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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES AND EXCHANGE ACT of 1934
October 23, 1998 (August 31, 1998)
Date of Report (Date of Earliest Event Reported)
THE WMF GROUP LTD.
(Exact name of registrant as specified in its charter)
Delaware 000-22567 54-1647759
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
1593 Spring Hill Road
Suite 400
Vienna, Virginia 22182
(Address of principal executive offices)
(703) 610-1400
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
The information set forth in Exhibits 99.1, 99.2, 99.3 and 99.4 is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
The following exhibits are filed herewith:
Exhibit Description
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99.1 The WMF Group, Ltd. press release dated August 31,
1998.
99.2 The WMF Group, Ltd. press release dated September
11, 1998.
99.3 The WMF Group, Ltd. press release dated October
14, 1998.
99.4 The WMF Group, Ltd. press release dated October
21, 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.
THE WMF GROUP LTD.
Date: October 23, 1998 By: /s/ Michael D. Ketcham
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Name: Michael D. Ketcham
Title: Officer and Treasurer
(Principal Financial Officer)
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EXHIBIT INDEX
Exhibit Description
- ------- -----------
99.1 The WMF Group, Ltd. press release dated August 31, 1998
99.2 The WMF Group, Ltd. press release dated September 11, 1998.
99.3 The WMF Group, Ltd. press release dated October 14, 1998.
99.4 The WMF Group, Ltd. press release dated October 21, 1998.
Exhibit 99.1
For Immediate Release: Contact: Michael D. Ketcham
Executive Vice President, CFO and Treasurer
(703) 610-1400
Email: [email protected]
WMF ANNOUNCES PROJECTED LOSS AND COMMITMENT FOR $20 MILLION SUBORDINATED DEBT
VIENNA, Va., August 31, 1998 ---- The WMF Group, Ltd. (the "Company") today
reported that its wholly-owned subsidiary, WMF Capital Corp., has sold, on a
servicing retained basis, $691 million in commercial mortgage loans to Merrill
Lynch Mortgage Capital Inc., and closed the related hedges, at a pre-tax loss of
approximately $30 million. The Company is assessing the book tax impact of the
loss. The Company had intended to sell the loans in a September mortgage-backed
securitization transaction led by Merrill Lynch, but opted to sell the loans at
this time due to continuing adverse securitization market conditions. The sale
of the mortgage loans was implemented in conjunction with the Company's decision
to adjust its business strategy to limit interest rate and spread risks that
have developed as a result of global market instability. As of June 30, 1998,
the Company's book equity was $43.3 million which will be reduced by the book
value of the after-tax loss from the sale of the loans.
WMF Capital Corp. has an inventory of approximately $230 million of loans and
currently intends to securitize them depending on market conditions, or will
otherwise sell them in the ordinary course of business.
The Company also announced that it has received a $20 million subordinated loan
commitment from Commercial Mortgage Investment Trust, Inc. ("COMIT"), in which
the Company has a minority interest. The majority shareholders of COMIT are the
majority shareholders of the Company, Harvard Private Capital Holdings, Inc. and
Capricorn Investors II, L.P. The COMIT loan has been approved by a majority of
the independent directors of the Company. The Company will apply $10 million of
the loan to reduce the Company's borrowings in order to cure certain covenant
defaults under its credit lines. The Company believes that the remaining
proceeds of the loan, along with operating cash flows, will be adequate for its
near term working capital and liquidity needs. The Company's lenders under
existing lines of credit for the Company's Fannie Mae and FHA products have
reaffirmed the availability of the warehouse credit for such purposes.
The COMIT loan to the Company will bear interest at an initial annual rate of
11%, matures on May 31, 1999, and is payable by the Company at any time without
penalty. In addition, the Company will issue five-year warrants to COMIT for the
purchase of a minimum of 300,000 and up to 1.2 million shares of the common
stock of the Company at the price of $11.25. Of the warrants, 900,000 are
cancelable or redeemable under certain circumstances.
Shekar Narasimhan, president and chief executive officer of the Company, stated
that the Company has responded quickly to adverse market conditions and "remains
a solid franchise with prospects for growth as the competition contracts."
