31, 2002 on a month-to-month
basis until the cars are returned. The debtor has also objected to the Fund's
claim, which objection is being disputed by the Fund. The full extent of any
recovery is not known at this time.
Item 2. Changes In Securities.
Inapplicable.
Item 3. Defaults Upon Senior Securities.
Inapplicable.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Inapplicable.
Item 5. Other Information.
Inapplicable.
Item 6. Exhibits And Reports On Form 8-K.
(a)Documents filed as a part of this report
1. Financial Statements
Included in Part I of this report:
Balance Sheets, March 31, 2002 and December 31, 2001.
Income statements for the three month periods ended March
31, 2002 and 2001.
Statement of changes in partners' capital for the three
months ended March 31, 2002.
Statements of cash flows for the three month periods ended
March 31, 2002 and 2001.
Notes to the Financial Statements
2. Financial Statement Schedules
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
(b) Report on Form 8-K
None
16
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 thereunto duly authorized.
Date:
May 13, 2002
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(Registrant)
By: ATEL Financial Corporation
General Partner of Registrant
By: /s/ Dean L. Cash
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Dean L. Cash
President and Chief Executive Officer
of General Partner
By: /s/ Paritosh K. Choksi
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Paritosh K. Choksi
Principal financial officer
of registrant
By: /s/ Donald E. Carpenter
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Donald E. Carpenter
Principal accounting
officer of registrant
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