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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: March 16 , 2000 Commission file number: 1-12151
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CHASE PREFERRED CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-3899576
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
270 Park Avenue, New York, NY 10017
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (212) 270-6000
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Item 5. Other Events
Chase Preferred Capital Corporation (the "Registrant") announced that on
March 16, 2000, the Registrant's Board of Directors, with the approval of its
independent directors, authorized a series of transactions pursuant to which the
Registrant will acquire approximately $7.1 billion of additional assets (the
"Additional Assets"), consisting of the following:
o a 100% participation interest in loans (and the related servicing rights)
originated by The Chase Manhattan Bank (the "Bank") and Chase Manhattan
Bank USA, National Association ("Chase USA") or their affiliates that are
secured by first priority security interests in manufactured housing units
("Manufactured Housing Loans");
o a 100% participation interest in loans (and the related servicing rights)
originated by the Bank and Chase USA or their affiliates that are secured
by residential second mortgages ("Second Mortgage Loans")
o nonrecourse intercompany loans (the "Intercompany Loans") made by the
Registrant to the Bank and Chase USA, secured by a pledge by the Bank and
Chase USA of all outstanding loans under home equity lines of credit
originated by the Bank or Chase USA, as the case may be ("HELOCs").
The Registrant expects that it will initially acquire approximately $2.1 billion
of Manufactured Housing Loans and approximately $2.6 billion of Second Mortgage
Loans. It is currently intended that, on a monthly basis following the initial
acquisition of Second Mortgage Loans and Manufactured Housing Loans, the
Registrant will purchase additional 100% participation interests in all Second
Mortgage Loans and Manufactured Housing Loans originated by the Bank and Chase
USA satisfying the criteria described below. The participation interests in the
Manufactured Housing Loans and Second Mortgage Loans will be treated as a sale
for accounting purposes, and those loans will accordingly appear as assets on
the Registrant's balance sheet following their acquisition.
The initial aggregate principal amount of the Intercompany Loans, which will
equal 80% of the outstanding principal balance of the HELOCs pledged as
security, is expected to be approximately $2.4 billion. In addition, on a
quarterly basis, the Registrant may, but is not required to, make additional
Intercompany Loans to the Bank and/or Chase USA in an aggregate amount not to
exceed 80% of the then outstanding principal balance of HELOCs pledged by the
applicable entity. The Intercompany Loan documents will also require that the
outstanding principal balance of the Intercompany Loans will at no time exceed
85% of the outstanding principal balance of HELOCs pledged as security and will
require the Bank and/or Chase USA to make prepayments of their respective
Intercompany Loans to ensure that such ceiling is not exceeded.
The Registrant believes that the price to be paid by the Registrant for the
Manufactured Housing Loans and Second Mortgage Loans will approximate their fair
value; however, no third party appraisals of those assets have been or will be
obtained. Similarly, no third party appraisals will be obtained to determine the
value of the HELOCs securing the Intercompany Loans.
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Funding of Additional Assets
The Registrant's initial acquisition of the Additional Assets will be funded
through the issuance and sale to the Bank of shares of a new series of preferred
stock, par value $25 per share, of the Registrant (the "Series B Preferred
Stock"), which shares will have an aggregate liquidation value equal to the
total of (i) the price paid for the Manufactured Housing Loans and Second
Mortgage Loans and (ii) the initial principal amount of the Intercompany Loans.
Proceeds obtained from the sale or repayment of principal balances of Additional
Assets will be applied to acquire Additional Assets or first mortgage loans. Any
increases in the aggregate amount of Additional Assets held by the Registrant
will be funded either through intercompany advances by the Bank to the
Registrant or through the sale to the Bank of additional shares of Series B
Preferred Stock.
