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, 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
of incorporation) Identification 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 December 21, 1998, Kevin D. Padrick and Timothy J. Galligan became
directors of Southern Pacific Funding Corporation (the "Corporation") and the
number of positions on the board of directors was reduced from six to three.
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
November 1998, filed with the Bankruptcy Court on December 31, 1998.
On December 24, 1998, the Corporation and Bear Stearns International
Limited ("Bear Stearns"), agreed to terms for a $39.9 million, 18-month,
debtor-in-possession financing facility (including a $399,000 origination fee)
secured by the Corporation's assets, including residual certificates
(representing the Corporation's residual equity interest and subordinated
interest-only strips in the Corporation's securitization offerings of mortgage
loan pools), servicing rights, prepayment penalties, and whole loans held for
sale. On or about September 23, 1998, Wilshire Real Estate Partnership, L.P.
("Wilshire"), a secured creditor of the Corporation, had borrowed
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<PAGE>
money from Bear Stearns and pledged as collateral residual certificates that the
Corporation had pledged to Wilshire. The financing was approved by the
Bankruptcy Court on January 6, 1999, and was funded on January 8, 1999. The net
proceeds of the financing with Bear Stearns were used to repay the Corporation's
debt to Wilshire in the amount of $38.6 million, which reflects a $1,000,000
early payment discount. In consideration of the discount, the Corporation has
granted to Wilshire the right to market the Corporation's inventory of whole
mortgage loans and to receive, as a rebate of the discount, 1.25 percent of the
first $6,000,000 of the sale proceeds plus 10 percent of the sale proceeds in
excess of $6,000,000, up to $1,000,000, but not less than $100,000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits:
99 Financial Statements from Monthly Operating Report
for November 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: January 13, 1999 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 NOVEMBER 1998
INCOME STATEMENT (Page 1 of 2)
<TABLE>
Filing
October 1,
1998
October November December January to Date
------------- ------------ ------------ ------------ ------------
GROSS SALES
<S> <C> <C> <C> <C> <C>
Interest Income $ 2,969,812 $ 2,359,240 $ 5,329,052
Servicing Income 711,909 627,509 1,339,418
Prepayment Penalty Income 858,818 762,923 1,621,741
Less: Returns and
Allowances -
------------- ------------ ------------ ------------ ------------
NET SALES 4,540,539 3,749,672 - - 8,290,211
COST OF SALES
BEGINNING INVENTORY -
Add: PURCHASES -
Less: ENDING INVENTORY -
------------- ------------ ------------ ------------ ------------
COST OF GOODS SOLD - - - - -
GROSS PROFIT 4,540,539 3,749,672 - - 8,290,211
OTHER OPERATING EXPENSES:
OFFICER SALARIES/DRAWS 413,199 612,381 1,025,580
DIRECT LABOR/SALARIES 427,198 740,169 1,167,367
BENEFITS/PAYROLL TAXES 249,293 206,435 455,728
SUPPLIES 26,820 13,597 40,417
INSURANCE 37,430 28,427 65,857
RENT 288,568 287,879 576,447
GENERAL AND ADMINISTRATIVE 563,389 1,623,341 2,186,730
</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 NOVEMBER 1998
INCOME STATEMENT (Page 2 of 2)
<TABLE>
Filing
October 1,
1998
October November December January to Date
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
DEPRECIATION/AMORTIZATION 425,077 420,588 845,665
------------ ----------- ------------ ------------ -----------
TOTAL OPERATING EXPENSES 2,430,974 3,932,817 - - 6,363,791
------------ ----------- ------------ ------------ -----------
NET OPERATING INCOME (LOSS) 2,109,565 (183,145) - - 1,926,420
ADD: OTHER INCOME (2) 51,608 5,533 57,141
LESS OTHER EXPENSES:
INTEREST EXPENSE (2,053,875) (1,777,895) (3,831,770)
OTHER (3) (1,077,948) 1,636,646 558,698
------------ ----------- ------------ ------------ -----------
TOTAL OTHER EXPENSES (970,650) (318,861) - - (1,289,511)
GAIN/LOSS SALE OF ASSETS 0 271,947 271,947
------------ ----------- ------------ ------------ -----------
