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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended June 14, 1996
OR
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 333-2336
CBM FUNDING CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-1955658
- - - -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10400 Fernwood Road
Bethesda, Maryland 20817
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(Address of principal executive offices)
Registrant's telephone number, including area code: 301-380-2070
Indicate by 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 and (2) has been subject to such filing
requirements for the past 90 days. Yes ____ No ____ (Not Applicable)
Shares outstanding as
Class of July 15, 1996
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Common Stock, $.01 par value per share 1,000
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CBM Funding Corporation
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Operations
Twelve and Twenty-Four Weeks Ended June 14, 1996................1
Balance Sheet
June 14, 1996 and December 31, 1995.............................2
Statement of Cash Flows
Twenty-Four Weeks ended June 14, 1996...........................3
Notes to Financial Statements.....................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................6
PART II - OTHER INFORMATION
Item 5. Other Information.................................................6
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CBM FUNDING CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per common share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Twenty-Four Weeks
Ended Ended
June 14, June 14,
1996 1996
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<S> <C> <C>
REVENUES
Interest income........................... $ 7,277 $ 12,413
EXPENSES
Interest expense.......................... 7,277 12,413
Amortization of deferred financing costs.. 300 428
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7,577 12,841
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NET LOSS................................... $ (300) $ (428)
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NET LOSS PER COMMON SHARE.................. $ (300) $ (428)
============= =============
</TABLE>
See notes to these financial statements.
1
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CBM FUNDING CORPORATION
BALANCE SHEET
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June 14, December 31,
1996 1995
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<S> <C> <C>
(Unaudited)
ASSETS
Mortgage Loan to Associates.......................... $ 406,164 $ --
Deferred financing costs, net of accumulated
amortization........................................ 12,927 --
Interest receivable.................................. 1,251 --
Cash and cash equivalents............................ 1 1
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Total Assets..................................... $ 420,343 $ 1
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LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Certificates payable................................. $ 406,164 $ --
Interest payable..................................... 1,251 --
Accrued liabilities.................................. 602 --
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Total Liabilities................................ 408,017 --
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SHAREHOLDER'S EQUITY
Common stock (1,000 shares of .01 per value stock
issued and outstanding)............................. -- --
Additional paid-in capital........................... 12,754 1
Accumulated deficit.................................. (428) --
----------- -----------
Total Shareholder's Equity....................... 12,326 1
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$ 420,343 $ 1
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</TABLE>
See notes to these financial statements.
2
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CBM FUNDING CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Twenty-Four
Weeks Ended
June 14,
1996
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<S> <C>
OPERATING ACTIVITIES
Net loss..................................................... $ (428)
Noncash items................................................ 428
Changes in operating accounts................................ --
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Cash provided by (used in) operating activities............ --
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INVESTING ACTIVITIES
Mortgage loan to Associates.................................. (410,200)
Mortgage loan collections.................................... 4,036
Payment of financing costs................................... (12,753)
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Cash used in investing activities.......................... (418,917)
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FINANCING ACTIVITIES
Proceeds from certificates................................... 410,200
Contribution by Courtyard II Associates, L.P................. 12,753
Principal repayments on certificates......................... (4,036)
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Cash provided by financing activities...................... 418,917
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INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS............................................. --
CASH AND CASH EQUIVALENTS at beginning of period.............. 1
----------
CASH AND CASH EQUIVALENTS at end of period.................... $ 1
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid as interest on certificates........................ $ 11,162
==========
</TABLE>
See notes to these financial statements.
3
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CBM FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
The accompanying financial statements have been prepared by CBM Funding
Corporation (the "Company") without audit. Certain information and footnote
disclosures normally included in financial statements presented in accordance
with generally accepted accounting principles have been condensed or omitted
from the accompanying statements. The Company believes the disclosures made are
adequate to make the information presented not misleading. In the opinion of
the Company, the accompanying unaudited financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position of the Company as of June 14, 1996 and
December 31, 1995, and the results of operations for the twelve and twenty-four
weeks ended June 14, 1996.
CBM Funding Corporation, a Delaware corporation and wholly owned subsidiary of
Courtyard II Associates, L.P. (the "Mortgagor" and "Associates"), which is a
wholly owned subsidiary of Courtyard by Marriott II Limited Partnership (the
"Partnership"), was formed on December 28, 1995. The Company was formed for the
purpose of (i) making the single, fixed rate, non-recourse $410.2 million
mortgage loan (the "Mortgage Loan") to the Mortgagor and (ii) conveying the
Mortgage Loan and other instruments securing the Mortgage Loan including the 69
cross-defaulted and cross-collaterized mortgages, representing first priority
liens on fee or leasehold interests in 69 Hotels (the "Hotels") owned by the
Mortgagor, fee interests in land leased from Marriott International, Inc. or its
affiliates on which 53 hotels are situated in, and related assets, and a pledge
of the Mortgagor's membership interests in, and the related right to receive
distributions from, the entity that owns the hotel located in Chicago/Deerfield,
Illinois ("Deerfield LLC"), to the trustee (the "Trustee") under a Trust and
Servicing Agreement dated January 24, 1996 (the "Trust and Servicing Agreement")
in exchange for Multiclass Mortgage Pass-Through Certificates (the
"Certificates") which represent interests in the trust fund under the Trust and
Servicing Agreement. For financial accounting purposes the assets and
liabilities of the Trustee are included in the financial statements of the
Company. However, legally, the Company transferred the Mortgage Loan to the
Trustee without recourse and has no interest in the Mortgage Loan, has no
obligations with respect to the Certificates and does not control the Trustee.
