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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
OCTOBER 13, 1998
Date of Report (Date of earliest event reported)
NOVASTAR FINANCIAL, INC.
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(Exact Name of Registrant as Specified in Charter)
Maryland 001-135333 74-2830661
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
(of Incorporation) Identification No.)
1901 West 47th Place
Suite 105
Westwood, Kansas 66205
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(Address of Principal Executive Offices) (Zip Code)
(913) 362-1090
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(Registrant's Telephone Number,
Including Area Code)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. OTHER EVENTS
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NovaStar Financial, Inc. (the "Company") has announced that the
Company has entered into a $15 million 90-day committed secured
financing agreement to address its immediate liquidity needs. In
connection with that agreement, the Company will issue warrants for
the purchase of approximately 800,000 shares of common stock, 10% of
the Company's outstanding shares, at an exercise price of $4.5625
per share, the closing price on October 12, 1998. A copy of the
Company's Press Release is included herewith as Exhibit 99.
Item 7(c). Exhibit
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99 Press Release, dated October 13, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: October 13, 1998
NOVASTAR FINANCIAL, INC.
By: /s/ Mark J. Kohlrus
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Mark J. Kohlrus
Senior Vice President, Treasurer
and Chief Financial Officer
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EXHIBIT INDEX
Exhibit Number
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99 Press Release, dated October 13, 1998
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EXHIBIT 99
NOVASTAR FINANCIAL, INC.
NovaStar Financial, Inc. Announces Committed Credit Facility to Address
Liquidity
WESTWOOD, Kan., Oct. 13 /PRNewswire/ -- NovaStar Financial, Inc.
(NYSE: NFI) announced today that it has entered into a 90-day committed secured
financing agreement to address its immediate liquidity needs. This agreement
involves the ability to borrow up to $15 million in principal, secured by
certain mortgage interests, and includes the issuance of warrants for the
purchase of approximately 800,000 shares of common stock at an exercise price of
$4.5625 per share, the closing price on October 12, 1998. Amounts borrowed
under the secured financing arrangement will be due 90 days from October 13,
1998. Both parties have entered into this arrangement with the intent of
pursuing the development of a long-term strategic alliance, which if
successfully completed, may involve the issuance of warrants for an additional
800,000 shares of common stock at the same strike price. The Company
contemplates that any such strategic alliance would benefit the Company by,
among other things, providing an additional source of purchases of NovaStar
Mortgage production, and additional financing facilities. Consummation of the
foregoing secured financing arrangement is subject to execution of definitive
documentation and payment of a commitment and related fees.
The Company had previously announced it learned late last week that
its access to back-up collateralized credit facilities with Wall Street broker-
dealers had been severely restricted as a result of market conditions affecting
financial institutions generally.
The Company indicated it still anticipates taking a number of steps
previously identified to provide additional liquidity, including:
. delay payment of the third quarter dividend of $0.35 per share
until January 15, 1999
. sell certain mortgage securities and related hedging arrangements
to eliminate margin calls
. continue with the sale of certain whole loans, the first of which
management anticipates closing during October and November 1998.
Notwithstanding the foregoing secured financing arrangement, the
Company expects that the sale of certain mortgage assets and related hedges will
produce significant fourth quarter losses.
The Company continues to be in discussions with its current lenders
regarding collateral levels under certain secured borrowings. The Company
anticipates that a portion of borrowings under the financing arrangement
discussed above will be used in satisfaction of amounts due to existing lenders.
"We are extremely pleased we were able to secure alternative financing
arrangements in such a short period of time," said Scott Hartman, Chairman and
CEO. "We believe that current market conditions warranted securing committed
financing arrangements. This facility, along with a number of other anticipated
measures as outlined above, provides us with the necessary funds to meet our
immediate liquidity requirements and also allows us to continue to fund the
mortgage loan originations of our affiliates, NovaStar Mortgage. We are very
optimistic about the long-term opportunities this relationship offers to
NovaStar."
The Company's stock closed at $4.5625 per share on Monday, October 12,
down from its high for this year of $21.125 on March 9, 1998.
NovaStar Financial, Inc. is a Real Estate Investment Trust (REIT) that
invests in single-family residential subprime mortgage loans originated by its
affiliate, NovaStar Mortgage,
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Inc. and in high-quality mortgage securities. Mortgage loans in the portfolio
are financed on a long-term basis by issuing collateralized mortgage obligations
in transactions structured as debt instruments. NovaStar Financial is located in
Westwood, Kansas, a part of the Kansas City metropolitan area. NovaStar Mortgage
maintains wholesale lending operations in Orange County, California and Boca
Raton, Florida .
Certain matters discussed in this news release may constitute forward-
looking statements within the meaning of the federal securities laws that
inherently include certain risks and uncertainties. Actual results and the
timing of certain events could differ materially from those projected in or
contemplated by the forward-looking statements due to a number of factors,
including general economic conditions, fluctuations in interest rates, the
availability of subprime residential mortgage loans, and other risk factors
outlined in the Company's annual report on Form 10K.
SOURCE NovaStar Financial, Inc
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/CONTACT: Mark J. Kohlrus, Chief Financial Officer, 913-514-3534, or
Investor Information, Anna LeCluyse, 913-514-3505, or fax, 913-514-3515, both of
NovaStar Financial/
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