INCOME (LOSS) BEFORE TAXES (970,650) (46,914) - - (1,017,564)
INCOME TAXES (44,528) 698,677 654,149
------------ ----------- ------------ ------------ -----------
NET INCOME (LOSS) $ (1,015,178) $ 651,763 $ - $ - $ (363,415)
============ =========== ============ ============ ===========
</TABLE>
(2) Schedule of Other Income attached
(3) Schedule of Other Expense attached
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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 NOVEMBER 1998
<TABLE>
RECONCILIATION OF NET INCOME Filing
TO NET CASH PROVIDED BY October 1,
OPERATIONS 1998
October November December January to Date
----------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS) $ (1,015,178) $ 651,763 $ (363,415)
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH:
DEPRECIATION/AMORTIZATION 425,077 420,588 845,665
(GAIN)LOSS ON SALE OF
ASSETS -- --
(INCREASE)DECREASE IN
RECEIVABLES 1,357,074 7,616,002 8,973,076
(INCREASE)DECREASE IN
INVENTORY(1) 422,818 293,830,863 294,253,681
INCREASE(DECREASE) IN
PAYABLES 1,206,020 (9,580,662) (8,374,642)
OTHER, NET (2) 1,489,709 824,691 2,314,400
----------- ----------- ------------ ------------- -----------
NET CASH PROVIDED BY
OPERATIONS 3,885,520 293,763,245 -- -- 297,648,765
CASH FLOWS FROM
INVESTING/FINANCING:
(PURCHASE OF) FIXED
ASSETS -- --
CAPITAL CONTRIBUTIONS -- --
LOAN PROCEEDS (SCHEDULE F
NO. 6) -- --
LOAN PRINCIPAL/CAP.
LEASE (PMTS) (97,922) (294,217,616) (294,315,538)
----------- ----------- ------------ ------------- -----------
NET INCREASE (DECREASE) IN
CASH 3,787,598 (454,371) -- -- 3,333,227
BEGINNING CASH 1,930,442 5,718,040 1,930,442
----------- ----------- ------------ ------------- -----------
ENDING CASH $ 5,718,040 $ 5,263,669 $ -- $ -- $ 5,263,669
=========== =========== ============ ============= ===========
</TABLE>
(1) Mortgage Loans Held
for Sale
(2) Accrual of Operations
of subsidiaries $(1,636,644)
Residual Loan 213,341
Interests
Prepaid expenses and 2,247,994
other assets, net -----------
824,691
===========
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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 NOVEMBER 1998
COMPARATIVE BALANCE SHEET
<TABLE>
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 $ 5,263,669
Inventory (Mortgage Loans
Held for Sale) 301,695,376 7,864,513
Accounts Receivable 102,752,739 95,136,737
(net of bad debts)
Notes Receivable --
Other (attach schedule) 1,940,083 1,621,035
------------ ------------ -------- --------
Total Current Assets 412,106,238 109,885,954 -- --
Fixed Assets:
Property and Equipment 11,424,029 9,166,950
Less: Accumulated
Depreciation (4,205,145) (4,133,906)
------------ ------------ -------- --------
Total Fixed Assets 7,218,884 5,033,044 -- --
Other Assets (attach schedule) 322,755,879 324,015,488
------------ ------------ -------- --------
TOTAL ASSETS $742,081,001 $438,934,486 $ -- $ --
============ ============ ======== ========
LIABILITIES
Postpetition Liabilities:
Accounts Payable $ 57,515 104,337
Notes Payable -- --
Rents and Leases Payable -- --
Taxes Payable 44,527 --
Accrued Interest -- --
Other 4,790 30,854
------------ ------------ -------- --------
Total Postpetition Liabilities 106,832 135,191 -- --
Prepetition Liabilities
(Noncurrent):
Unsecured Debt 171,293,855 172,060,677
Notes Payable-Secured 455,556,112 151,616,803
Priority Claims:
Taxes 76,332 76,332
Wages 1,409,372 1,409,372
Deposits --
Other 18,536,567 17,882,417
------------ ------------ -------- --------
Total Prepetition Liabilities 646,872,238 343,045,601 -- --
------------ ------------ -------- --------
TOTAL LIABILITIES 646,979,070 343,180,792
OWNER EQUITY (DEFICIT) 95,101,931 95,753,694
------------ ------------ -------- --------
TOTAL LIABILITIES AND OWNER
EQUITY $742,081,001 $438,934,486 $ -- $ --
============ ============ ======== ========
</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 NOVEMBER 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 135 -
Number hired during period 3 -
Number terminated or resigned during period 30 -
--- ---
Total number of employees on payroll at period end 108 -
Total Payroll for the period: $ 1,335,703
Includes payment of severance and retention compensation for terminated
employees
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.
