U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 3, 2006
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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. Please see our
annual report on Form 10-KSB filed March 31, 2006, for more information about
the Varde agreement generally.
On April 3, 2006, our wholly-owned subsidiary Matterhorn Financial Services LLC
("Matterhorn") borrowed approximately $0.8 million under the facility, and again
on April 4, 2006, Matterhorn borrowed another approximately $0.6 million under
the facility. Both of these loans were made in connection with our purchase of
certain charged-off loan portfolios. Each of these obligations has a two-year
term expiring in April 2008 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 residual interest in excess
profits. Performance Capital Management, LLC, our parent operating company, has
guaranteed 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, LLC;
- Termination of Performance Capital Management, LLC 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 approximately $0.8
million loan (as well as other loans previously advanced by Varde) include
charged-off loan portfolios purchased at a cost of approximately $1.0 million on
April 3, 2006, as well as other portfolios owned by Matterhorn. The assets of
Matterhorn that provide security for Varde's approximately $0.6 million loan (as
well as other loans previously advanced by Varde) include charged-off loan
portfolios purchased at a cost of approximately $.6 million on April 4, 2006, as
well as other portfolios owned by Matterhorn. The fair value of
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these encumbered assets likely exceeds their cost basis because new portfolios
generally have a fair value in excess of their cost basis. Following these
borrowings, the remaining availability under the credit facility is
approximately $13.4 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, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PERFORMANCE CAPITAL MANAGEMENT, LLC
April 5, 2006 By: /s/ David J. Caldwell
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(Date) David J. Caldwell
Its: Chief Operations Officer
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