As filed with the Securities and
Exchange Commission August 22, 2000 File No. 333-71091
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Amendment No. 7
IBF VI -- SECURED LENDING CORPORATION
(Name of small business issuer as specified in its charter)
Delaware 52-2139510
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1733 Connecticut Avenue, N.W.
Washington, DC 20009
(202) 588-7500
(Address and telephone number of registrant's principal executive offices
and principal place of business)
Simon A. Hershon
IBF VI -- Secured Lending Corporation
1733 Connecticut Avenue, N.W.
Washington, DC 20009
(202) 588-7500
(Name, address and telephone number of agent for service)
Copies to:
H. John Steele, Esq. Arthur Don, Esq.
Brown & Wood LLP Steve Curtis, Esq.
1666 K Street, N.W. D'Ancona & Pflaum LLC
Washington, DC 20006-1208 111 East Wacker Drive, Suite 2800
(202) 533-1460 Chicago, IL 60601
(202) 533-1399 fax (312) 602-2000
(312) 602-3000 fax
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
The securities being registered on the Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Title of each class of securities Dollar amount to Proposed maximum Proposed maximum Amount of
to be registered be registered offering price per aggregate offering price registration fee
unit
------------------------------------ ------------------ ----------------------- ------------------------- -----------------
<S> <C> <C> <C> <C>
Current Interest Subordinated Bonds $50,000,000 $1,000 $50,000,000 $13,900*
Accretion Subordinated Bonds
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*Previously paid.
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
IBF VI - SECURED LENDING CORPORATION
Cross-Reference Sheet Showing Location in Prospectus,
Filed as Part of Registration Statement, of Information
Required by Form SB-2
<TABLE>
<CAPTION>
Item
Number in
Form SB-2 Item Caption in Form SB-2 Location in Prospectus
--------- ------------------------- ----------------------
<S> <C> <C>
1 Front of Registration Statement and Outside Front Cover of
Prospectus....................................................... Front Cover Page
2 Inside Front and Outside Back Cover Pages of Prospectus.......... Inside Front Cover Page; Back
Cover Page
3 Summary Information and Risk Factors............................. Prospectus Summary; Risk Factors
4 Use of Proceeds.................................................. Use of Proceeds
5 Determination of Offering Price.................................. Not Applicable
6 Dilution......................................................... Not Applicable
7 Selling Security Holders......................................... Not Applicable
8 Plan of Distribution............................................. Front Cover Page; Plan of
Distribution
9 Legal Proceedings................................................ Management
10 Directors, Executive Officers, Promoters and Control Persons..... Prospectus Summary; Certain
Relationships and Related
Transactions
11 Security Ownership of Certain Beneficial Owners and Management... Prospectus Summary; Certain
Relationships and Related
Transactions
12 Description of Securities........................................ Description of the Bonds; Cover
Page of Registration Statement;
Cover Page of Prospectus;
Prospectus Summary; Risk
Factors; Investor Suitability
and Minimum Investment
Requirements; Subscription
Procedures
13 Interest of Named Experts and Counsel............................ Not Applicable
14 Disclosure of Commission Position on Indemnification for
Securities Act Liabilities....................................... Risk Factors
15 Organization within Last Five Years.............................. Prospectus Summary; Certain
Relationships and Related
Transactions
16 Description of Business.......................................... Front Cover Page; Prospectus
Summary; Management's Discussion
and Analysis of Liquidity and
Capital Resources; Management;
Certain Relationships and
Related Transactions; Risk
Management; Operating Policies
and Objectives; Investment
Guidelines; Risk Factors;
Additional Information
17 Management's Discussion and Analysis or Plan of Operation........ Operating Policies and
Objectives; Management's
Discussion and Analysis of
Liquidity and Capital Resources
18 Description of Property.......................................... Prospectus Summary; Risk
Factors; Use of Proceeds;
Investment Guidelines; Initial
Mortgage Loan Acquisitions;
Management; Certain Legal
Aspects of Mortgage Loans and
Real Property Investments
19 Certain Relationships and Related Transactions................... Management; Certain
Relationships and Related
Transaction
20 Market for Common Equity and Related Stockholder Matters......... Prospectus Summary; Certain
Relationships and Related
Transactions
21 Executive Compensation........................................... Not Applicable
22 Financial Statements............................................. Appendix I and Appendix II to
the Prospectus
23 Changes In and Disagreements With Accountants on Accounting and
Final Disclosure................................................. Not Applicable
24 Indemnification of Officers and Directors........................ Part II of Registration Statement
25 Other Expenses of Issuance and Distribution...................... Part II of Registration Statement
26 Recent Sales of Unregistered Securities.......................... Part II of Registration Statement
27 Exhibits......................................................... Exhibits to Registration
Statement
28 Undertakings..................................................... Part II of Registration Statement
</TABLE>
<PAGE>
Prospectus Supplement [LOGO]
(To Prospectus dated August 23, 2000)
$50,000,000
IBF VI -- Secured Lending Corporation
Current Interest Subordinated Bonds - Due 2006
Accretion Subordinated Bonds - Due 2006
Interest Rates
The unsecured current interest subordinated bonds due December 31, 2006
we are offering will bear interest at the rate of 10.75% per annum. The
unsecured accretion subordinated bonds due December 31, 2006 we are offering
will accrete interest at the rate of 10.75% per annum, compounded quarterly.
