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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 12, 1998
Date of Report (Date of earliest event reported)
NOVASTAR FINANCIAL, INC.
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(Exact Name of Registrant as Specified in Charter)
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<CAPTION>
<S> <C> <C>
Maryland 001-135333 74-2830661
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer Identification No.)
(of Incorporation)
1901 West 47th Place
Suite 105
Westwood, Kansas 66205
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(Address of Principal Executive Offices) (Zip Code)
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(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
current market conditions require the Company to increase its
liquidity. In that regard, payment of the third quarter dividend
of $0.35 per share has been delayed until January 15, 1999. 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 12, 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 12, 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 12, 1998
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EXHIBIT 99
NOVASTAR FINANCIAL, INC.
NovaStar Financial Announces Liquidity Issues: Delays Dividend
WESTWOOD, Kan., Oct. 12 /PRNewswire/ -- NovaStar Financial, Inc.
(NYSE: NFI) announced today that it is in discussions with current and
potential lenders and investors regarding liquidity issues and collateral for
its secured borrowings. The Company stated that current market conditions
require the Company to increase its liquidity. The Company is working with
lenders to package and sell mortgage assets and taking other actions to meet its
liquidity needs.
The Company had in place back-up credit facilities with Wall Street
broker-dealers and was relying upon such facilities to meet its liquidity
requirements. The Company was informed late last week, however, that as a
result of current market conditions affecting financial institutions generally
its access to such credit facilities would be severely restricted.
To address its liquidity needs, the Company is taking the following
measures:
* delay payment of the third quarter dividend of $0.35 per share
until January 15, 1999
* sale of certain mortgage securities and related hedging
arrangements
* continuing with the sale of certain whole loans, the first of
which management anticipates closing during October and November
1998
* reducing general and administrative expenses
The Company cautions, however, that there is no assurance that the
above measures will be successful in restoring the Company's liquidity or that,
if successful, the Company's lenders will continue to make funds available to
the Company to fund future mortgage loan originations.
"This impairment of our liquidity is disappointing," said Scott
Hartman, Chairman and CEO. "The tightening of borrowing parameters in the debt
market as well as the generally adverse conditions in the equity markets have
put us in a cash bind. NovaStar Mortgage's origination and servicing business
remains sound. We are taking a number of strong measures to restore our
liquidity as soon as possible and, with the cooperation of our lenders, we
intend to continue operations during this period of impaired liquidity."
The Company expects third quarter earnings to be between $2.2 million
and $2.4 million, or $0.27 to $0.30 per share, compared to second quarter
earnings of $1.9 million, or $0.21 per share. However, the sale of mortgage
assets and hedges related to the financing of such assets, particularly the sale
of certain collateral, will produce significant fourth quarter losses.
The Company's stock closed at $7.3125 per share on Friday, October 9,
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, 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.
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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
-0- 10/12/98
/CONTACT: Mark J. Kohlrus, Chief Financial Officer, 913-514-3534, or
Investors, Anna LeCluyse, 913-514-3505, fax, 913-514-3515, both of NovaStar/
(NFI)
-0-
