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): November 19, 1998
SOUTHERN PACIFIC FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
California 1-11785 33-0636924
(State or other jurisdiction (Commission File No.) (IRS Employer Identification
of incorporation) No.)
One Centerpointe Drive, Suite 551
Lake Oswego, Oregon 97035
(Address of principal executive offices) (Zip Code)
(503) 684-6316
(Registrant's telephone number, including area code)
Item 5. Other Events.
On November 19, 1998, Robert W. Howard and Bernard A. Guy each
submitted his written resignation as a director of Southern Pacific Funding
Corporation (the "Corporation").
The Corporation filed a voluntary petition with the United States
Bankruptcy Court for the District of Oregon (the "Bankruptcy Court") under
Chapter 11 of the United States Bankruptcy Code, Case No. 298-37613-elp11, on
October 1, 1998. The Corporation is required to file Monthly Operating Reports
with the Bankruptcy Court pursuant to Bankruptcy Rule 2015. In connection
therewith, attached hereto as Exhibit 99 are the financial statements (omitting
certain schedules) included in the Monthly Operating Report for the Month Ending
October 1998, filed with the Bankruptcy Court on November 30, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits:
99 Financial Statements from Monthly Operating Report for October
1998.
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<PAGE>
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 thereunto duly authorized.
SOUTHERN PACIFIC FUNDING CORPORATION
Dated: December 28, 1998 By: /s/ Timothy Breedlove
Name: Timothy Breedlove
Title: Chief Financial Officer
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Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
<TABLE>
INCOME STATEMENT ( Page 1 of 2 ) Filing
October 1, 1998
October November December January to Date
----------- ----------- ----------- ----------- ---------------
GROSS SALES
<S> <C> <C> <C> <C> <C>
Interest Income $ 2,969,812 $ 2,969,812
Servicing Income 711,909 711,909
Prepayment Penalty Income 858,818 858,818
Less: Returns and Allowances -
----------- ----------- ----------- ----------- ------------
NET SALES 4,540,539 - - - 4,540,539
COST OF SALES
BEGINNING INVENTORY -
Add: PURCHASES -
Less: ENDING INVENTORY -
----------- ----------- ----------- ----------- ------------
COST OF GOODS SOLD - - - - -
GROSS PROFIT 4,540,539 - - - 4,540,539
OTHER OPERATING EXPENSES:
OFFICER SALARIES/DRAWS 413,199 413,199
DIRECT LABOR/SALARIES 427,198 427,198
BENEFITS/PAYROLL TAXES 249,293 249,293
SUPPLIES 26,820 26,820
INSURANCE 37,430 37,430
RENT 288,568 288,568
GENERAL AND ADMINISTRATIVE 563,389 563,389
</TABLE>
5 of 21
EXHIBIT 99
----------
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
<TABLE>
INCOME STATEMENT ( Page 2 of 2 ) Filing
October 1, 1998
October November December January to Date
-------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
DEPRECIATION/AMORTIZATION 425,077 425,077
-------------- --------------- --------------- --------------- -------------
TOTAL OPERATING EXPENSES 2,430,974 - - - 2,430,974
-------------- --------------- --------------- --------------- -------------
NET OPERATING INCOME (LOSS) 2,109,565 - - - 2,109,565
ADD: OTHER INCOME (2) 51,608 51,608
LESS OTHER EXPENSES:
INTEREST EXPENSE (2,053,875) (2,053,875)
OTHER (3) (1,077,948) (1,077,948)
-------------- --------------- --------------- --------------- -------------
TOTAL OTHER EXPENSES (970,650) - - - (970,650)
GAIN/LOSS SALE OF ASSETS 0 -
-------------- --------------- --------------- --------------- --------------
INCOME (LOSS) BEFORE TAXES (970,650) - - - (970,650)
INCOME TAXES (44,528) (44,528)
============== =============== =============== =============== ==============
NET INCOME (LOSS) $ (1,015,178) $ - $ - $ - $ (1,015,178)
============== =============== =============== =============== ==============
</TABLE>
(2) Schedule of Other Income attached
(3) Schedule of Other Expense attached
6 of 21
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
<TABLE>
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATIONS Filing
October 1, 1998
October November December January to Date
------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS) $ (1,015,178) $ (1,015,178)
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH:
DEPRECIATION/AMORTIZATION 425,077 425,077
(GAIN)LOSS ON SALE OF ASSETS -- --
(INCREASE)DECREASE IN RECEIVABLES 1,357,074 1,357,074
(INCREASE)DECREASE IN INVENTORY(1) 422,818 422,818
INCREASE(DECREASE) IN PAYABLES 1,206,020 1,206,020
OTHER, NET (2) 1,489,709 1,489,709
------------- -------------- -------------- --------------- --------------
NET CASH PROVIDED BY OPERATIONS 3,885,520 -- -- -- 3,885,520
CASH FLOWS FROM
INVESTING/FINANCING:
(PURCHASE OF) FIXED ASSETS -- --
CAPITAL CONTRIBUTIONS -- --
LOAN PROCEEDS (SCHEDULE F, NO. 6) -- --
LOAN PRINCIPAL/CAP. LEASE (PMTS) (97,922) (97,922)
------------- -------------- -------------- --------------- --------------
NET INCREASE (DECREASE) IN CASH 3,787,598 -- -- -- 3,787,598
BEGINNING CASH 1,930,442 1,930,442
------------- -------------- -------------- --------------- --------------
ENDING CASH 5,718,040 -- -- -- 5,718,040