If an election is made to pay current interest on any accretion subordinated
bonds, we will pay current interest at the rate of 10.75% per annum.
Redemption Price
The redemption price of any bond will be equal to 100% of the principal
amount of the bond plus any related accrued or accreted interest through the
date of redemption. The table below shows redemption prices of $1,000
increments of accretion subordinated bonds on June 30, 2001, at each following
June 30 prior to maturity and at maturity on December 31, 2006. The redemption
price of accretion subordinated bonds redeemed between these dates would
include an additional amount reflecting the additional interest accreted since
the immediately preceding date in the table to the actual redemption date.
<TABLE>
<CAPTION>
Accretion Bond
Original Redemption
Redemption Date Principal Amount Accreted Interest Price
--------------- ---------------- ----------------- -----
<S> <C> <C> <C>
June 30, 2001.............. $1,000 $ 93.29 $1,093.29
June 30, 2002.............. 1,000 122.35 1,215.64
June 30, 2003.............. 1,000 136.05 1,351.69
June 30, 2004.............. 1,000 151.27 1,502.96
June 30, 2005.............. 1,000 168.20 1,671.15
June 30, 2006.............. 1,000 187.02 1,858.18
December 31, 2006 -
Stated Maturity... 1,000 101.22 1,959.40
</TABLE>
This table assumes you purchased your bond on August 1, 2000. Interest will
begin accruing on a bond from the date of its issuance by IBF VI. Your actual
redemption schedule will be different if you purchase your bond on any other
date and will be given to you when you purchase your bond.
An offer can only be made by the prospectus dated August 18, 2000,
delivered with a copy of this prospectus supplement. See "Risk Factors" for
certain information you should consider before you purchase bonds.
National Securities Corporation
The date of this prospectus supplement is August 23, 2000.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Prospectus [LOGO]
$50,000,000
IBF VI -- Secured Lending Corporation
Current Interest Subordinated Bonds
Accretion Subordinated Bonds
IBF VI - Secured Lending Corporation is offering its unsecured current
interest subordinated bonds and its unsecured accretion subordinated bonds.
There is no market for you to resell your bonds.
We will provide the maturity date and the interest rates currently being
offered on the bonds in a prospectus supplement to this prospectus. You should
read this prospectus and the prospectus supplement carefully before you
invest.
See "Risk Factors" beginning on page 3 for certain information you should
consider before you purchase bonds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The Attorney General of the State of New York has not passed on or
endorsed the merits of this offering. Any representation to the contrary is
unlawful.