The Bank, as holder of the Series B Preferred Stock, will be entitled to receive
cumulative dividends, when, as and if declared by the Board of Directors, at a
variable dividend rate to be determined by a committee of the Board of Directors
prior to the initial issuance of the Series B Preferred Stock and tied to the
Federal funds (effective) rate. The Series B Preferred Stock will rank junior to
the Registrant's 8.10% Cumulative Preferred Stock, Series A (the "Series A
Preferred Stock"), with respect to the payment of dividends and will rank on a
parity with the Series A Preferred Stock upon liquidation, dissolution or
winding up of the Registrant. The Series B Preferred Stock will be redeemable at
the option of the Registrant on or after September 18, 2001 or at any time upon
the occurrence of certain events relating to tax treatment of the Registrant or
the Series B Preferred Stock. The Series B Preferred Stock is not convertible
into the Registrant's common stock or any other securities. Except as required
by Delaware law, the holder of the Series B Preferred Stock will not have any
voting rights, other than the right to approve the issuance of senior preferred
stock or certain amendments to the Registrant's certificate of incorporation
that would adversely affect the Series B Preferred Stock.
Credit Quality and Related Matters
It is currently anticipated that the Registrant will purchase participation
interests in (i) all Second Mortgage Loans and Manufactured Housing Loans
originated by the Bank and (ii) all Second Mortgage Loans and Manufactured
Housing Loans originated by Chase USA other than those that would be considered
"low quality" assets under applicable regulatory standards. No Second Mortgage
Loan or Manufactured Housing Loan will be acquired prior to the sixth month
following its origination. The security agreements with respect the Intercompany
Loans provide that all HELOCs, regardless of their credit quality, will be
pledged to the Registrant, although the Registrant has the discretion to release
its security interest in any particular HELOC or to require the Bank or Chase
USA, as the case may be, to take appropriate action with respect to the borrower
under the HELOC, including, without limitation, initiating foreclosure
proceedings with respect to the property securing the HELOC.
The Registrant's Board of Directors, with the approval of the Registrant's
independent directors, has implemented certain amendments to its policies to
permit the acquisition of the Manufactured Housing Loans and the Second Mortgage
Loans and the extension of the Intercompany Loans. The Registrant's current
policies and contractual terms relating to its first mortgage loans were not
changed, and it is
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currently anticipated that the Registrant will continue to maintain its
portfolio of first mortgage loans, and to acquire new residential first mortgage
loans, in accordance with its customary practices.
Servicing Arrangements
The Manufactured Housing Loans and the Second Mortgage Loans will be acquired on
a servicing released basis. The Registrant will engage Chase Manhattan Mortgage
Corporation ("CMMC") to service those assets on the Registrant's behalf. The
servicing arrangements between the Registrant and CMMC will provide that the
Registrant will retain the power to direct CMMC to foreclose on any Manufactured
Housing Loan or Second Mortgage Loan.
The HELOCs securing the Intercompany Loans will continue to be owned by the Bank
or Chase USA, as the case may be, and will continue to be serviced in accordance
with their current servicing arrangements. However, as noted above, the security
agreements with respect to the Intercompany Loans will give the Registrant the
power to direct the servicer of the HELOCs to foreclose on HELOCs under certain
circumstances specified in the security agreements.
Amendment to Advisory Agreement
In connection with the acquisition of the Additional Assets, the Registrant and
the Bank, which acts as Advisor with respect to the Registrant's operations,
will agree to amend the Advisory Agreement to increase the Bank's annual fee
from $250,000 to $500,000.
Required Approvals
All board and regulatory approvals required to consummate the acquisition of the
Additional Assets have been obtained, and the rating agencies currently rating
the Series A Preferred Stock have confirmed that the acquisition of the
Additional Assets will not adversely affect their ratings on the Series A
Preferred Stock. Accordingly, the Registrant anticipates that the initial
acquisitions of the Additional Assets will occur in the second quarter of 2000.
Forward-Looking Statements
The above contains statements that are forward looking within the meaning of the
Private Securities Litigation Act of 1995. Those statements are subject to risks
and uncertainties and the Registrant's actual results may differ materially from
those set forth in the forward-looking statements. Those uncertainties may
include, among others, the risk of adverse impacts from an economic downturn or
changes in interest rates, factors impacting the adequacy of the Registrant's
allowance for loan losses, the Registrant's dependence upon its affiliates and
conflicts of interest that may arise with its affiliates. For a more detailed
discussion of those uncertainties, reference is made to the Registrant's reports
filed with the Securities and Exchange Commission, in particular the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1998.
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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 hereunto duly authorized.
CHASE PREFERRED CAPITAL CORPORATION
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(Registrant)
Dated: March 20, 2000 By: /s/ Louis M. Morrell
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Louis M. Morrell
Treasurer
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