============= ============== ============== =============== ==============
(1) Mortgage Loans Held for Sale
(2) Accrual of Operations of
subsidiaries 1,077,948
Residual Loan Interests 279,971
Prepaid expenses and other
assets, net 131,790
------------- 7 of 21
1,489,709
=============
</TABLE>
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<PAGE>
<TABLE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
COMPARATIVE BALANCE SHEET
AS OF AS OF AS OF AS OF
10/31/98 11/30/98 12/31/98 01/31/99
-------- -------- -------- --------
ASSETS
Current Assets:
<S> <C> <C> <C> <C>
Cash $ 5,718,040
Inventory (Mortgage Loans Held for Sale) 301,695,376
Accounts Receivable 102,752,739
(net of bad debts)
Notes Receivable --
Other (attach schedule) 1,940,083
-------------- -------- -------- -------
Total Current Assets 412,106,238 -- -- --
Fixed Assets:
Property and Equipment 11,424,029
Less: Accumulated Depreciation (4,205,145)
-------------- -------- -------- --------
Total Fixed Assets 7,218,884 -- -- --
Other Assets (attach schedule) 322,755,879
-------------- -------- -------- --------
TOTAL ASSETS $ 742,081,001 $ -- $ -- $ --
============== ======== ======== ========
LIABILITIES
Postpetition Liabilities:
Accounts Payable $ 57,515
Notes Payable --
Rents and Leases Payable --
Taxes Payable 44,527
Accrued Interest --
Other 4,790
-------------- -------- -------- --------
Total Postpetition Liabilities 106,832 -- -- --
Prepetition Liabilities (Noncurrent):
Unsecured Debt 171,293,855
Notes Payable-Secured 455,556,112
Priority Claims:
Taxes 76,332
Wages 1,409,372
Deposits --
Other 18,536,567
-------------- -------- -------- --------
Total Prepetition Liabilities 646,872,238 -- -- --
--------------
TOTAL LIABILITIES 646,979,070 -- -- --
OWNER EQUITY (DEFICIT) 95,101,931
-------------- -------- -------- --------
TOTAL LIABILITIES AND OWNER EQUITY $ 742,081,001 $ -- $ -- $ --
============== ======== ======== ========
</TABLE>
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
SCHEDULE F
STATEMENT OF PERSONNEL, INSURANCE AND OPERATIONS
1. PERSONNEL REPORT (required if more than ten employees)
Full Time Part Time
Total number of employees at beginning of period 618 2
Number hired during period 8 -
Number terminated or resigned during period 491 2
------ -----
Total number of employees on payroll at period end 135 -
Total Payroll for the period: $ 1,402,655
Includes payment of items accrued for book purposes as of September 30,
1998
2. INSURANCE - Copies of certificates of insurance must accompany first report.
For subsequent months, explain any changes in insurance coverage:
Copies of insurance certificates have already been submitted.
3. Subsequent to the filing of the petition have any payments been made on
prepetition unsecured debt, except as authorized by the court?
[x] No.
[ ] Yes. Identify amount, who was paid and date paid:
----------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4. Provide a narrative report of significant events which may have an effect
on the financial condition of the debtor or any events out of the ordinary
course of business, which have occurred since the period covered by this
report. Attach separate sheet(s) if necessary. See Narrative attached.
5. If assets, other than inventory sold in the ordinary course of business,
were disposed of during the current month, provide the following
information for each asset (attach separate sheet(s), if necessary):
ENTITY TO WHOM AUTHORIZATION
TRANSFERRED (e.g. notice dated
DESCRIPTION VALUE ON (relationship to or court
----
OF ASSET BOOK BASIS debtor if any) order dated ) Terms
----
- --------------------------------------------------------------------------------
NONE
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
STATEMENT OF PERSONNEL, INSURANCE, AND OPERATIONS - Continued
6. For each loan obtained during the current month provide the following
information (attach separate sheet(s), if necessary):
- ------------------------------------------------------------------------------
AMOUNT OF LOAN TERMS OF LOAN
LENDER'S NAME (describe right (interest rate, PROCEDURE FOR
(Relationship to to receive future maturity OBTAINING
debtor, if any) advances, if any) collateral, etc.) AUTHORIZATION
- --------------------------------------------------------------------------------
NONE
7. Statement of Disbursements and Fee paid to the U.S. Trustee pursuant to
Federal Rule of Bankruptcy Procedure 2015(a)(5):
- --------------------------------------------------------------------------------
QUARTER ENDING TOTAL DISBURSEMENTS FEE PAID
-------------- ------------------- --------
March 31, 1998 --------------- ---------------
June 30, 1998 --------------- ---------------
September 30, 1998 --------------- ---------------
December 31, 1998 $ 2,711,699 (1) ---------------
(1) Excludes servicing disbursements
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
ADDENDUM TO SCHEDULE F - Item 4
4. Provide a narrative report of significant events which may have an effect on
the financial condition of the debtor or any events out of ordinary course of
business, which have occurred since the period covered by this report
(10/31/98). Attach separate sheet(s) if necessary.