----------------------------------------------------------------------------
Price To Sales Proceeds To
Public Commission Company
-------------------- ---------------- ---------------- ---------------------
Per bond 100% 8% 92%
-------------------- ---------------- ---------------- ---------------------
Minimum $500,000 $40,000 $460,000
-------------------- ---------------- ---------------- ---------------------
Maximum $50,000,000 $4,000,000 $46,000,000
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The offering is made through National Securities Corporation, as
underwriter on a best efforts basis. If less than $500,000 of bonds are sold
within three months following the date of this prospectus, or within six
months following the date of this prospectus if we and the underwriter elect
an extension, all proceeds raised will be promptly returned to investors with
interest. All proceeds from the sale of bonds will be placed in escrow pending
investment by IBF VI - Secured Lending Corporation or return to investors. If
the minimum amount of bonds is sold within the initial offering period, then
the offering will continue until the earliest of the date on which the maximum
amount of bonds are sold, the date on which IBF VI - Secured Lending
Corporation elects to terminate this offering in its sole discretion, or
December 31, 2001.
National Securities Corporation
The date of this prospectus is August 23, 2000.
<PAGE>
Table of Contents
<PAGE>
Prospectus Summary..........................................................1
Risk Factors................................................................2
Description of the Bonds....................................................6
Forward-Looking Statements.................................................11
Use of Proceeds............................................................12
Management's Discussion and Analysis of Liquidity and
Capital Resources .......................................................13
Operating Policies and Objectives..........................................14
Investment Guidelines......................................................16
Risk Management............................................................24
Significant Acquisitions...................................................27
Management.................................................................28
Regulatory Matters.........................................................35
Certain Relationships and Related Transactions.............................36
Indemnification............................................................37
Certain Legal Aspects of Mortgage Loans and Real Property Investments......38
Certain United States Federal Income Tax Considerations....................40
Plan of Distribution.......................................................43
Investor Suitability and Minimum Investment Requirements;
Subscription Procedures .................................................44
Legal Matters..............................................................45
Experts....................................................................46
Additional Information.....................................................46
Appendix I - Audited Financial Statements.................................I-1
Appendix II - Interim Financial Statements...............................II-1
Appendix III - Subscription Agreement...................................III-1
<PAGE>
Prospectus Summary
The Issuer
The issuer, IBF VI - Secured Lending Corporation which is referred to as
"IBF VI" in this prospectus, is a Delaware corporation organized on June 8,
1998. IBF VI changed its name from IBF VI Participating Income Corporation on
May 11, 2000. IBF VI is a direct, wholly owned subsidiary of InterBank Funding
Corporation, a Delaware corporation, and an affiliate of IBF Management Corp.
and InterBank Consultants, Inc. In this prospectus, InterBank Funding
Corporation is referred to as "InterBank," IBF Management Corp. is referred to
as "IBF Management" and InterBank Consultants, Inc. is referred to as "IB
Consultants." The principal offices of IBF VI and its affiliates are located
at 1733 Connecticut Avenue, N.W., Washington, DC 20009, telephone number (202)
588-7500.
Business
IBF VI will engage either directly, or through one or more wholly owned
affiliates, in the following businesses:
o Purchasing and originating loans secured more than 100% by the value
of commercial and residential real estate, which may include
distressed properties, properties located outside the United States
and residential mortgage loans made to borrowers whose credit
standing would not qualify them for bank, Fannie Mae or Freddie Mac
guidelines;
o Purchasing and originating other commercial real estate related
loans and commercial loans that are collateralized by non-real
estate property;
o Issuing nonrecourse collateralized mortgage bonds and entering into
short-term financings secured by, and used to finance the purchase
of, its loans;
o Through a management agreement with its affiliate, IBF Management,
and through management or servicing agreements with one or more
unaffiliated parties, manage and service its loans.
IBF VI may also invest in subordinated interests in residential or commercial
mortgage-backed securities.
IBF VI's investment objective is to purchase and originate loans that
will produce an average annual percentage rate of return of at least 18
percent. IBF VI will attempt to obtain this rate of return through a
combination of origination fees, stated interest, discount fees and leverage.
This strategy requires that IBF VI originate or acquire certain non-conforming
loans, distressed loans, subordinated interests in pools of loans and enter
into substantial leverage, all of which will typically involve a high degree
of risk. Management has broad discretion in selecting the investments IBF VI
will acquire or make.
The Offering
Bonds Offered Up to $50,000,000 aggregate principal
amount of current interest subordinated
bonds and accretion subordinated bonds.
Each class of bonds will be general
unsecured, subordinated debt of IBF VI.