On December 24, 1998, the debtor and Bear Stearns International Limited
("Bear") agreed to terms for an 18-month financing, secured by the debtor's
assets, including residual certificates (representing the debtor's residual
equity interest and subordinated interest-only strips in the debtor's
securitization offerings of mortgage loan pools), servicing rights,
prepayment penalties, and whole loans held for sale. On or about September
23, 1998, Wilshire Real Estate Partnership L.P. ("Wilshire"), a secured
creditor of the debtor, had borrowed money from Bear and pledged as
collateral residual certificates that the debtor had pledged to Wilshire. The
proceeds of the financing with Bear will be used to repay the debt to
Wilshire. The financing is subject to court approval and is scheduled for
hearing on January 6, 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 NOVEMBER 1998
STATEMENT OF PERSONNEL, INSURANCE, AND OPERATIONS - Continued
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
- --------------------------------------------------------------------------------
Cincinnati, OH $104,652 First Franklin Financial Oct. 21, 1998 all sales of
personal property approved
Minneapolis, MN 6,741 Maynards
West Corvina, CA 24,223 Maynards
Vienna, VA 73,683 Maynards
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 $ 5,307,414 (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 NOVEMBER 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 $ 7,548 $ 23,819
Miscellaneous Refunds Received 35,337 (2,015) 33,322
--------- -------- -------- ------- ---------
TOTAL OTHER INCOME $ 51,608 $ 5,533 $ - $ - $ 57,141
========= ======== ======== ======= =========
</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 NOVEMBER 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) (78,612) (189,779)
Hallmark America (7,265) -- (7,265)
National Capital Funding, Inc. (92,012) (22,144) (114,156)
Southern Pacific Mortgage Limited (690,538) 1,737,400 1,046,862
----------- ---------- ----------- ----------- -----------
TOTAL OTHER EXPENSE $(1,077,948) $1,636,644 $ - $ - $ 558,696
=========== ========== =========== =========== ===========
</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 NOVEMBER 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 $ 1,464,976
Prepaid Lease Deposit 146,052 146,052
Prepaid Maintenance Contracts 3,216 1,238
Miscellaneous Servicing
accounts 5,611 8,769
------------ ----------- ------------ -----------
TOTAL OTHER CURRENT ASSETS $ 1,940,083 $ 1,621,035 $ - $ -
============ ============ ============ ===========
OTHER ASSETS
Residual Loan Interests $302,703,733 $302,490,391
Mortgage Servicing Rights 7,503,655 7,343,613
Investment in Subsidiaries 11,734,122 13,370,766
Real Estate Owned 814,369 810,718
------------ ----------- ------------ -----------
TOTAL OTHER ASSETS $322,755,879 $324,015,488 $ - $ -
============ ============ ============ ===========
</TABLE>
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