Narasimhan said: "We are pleased with the support of our principal investors and
lenders. The Company expects to close over $200 million in mortgage loans this
week."
The Company (NASDAQ: "WMFG"), headquartered in Vienna, Va., is one of the
largest commercial mortgage financial services companies in the country, as
measured by servicing portfolio size, according to a survey published by the
Mortgage Bankers Association of America.
As the nation's largest originator of Fannie Mae and FHA-insured multifamily and
health care loans, the Company has originated more than $7 billion in
conventional and FHA-insured multifamily and commercial loans since 1993, and
currently has a servicing portfolio of approximately $11.5 billion.
CONFERENCE CALL:
The Company will conduct a conference call to discuss these business
developments on Tuesday, September 1 at 1:00 pm EDT. To participate on the call,
please call 800-633-8514. If you are unable to do so, you may listen to a
recording of the meeting by calling 800-633-8284 (reservation number 4681912)
through close of business, September 8, 1998.
Note: This press release contains "forward-looking statements" within the
meaning of federal securities law. These forward-looking statements include,
among others, statements concerning the Company's outlook for future periods;
business strategies and their anticipated results; and similar statements
concerning anticipated future events and expectations that are not historical
facts. The forward-looking statements in this press release speak only as of the
date hereof and are subject to numerous risks and uncertainties which could
cause actual results to differ materially from those expressed in or implied by
the statements, including the inability to negotiate waivers of existing
defaults under its lines of credit and modifications to those lines, the
inability to raise additional capital on favorable terms or at all, adverse
industry and economic conditions generally, adverse changes in interest rates,
the secondary mortgage market or in assets securing mortgages, and the failure
of hedges to reduce interest rate risk effectively, as well as the risks
identified in the Company's filings with the Securities and Exchange Commission,
including the Company's Information Statement/Prospectus filed on November 5,
1997.
Exhibit 99.2
For Immediate Release: Contact: Michael D. Ketcham
Executive Vice President, CFO and Treasurer
(703) 610-1400
Email: [email protected]
WMF ANNOUNCES FINANCINGS
VIENNA, Va., September 11, 1998 -- The WMF Group, Ltd. (the "Company")
today reported that it has closed the previously announced loan of $20 million
in subordinated debt from Commercial Mortgage Investment Trust, Inc. ("COMIT"),
in which the Company has a minority interest. The majority shareholders of COMIT
are the majority shareholders of the Company, Harvard Private Capital Holdings,
Inc. and Capricorn Investors II, L.P. The Company has applied $10 million of the
loan proceeds to reduce the Company's borrowings under its corporate credit
facility.
Shekar Narasimhan, president and chief executive officer of the
Company, stated that the Company's pipelines of business remain strong and that
the superior quality of the Company's mortgage banking franchise continues to be
demonstrated even in difficult market conditions. Narasimhan confirmed that the
Company closed over $200 million in loans last week.
The Company also reported that its wholly-owned subsidiary, WMF Capital
Corp., has reached an agreement with Merrill Lynch Capital Markets Inc. as part
of the Company's strategy to limit interest rate and spread risk as announced
last week. WMF Capital Corp. has limited its existing credit facility with
Merrill to $270 million and has added a $50 million revolver. It is funding new
loans this week under these arrangements. Mortgage loans can be sold weekly or
as often as necessary to replenish the revolver.
"We have taken steps to limit our downside while continuing to support
a superb origination and securitization franchise. Mike Greco and his team at
WMF Capital Corp. are committed to re-energizing the capital markets operations
of our Company and shaping it for the future," said Narasimhan.
The Company (NASDAQ: WMFG), headquartered in Vienna, Va, is one of the
largest commercial mortgage financial services companies in the country, as
measured by servicing portfolio size, according to a survey published by the
Mortgage Bankers Association of America. As the nation's largest originator of
Fannie Mae and FHA-insured multifamily and health care loans, the Company has
originated more than $7 billion in conventional and FHA-insured multifamily and
commercial loans since 1993, and currently has a servicing portfolio of
approximately $11.5 billion. Please visit our website at www.wmfg.com for more
information.