Denominations The minimum principal amount of bonds you
can purchase is $5,000 unless there is a
higher requirement in your state of
residence. However, the minimum purchase
for individual retirement accounts and
Keogh plans is $2,000. After the minimum
purchase, sales will be made in increments
of $1,000.
Maturity Date The bonds will mature no later than
December 31, 2007, as set forth in the
related prospectus supplement.
Interest For the current interest subordinated
bonds, interest accrues at the stated rate
set forth in the related prospectus
supplement and is payable quarterly, unless
you purchase more than $15,000 of bonds and
elect to receive interest monthly. Stated
interest will have a priority in payment
over management fees due to IBF Management
for the same period.
Interest will not be paid on the accretion
subordinated bonds unless there is an
election to do so by you or IBF VI. The
original issue discount on the accretion
subordinated bonds is the difference
between the original principal amount and
the redemption price.
Redemption IBF VI may redeem any portion of your bonds
from time to time after June 30, 2001. In
addition, your bonds may be tendered by you
for redemption under limited circumstances,
including your death or other hardship
circumstances. Any redemption of the bonds
for hardship reasons will
o require to delivery by you of a
request for hardship exemption,
o be reduced by a penalty described in
this prospectus,
o be at the discretion of IBF VI, and
o be limited to 10% of the aggregate
principal amount of the bonds for
each calendar year.
No Rating The bonds are not rated.
Risk Factors
Before you invest in our bonds, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included in this
prospectus before you decide to purchase any of the bonds we are offering.
Risks Related to the Offering
Your bonds are not insured and will only be repaid if our business is
successful. No governmental or private agency insures the bonds offered by
this prospectus. As a holder of the bonds you will only be repaid if our
assets and the income produced from our operations are sufficient to make
repayment.
Your bonds are unsecured and second in right of repayment to our senior
debt and adequate funds may not be available to repay your bonds after
satisfying the senior debt. The bonds offered by this prospectus will be
subordinated, or second in right of repayment, to our senior debt. If we are
unable to repay any senior debt we incur and your bonds, our senior debt would
have to be paid in full prior to payment of your bonds, which may not leave
adequate funds to repay your bonds.
There is no limitation on the amount of senior debt we can incur which
may become a substantial liability for our operations and adversely affect our
ability to repay your bonds. Senior debt includes any indebtedness incurred in
connection with our borrowing -- including our subsidiaries -- from a bank,
trust company, insurance company, or from any other institutional lender and
does not have to be specifically designated as "senior debt." If we have a
significant amount of senior debt, our operations will need to earn
substantial income to repay the senior debt which would not leave adequate
funds to repay your bonds.
You may never be able to resell your bonds because there is no secondary
market for bonds. There is no public market for the bonds. According, you may
never be able to resell your bonds and should purchase the bonds only if you
are prepared to make a long-term investment with the expectation of holding
the bonds until maturity.
A default by us in paying interest or principal on your bonds could
result in the acceleration of the maturity of your bonds and a termination of
your investment. If we default in our obligation to pay you interest or
principal on the bonds or there is a default under the indenture, the
indenture trustee or the holders of 30% of the outstanding bonds acting
together may accelerate the due date of all principal and interest on the
bonds. Although the holders of a majority of the bonds outstanding could vote
to waive the default, if they are unwilling to do so your investment in the
bonds would be terminated through prepayment, which may or may not result in
full payment on the bonds, even if you would prefer that your investment
continue until the original maturity.
Risks Related to Our Business
Non-performing loans are risky investments and may cause us to suffer
losses or delays in payment on the loans, resulting in the inability to repay
your bonds. We plan to acquire non-performing loans secured by real estate or
other non-real estate assets. Non-performing loans may entail a higher risk of
loss or delayed payment than loans typically extended by commercial banks. In
the event we experience higher losses or delays in payment on non-performing
loans than expected, we may be unable to repay your bonds.
We may suffer greater losses and be unable to repay your bonds due to the
potential lack of diversification of the loans and investments. If we do not
sell all of the bonds offered under this prospectus, we will be limited in our
ability to diversify our loan portfolio. The lack of sufficient
diversification and the dependence on a small number of loans and investments
creates the risk that the non-performance of any one loan or, in the case of a
non-performing loan acquired by us, lower than expected net liquidation
proceeds, could prevent us from being able to repay your bonds.