Debt Refinancing - Certificates
The Certificates in an initial principal amount of $410.2 million were issued by
the Trustee. Proceeds from the sale of the Certificates were utilized by the
Company to provide a Mortgage Loan to Associates. The Certificates and Mortgage
Loan each require monthly payments of principal and interest based on a 17-year
amortization schedule. The Mortgage Loan matures on January 28, 2008. However,
the maturity date of the Certificates and the Mortgage Loan each may be extended
until January 28, 2013 with the consent of 66 2/3% of the holders of the
outstanding Certificates affected thereby. The Certificates were issued in the
following classes and pass-through rates of interest.
<TABLE>
<CAPTION>
Initial Certificate Pass-Through
Class Balance Rate
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<S> <C> <C>
Class A-1 $ 45,500,000 7.550%
Class A-2 $ 50,000,000 6.880%
Class A-3P & I $ 129,500,000 7.080%
Class A-3IO Not Applicable 0.933%
Class B $ 75,000,000 7.480%
Class C $ 100,000,000 7.860%
Class D $ 10,200,000 8.645%
</TABLE>
4
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The Class A-3IO Certificates receive payments of interest only based on a
notional balance equal to the Class A-3P & I Certificate balance.
The Certificates/Mortgage Loan maturities are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 $ 10,283
1997 13,216
1998 14,242
1999 15,347
2000 16,539
Thereafter 340,573
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$410,200
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</TABLE>
The Mortgage Loan is secured primarily by 69 cross-defaulted and cross-
collateralized mortgages representing first priority mortgage liens on (i) the
fee or leasehold interest in the 69 Hotels, related furniture, fixtures and
equipment and the property improvement fund, (ii) the fee interest in the land
leased from Marriott International, Inc. or its affiliates on which 53 Hotels
are located, (iii) a pledge of the Mortgagor's membership interest in and the
related right to receive distributions from Deerfield LLC and (iv) an assignment
of the restated management agreement. The Mortgage Loan is non-recourse to the
Mortgagor, the Partnership and its partners.
Operating profit from the Hotels and the Deerfield Hotel in excess of debt
service on the Mortgage Loan is available to be distributed to the Partnership.
Amounts distributed to the Partnership are used for the following, in order of
priority: (i) to pay debt service on the $127.4 million of senior notes
("Senior Notes") issued in a concurrent offering by the Partnership and its
wholly owned subsidiary, Courtyard II Finance Company, (ii) to fund a
supplemental debt service reserve, if necessary, (iii) to offer to purchase a
portion of the Senior Notes at par, if necessary, (iv) for working capital as
discussed in the working capital agreement with Marriott International, Inc. and
(v) for distributions to the partners of the Partnership.
Prepayments of the Mortgage Loan are permitted with the payment of a premium
(the "Prepayment Premium"), subject to certain exceptions. The Prepayment
Premium is equal to the greater of (i) one percent of the Mortgage Loan being
prepaid or (ii) a yield maintenance amount based on a spread of .25% or .55%
over the U.S. treasury rate, as defined.
Exchange Offer
On June 30, 1996, the Company completed an exchange offer of its Multiclass
Mortgage Pass-Through Certificates, Series 1996-1A with an outstanding principal
balance of $406.2 million at that time, ("Old Certificates") for an equal amount
of Multiclass Mortgage Pass-Through Certificates, Series 1996-1B ("New
Certificates"). The form and terms of the New Certificates are substantially
identical to the form and terms of the Old Certificates, except that the New
Certificates are registered under the Securities Act of 1933, as amended and
their transfers are not restricted.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
Principal Sources and Uses of Cash
The Company's principal source of cash is from collections on the mortgage loan
and from additional paid-in capital from the issuance of stock. For the twenty-
four weeks ended, June 14, 1996, collections on the mortgage loan were used to
repay principal on the certificates of $4.0 million. For the twenty-four weeks
ended June 14, 1996, additional paid-in capital from the issuance of stock was
used to pay financing costs of $12.8 million.
RESULTS OF OPERATIONS
For the twenty-four weeks ended June 14, 1996, the Company reported revenues and
interest expense of $12.4 million each. Amortization of deferred financing
costs for the twenty-four weeks ended was $.4 million. Therefore, the Company
reported a net loss of $.4 million for the twenty-four weeks ended June 14,
1996.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On June 30, 1996, the Company completed an exchange offer of its Multiclass
Mortgage Pass-Through Certificates, Series 1996-1A with an outstanding principal
balance of $406.2 million at that time ("Old Certificates") for an equal amount
of its Multiclass Mortgage Pass-Through Certificates, Series 1996-1B ("New
Certificates"). The form and terms of the New Certificates are substantially
identical to the form and terms of the Old Certificates, except that the New
Certificates are registered under the Securities Act of 1933, as amended and
their transfers are not restricted.
6
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
CBM FUNDING CORPORATION
July 26, 1996 By: /s/ Bruce F. Stemerman
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Bruce F. Stemerman
President, Chief Accounting Officer
and Director
7
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-14-1996
<CASH> 1
<SECURITIES> 12,927<F1>
<RECEIVABLES> 407,415
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 420,343
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 420,343
<CURRENT-LIABILITIES> 1,853
<BONDS> 406,164
0
0
<COMMON> 0
<OTHER-SE> 12,326
<TOTAL-LIABILITY-AND-EQUITY> 420,343
<SALES> 0
<TOTAL-REVENUES> 7,277
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,577
<INCOME-PRETAX> (300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
<FN>
<F1>This represents deferred financing costs, net.
</FN>
</TABLE>