This press release contains "forward-looking statements" within the
meaning of federal securities law. These forward-looking statements include,
among others, statements concerning the Company's outlook for future periods;
business strategies and their anticipated results; and similar statements
concerning anticipated future events and expectations that are not historical
facts. The forward-looking statements in this press release speak only as of the
<PAGE>
date hereof and are subject to numerous risks and uncertainties which could
cause actual results to differ materially from those expressed in or implied by
the statements, including the inability to negotiate waivers of existing
defaults under its lines of credit and modifications to those lines, the
inability to raise additional capital on favorable terms or at all, adverse
industry and economic conditions generally, adverse changes in interest rates,
the secondary mortgage market or in assets securing mortgages, and the failure
of hedges to reduce risks effectively, as well as the risks identified in the
Company's filings with the Securities and Exchange Commission, including the
Company's Information Statement/Prospectus filed on November 5, 1997.
Exhibit 99.3
For Immediate Release: Contact: Michael D. Ketcham
Executive Vice President, CFO and Treasurer
(703) 610-1400
Email: [email protected]
WMF Announces Projected Third Quarter Loss and Recapitalization of Subsidiary
VIENNA, Va., Oct. 14, 1998 * The WMF Group, Ltd. (the "Company") today reported
that its wholly owned subsidiary, WMF Capital Corp., expects to report an after
tax loss of approximately $31 million for the quarter ended September 30, 1998.
The loss relates to the disposition of $691 million in commercial mortgage loans
that was reported in August as well as additional previously unreported losses
relating to the remaining inventory of $278 million in commercial mortgage
loans. Subsequent to the end of the third quarter, the Company is pursuing a
recapitalization strategy for WMF Capital Corp., which includes the sale of the
remaining loan inventory and all related hedges. Based on discussions to date,
the Company does not anticipate any material gains or losses when these
potential transactions are consummated. The Company is not planning to
contribute additional capital to WMF Capital Corp. or to take principal risk
positions at WMF Capital Corp.
As part of the reevaluation of its business strategy for WMF Capital Corp. and
its interest rate and spread risk management strategies, the Company has changed
its accounting for WMF Capital Corp.'s hedge positions. The change will result
in WMF Capital Corp. reporting its hedge positions at fair market value, but its
loan portfolio will continue to be reported at the lower of cost or market. WMF
Capital Corp. had previously offset hedge losses against mortgages held for sale
to reflect the economic substance of the hedged position. The Company will
revise its financial statements for the six months ended June 30, 1998 to
reflect this change, resulting in the reallocation of hedge losses of
approximately $7.5 million pretax and $4.8 million after tax from the third
quarter. The reallocated losses were a part of the pretax loss of $30 million
reported in August, but consistent with the change in accounting methods, are
not included in the expected third quarter loss discussed above. The Company's
revised six months after tax loss amounted to $4.3 million.
The Company's mortgage banking operations have continued to be profitable, are
in compliance with regulatory and investor requirements, and have adequate
liquidity to fulfill their obligations in the normal course. Additionally,
management has retained BT/Alex Brown as the Company's financial advisor.
The Company will release its quarterly earnings, with segment reporting, in
early November and will discuss the results for the quarter at that time.
The Company (Nasdaq: WMFG) headquartered in Vienna, Va., is one of the
largest commercial mortgage financial services companies in the country, as
measured by servicing portfolio size, according to a survey published by the
Mortgage Bankers Association of America. As the nation's largest originator of
Fannie Mae and FHA-insured multifamily and health care loans, WMF Group has
originated more than $7 billion in conventional and FHA-insured multifamily and
commercial loans since 1993, and currently has a servicing portfolio of
approximately $11.5 billion.