The existence of conflicts of interest could negatively affect the
quality of our loans and investments and decrease the return on investment and
the amount available to repay your bonds. Simon A. Hershon and Ehud D. Laska,
both officers and directors of IBF VI, are the owners of InterBank, which is
the sole stockholder of IBF VI. Simon A. Hershon is also the sole stockholder
of IBF Management and IB Consultants. InterBank owns other business entities
that acquire and make loans for their own accounts, and many investments
appropriate for IBF VI also will be appropriate for these other accounts.
Management's duties on behalf of these other entities may cause conflicts of
interest when they are presented with loan and investment opportunities that
could be of benefit to us and to those other entities. We will have to rely on
their judgment as to the proper allocation of these loan and investment
opportunities in a manner that does not adversely affect the quality or return
on our investment.
We may make loans to affiliates of InterBank or acquire investments from
InterBank. There is a potential conflict of interest when management has an
interest in the lender and the borrower. Any lost loan or investment
opportunities or disadvantageous loan terms caused by the existence of
conflicts of interest may affect our return on investment and reduce the
amount available to repay your bonds.
Subordinated loans on real estate have higher risks of loss and could
reduce income available to repay your bonds. We may originate or acquire loans
secured directly by commercial real estate or by the equity ownership in the
real estate, including loans that are subordinate to first liens on the real
estate. Loans that are subordinate to first liens on real estate have greater
risks of loss than first lien mortgage loans. An overall decline in the real
estate market could adversely affect the value of the real property securing
these loans such that the aggregate outstanding balance of the second lien
loan and the balance of the more senior loan on the real property exceed the
value of the real property. Our income could be adversely affected by larger
than expected losses resulting from these types of impairment in value and
reduce our ability to repay your bonds.
Our business may be adversely affected if our hedging strategy is not
successful which would reduce income available to repay your bonds. If we
purchase loans for issuance of collateralized mortgage bonds, but the
collateralized mortgage bonds are not issued simultaneously with the loan
purchase, we may hedge the value of the loans in an effort to lock in some or
all of the value of the loans until the collateralized mortgage bonds can be
issued. Our performance may be affected adversely if we do not hedge
effectively against interest rate and other risks. No hedging strategy will
insulate us completely from interest rate risk. A liquid secondary market may
not exist for hedging instruments purchased or sold, and we may be required to
maintain a position until exercise or expiration, which could result in losses
and reduce income available to repay your bonds.
If we invest in subordinate interests in mortgages pledged as collateral
for senior, secured debt securities and the collateral does not perform as
anticipated, we could suffer losses which reduce income available to repay
your bonds. We plan to purchase subordinate interests in pools of loans that
have been pledged as collateral for senior, secured debt securities. These
interests have special risks, including a substantially greater risk of loss
of principal and non-payment of interest than the senior, secured debt
classes. If the collateral securing the senior, secured debt does not perform
as well as we anticipate at the time of making the investment, we may suffer
losses or not achieve the yields we need to repay your bonds.
Lending to credit-impaired borrowers may cause us to suffer losses on our
loans and reduce income available to pay interest and principal on your bonds.
A significant portion of our loans will be made to borrowers who are either
unable or unwilling to obtain financing from traditional sources, such as
commercial banks. Loans made to these borrowers may entail a higher risk of
delinquency and loss than loans made to borrowers who use traditional
financing sources. In the event our loans experience higher delinquencies,
foreclosures or losses than anticipated, our results of operations or
financial condition would be adversely affected and we may not be able to
repay your bonds.
We are dependent upon financing the fund our operations and failure to
obtain financing will adversely affect our business plans and our ability to
repay indebtedness. We are dependent upon the availability of financing to
fund our operations. For our ongoing operations, we are dependent upon
frequent financings, including:
o the sale of unsecured subordinated debt securities;
o short term borrowings secured by mortgage loans used to purchase
mortgage loans or "warehouse credit facilities";
o lines of credit; and
o funds received from offerings of collateralized mortgage bonds.