a. On October 30, 1998, the debtor entered into an agreement with
Maynards Industries (1991) Inc., a firm specializing in liquidation, to sell the
furniture, fixtures, and equipment ("FFE") of the debtor located at the debtor's
branch offices and the debtor's former corporate headquarters. Maynards
conducted a sale of the FFE of the corporate headquarters during the week of
November 9-13 and has begun to sell the FFE for the debtor's branches. SPFC
received a minimum net guarantee payment of $1.0 million from Maynards on
November 20, 1998.
b. On November 20, 1998, the debtor and Wilshire Real Estate
Partnership L.P. ("Wilshire"), a secured creditor of the debtor, agreed to a
settlement regarding the status of Wilshire's prepetion loan to the debtor in
the amount of $40 million. Wilshire had sought relief from stay to sell the
residual certificates (representing the debtor's residual equity interest and
subordinated interest-only strips in the debtor's securitization offerings of
mortgage loan pools) the debtor had pledged to Wilshire as collateral. Based on
book value, these residual certificates represent approximately 50% of the
residual certificates owned by the debtor. The debtor had also pledged an
interest in prepayment penalties and servicing rights. Under the terms of the
settlement, Wilshire agreed to extend the term of the loan to three years. Both
parties agreed to mutual release of claims. The settlement is subject to court
approval and is scheduled for hearing on December 8, 1998.*
c. On November 5, 1998, the court granted the debtor authority to
repurchase approximately $294,000,000 principal balance of mortgage loans from
First Union National Bank, one of its warehouse lenders, and simultaneously sell
the loans to Lehman Commercial Paper, Inc. for a purchase price of par plus 50
basis points. On November 23, 1998, the debtor entered into agreements with
First Union and Lehman to effect the repurchase and sale which was promptly
closed.
d. On November 5, 1998, MorCap Inc., a wholly owned subsidiary of
National Capital Holdings, Inc., a subsidiary of debtor, filed a petition under
chapter 11.
e. On November 20, 1998, Home America Financial Services, Inc., a
wholly owned subsidiary of the debtor, filed a petition under chapter 11.
* The hearing was subsequently rescheduled to January 15, 1999.
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
INCOME STATEMENT
SUPPORTING SCHEDULE (2) OTHER INCOME
<TABLE>
Filing
October 1,1998
October November December January to Date
--------------- ------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Insurance Commissions Revenue (Servicing) $ 16,271 $ 16,271
Miscellaneous Refunds Received 35,337 35,337
---------------- -------------- ----------- ------------ ---------------
TOTAL OTHER INCOME $ 51,608 $ - $ - $ - $ 51,608
================ ============== =========== ============ ===============
</TABLE>
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
INCOME STATEMENT
SUPPORTING SCHEDULE (3) OTHER EXPENSE
<TABLE>
Filing
October 1,1998
October November December January to Date
--------------- ------------- ----------- ------------ ---------------
Equity in Operations (Losses) of Subsidiaries
<S> <C> <C> <C> <C> <C>
Oceanmark Financial Services $ (176,966) $ (176,966)
Home America Financial Services (111,167) (111,167)
Hallmark America (7,265) (7,265)
National Capital Funding, Inc. (92,012) (92,012)
Southern Pacific Mortgage Limited (690,538) (690,538)
---------------- -------------- ----------- ------------ ---------------
TOTAL OTHER INCOME $ (1,077,948) $ - $ - $ - $ (1,077,948)
================ ============== =========== ============ ===============
</TABLE>
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<PAGE>
Southern Pacific Funding Corp. Debtor in Possession
Case No. 398-37613-elp11
RULE 2015 REPORT FOR THE MONTH
AND YEAR OCTOBER 1998
COMPARATIVE BALANCE SHEET
SUPPORTING SCHEDULES - OTHER ASSETS
<TABLE>
AS OF AS OF AS OF AS OF
10/31/98 11/30/98 12/31/98 01/31/99
------------- --------------- -------------- --------------
OTHER CURRENT ASSETS
<S> <C> <C> <C> <C>
Prepaid Expenses $ 1,785,204
Prepaid Lease Deposit
146,052
Prepaid Maintenance Contracts
3,216
Miscellaneous Servicing accounts
5,611
------------- -------------- -------------- --------------
TOTAL OTHER CURRENT ASSETS $ 1,940,083 $ - $ - $ -
============= ============== ============== ==============
OTHER ASSETS
Residual Loan Interests $ 302,703,733
Mortgage Servicing Rights
7,503,655
Investment in Subsidiaries
11,734,122
Real Estate Owned
814,369
------------- -------------- -------------- --------------
TOTAL OTHER CURRENT ASSETS $ 322,755,879 $ - $ - $ -
============= ============== ============== ==============
</TABLE>
- 12 -