Note: This press release contains "forward-looking statements" within the
meaning of federal securities law. These forward-looking statements include,
among others, statements concerning transactions currently under negotiation, or
anticipated, the Company's outlook for future periods; business strategies and
their anticipated results; and similar statements concerning anticipated future
events and expectations that are not historical facts. The forward- looking
statements in this press release speak only as of the date hereof and are
subject to numerous risks and uncertainties which could cause actual results to
differ materially from those expressed in or implied by the statements,
including the inability to consummate transactions under negotiation, or
anticipated inability to negotiate waivers of existing defaults under its lines
of credit and modifications to those lines, the inability to raise additional
capital on favorable terms or at all, adverse industry and economic conditions
generally, adverse changes in interest rates, the secondary mortgage market or
in assets securing mortgages, and the failure of hedges to reduce interest rate
risk effectively, as well as the risks identified in the Company's filings with
the Securities and Exchange Commission, including the Company's Information
Statement/Prospectus filed on November 5, 1997.
Exhibit 99.4
For Immediate Release: Contact: Michael D. Ketcham
Executive Vice President, CFO and Treasurer
(703) 610-1400
Email: [email protected]
WMF Group Announces Recapitalization Plan
VIENNA, Va., Oct. 21, 1998 * The WMF Group, Ltd. (the "Company") today announced
a $30 million recapitalization plan which will include the sale of up to six
million additional shares of common stock to the Company's existing shareholders
and option holders at $5 per share and the retirement of $20 million of
subordinated debt and related warrants issued in September.
The majority shareholders of the Company, Harvard Private Capital Holdings, Inc.
and Capricorn Investors II, L.P., have agreed to purchase up to five million of
the shares to be offered, with the purchase of approximately four million of
those shares to be completed before year-end. Other shareholders will be offered
the right to purchase shares in a rights offering to be completed in the first
quarter of 1999. Harvard and Capricorn have agreed to purchase up to one million
of any shares not subscribed for in that offering. Other significant
shareholders, including certain of the Company's independent directors, also
have expressed interest in purchasing unsubscribed shares. No record date for
the distribution of rights has been set. As part of the plan, the Company
expects to retire the $20 million of subordinated debt issued in September and
cancel the related warrants. The transactions are subject to the fulfillment of
certain conditions, including satisfactory arrangements with the Company's
senior lenders and the implementation of certain expense reduction initiatives
as discussed below.
The Company also announced today that it has approved the immediate
implementation of a broad expense reduction program, including a reduction of
approximately 15% of the Company's workforce, and the decrease of general and
administrative expenses throughout the Company. This program is expected to
result in annual cost savings of at least $5 million which will be realized
beginning in the first quarter of 1999.
This announcement is not an offer to sell or a solicitation of offers to buy any
security of the Company, nor shall there be any sale of any security of the
Company in any jurisdiction where such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities laws of
such jurisdiction. The rights offering will be made only by means of a
prospectus to be issued by the Company.
The Company (NASDAQ: "WMFG") headquartered in Vienna, Va., is one of the largest
commercial mortgage financial services companies in the country, as measured by
servicing portfolio size, according to a survey published by the Mortgage
Bankers Association of America. As the nation's largest originator of Fannie Mae
and FHA-insured multifamily and health care loans, WMF Group has originated more
than $7 billion in conventional and FHA-insured multifamily and commercial loans
since 1993, and currently has a servicing portfolio of approximately $11.5
billion.
Note: This press release contains "forward-looking statements"' within the
meaning of federal securities law. These forward-looking statements include,
among others, statements concerning transactions currently under negotiation or
anticipated, the Company's outlook for future periods; business strategies and
their anticipated results; and similar statements concerning anticipated future
events and expectations that are not historical facts. The forward-looking
statements in this press release speak only as of the date hereof and are
subject to numerous risks and uncertainties which could cause actual results to
differ materially from those expressed in or implied by the statements,
including the inability to consummate transactions under negotiation or
anticipated, inability to negotiate waivers of existing defaults under its lines
of credit and modifications to those lines, the inability to raise additional
capital on favorable terms or at all, adverse industry and economic conditions
generally, adverse changes in interest rates, the secondary mortgage market or
in assets securing mortgages, and the failure of hedges to reduce interest rate
risk effectively, as well as the risks identified in the Company's filings with
the Securities and Exchange Commission, including the Company's Information
Statement/Prospectus filed on November 5, 1997.