Any failure to obtain adequate funding under a warehouse credit facility
or other borrowings could hurt our cash flow and profitability. To the extent
that we are not successful in maintaining or replacing existing subordinated
debt securities upon maturity, we would have to limit our loan originations or
sell loans earlier than intended which could have a negative effect on our
results of operations and financial condition and our ability to pay interest
and principal on your bonds.
If we are required to register as an investment company under the
Investment Company Act, we would become subject to restrictions that would
prevent us from operating profitably enough to repay your bonds. We must
maintain an exemption from the Investment Company Act of 1940 so as not to
become regulated as an investment company. If we are unable to satisfy an
exemption from the Investment Company Act and must register as an investment
company, we will be unable to achieve our business plan, including our desired
leverage and yield objectives, and engaging in transactions with affiliates,
among other restrictions. These restrictions could prevent us from fully
repaying your bonds. Section 3(c)(5)(C) of the Investment Company Act excludes
from regulation entities that are primarily engaged in the business of
purchasing or otherwise acquiring "mortgages and other liens on and interests
in real estate." In order to qualify for this exemption, we, together with our
wholly-owned subsidiaries, must, among other things, at all times hold not
less than 80% of our total assets as qualifying mortgage loans and
mortgage-related assets. We refer you to the discussion under "Regulatory
Matters -- Investment Company Act exemption" later in this prospectus where
this exemption is discussed in greater detail.
After the commencement of the sale of bonds under this prospectus, we may
be required to temporarily invest bond proceeds in short-term liquid
investments until we identify qualifying mortgage loans for purchase. We will
not purchase any non-qualifying loans or investments during such period.
Nevertheless, we may be required to rely on Rule 3a-2 of the Investment
Company Act, which provides a temporary exception not to exceed one year from
the Investment Company Act for companies that have a bona fide intent to be
engaged primarily, as soon as is reasonably possible, in a business other than
that of investing, reinvesting, owning, holding or trading in securities but
who temporarily fall within the definition of an investment company. Reliance
upon the rule is permitted only once every three years. Therefore, if we rely
on Rule 3a-2 during the initial investment period, we will not have it
available to us for three years.
If a substantial portion of our qualifying mortgage loans were to be
prepaid or liquidated during the first three years, we, together with our
wholly owned subsidiaries, may have to purchase or sell assets that we would
not ordinarily purchase or sell in the normal course of business. If we or our
wholly owned subsidiaries were required to sell assets, they may have to be
sold sooner than they otherwise would. These sales may be at depressed prices,
and we may not realize anticipated benefits from, or may incur losses on,
these investments. Some investments may not be sold due to contractual or
legal restrictions or the inability to locate a suitable buyer. Moreover, we
may incur tax liabilities when we sell assets. We may also be unable to buy
additional assets that may be important to our operating strategy to achieve
sufficient yields on our investments to repay the bonds. If we are unable to
purchase or sell assets to meet the exemption, we may be required to register
under the Investment Company Act, with the significant adverse consequences
described above.
Description of the Bonds
The bonds will be issued under an indenture between IBF VI, as issuer,
and Continental Stock Transfer & Trust Company, as indenture trustee. The
indenture is an exhibit to the registration statement of which this prospectus
is a part. The indenture is governed by the Trust Indenture Act of 1939, as
amended. The following summary does not contain all information that may be
important to you. You are encouraged to review the indenture by obtaining a
copy in the manner described under "Additional Information."
General
The bonds are unsecured, subordinated debt obligations of IBF VI only and
are being offered in an aggregate principal amount not to exceed $50,000,000.
The bonds will mature on the date set forth in the related prospectus
supplement which will be no later than December 31, 2007 and may be redeemed
in limited circumstances. See "-- Redemption" below. The bonds will be
subordinated to the prior payment in full of fees and expenses of the
indenture trustee. The bonds are not rated by any statistical rating
organization. The lack of a rating is likely to inhibit the development of a
public market for the bonds and your ability to sell the bonds to anyone else.
The bonds will generally be issued in minimum denominations of $5,000 of
principal amount and increments of $1,000. See "Investor Suitability and
Minimum Investment Requirements; Subscription Procedures -- Requirements
Concerning Minimum Investment and Minimum Investor Net Worth/Income." The
bonds will be issued in book-entry form. Each purchaser of a bond will receive
a confirmation of the transaction that evidences ownership of the bond.
However, this confirmation will not be a negotiable instrument, and the holder
cannot transfer rights of ownership in a bond by mere endorsement and delivery
of this confirmation to a purchaser. IBF VI will furnish to holders of the
bonds any reports required by the indenture governing the bonds, the Trust
Indenture Act and any other applicable requirement of federal and state law.
IBF VI will maintain a register to record the owner of each outstanding
bond and may treat the person whose name is recorded as the owner of the bond
for all purposes. In order to transfer ownership of a bond on the register,
holders must provide IBF VI with written notice, signed by the holder or the
duly authorized representative of the holder, on a form that IBF VI will
supply. A holder may not pledge, assign or hypothecate any bond as collateral
for a loan or otherwise.
The current interest subordinated bonds will pay interest at the rate set
forth in the related prospectus supplement. If you purchase at least $15,000
of current interest subordinated bonds, the fixed interest is paid to you
monthly or quarterly, as you elect. If you purchase less than $15,000 of
bonds, then you will be paid interest quarterly. The interest payment will be
made to the holder of record as of the last day of the calendar month prior to
the interest payment date, which is the end of the applicable monthly or
quarterly period. In the event an interest payment date falls on a day other
than a business day, interest will be paid on the next business day.
The accretion subordinated bonds will pay all principal and accreted
interest on the maturity date or on any earlier redemption date. Interest will
accrete at the rate set forth in the related prospectus supplement compounded
on each quarterly interest accrual date. You should be aware that the
difference between the price at which you purchase accretion subordinated
bonds and the redemption price will be considered original issue discount and
must be included in your gross income for tax purposes.
Interest on the bonds will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Principal and interest will be payable at
the office of the indenture trustee in New York, New York.
Election to receive current interest on accretion subordinated bonds
You may elect to receive current interest quarterly on your accretion
subordinated bonds at the interest rate set forth in the related prospectus
supplement by submitting a request to the indenture trustee during the month
of December of each year prior to maturity. Once you elect to receive current
interest on your accretion subordinated bonds, you will not have the option to
rescind your election.
IBF VI also has the option to pay current interest on the accretion
subordinated bonds if a tax event occurs. From and after the date a tax event
occurs, IBF VI may elect to pay interest quarterly on the accredited
subordinated bonds at the interest rate set forth in the related prospectus
supplement instead of accreting interest.
In the case of either election, the principal amount will be restated and
will be calculated by adding the following:
o the original principal amount; and
o the amount of accreted interest which had accrued (1) through
December 31 of the year you exercise your option or (2) in the case
of IBF VI, through the date on which IBF VI exercises the option.
A tax event occurs when IBF VI receives an opinion from an experienced
independent tax counsel stating that:
o any amendment, or change or announced prospective change in the laws
or regulations of the United States or any of its political
subdivisions or taxing authorities of the United States; or
o any amendment, change, interpretation or application of the laws or
regulations by any legislative body court government agency or
regulatory authority.
which, if enacted, presents more than an insubstantial risk that interest,
including accreted interest, payable on the accretion subordinated bonds
either;
o would not be deductible on a current accrual basis; or
o would not be deductible under any other method;
in whole or in part, by IBF VI for federal income tax purposes.
Redemption
After June 30, 2001, IBF VI may redeem any portion of your bonds from
time to time on at least 30 days' advance notice to you. After the redemption
date specified in the notice, your bond ceases to accrue stated interest.
Partial redemptions will be allocated among holders of the bonds by lot.
You may tender your bond to the indenture trustee for redemption under
hardship circumstances commencing in December 2001. A request for hardship
redemption may only be delivered to IBF VI during any subsequent June and
December. The request is irrevocable and represents a binding commitment by
you to tender your bond for redemption. The request must provide information
on your financial difficulty or change of circumstances and you must provide
any additional information requested by IBF VI on the hardship situation. Any
request for redemption under hardship circumstances have a redemption penalty
deducted from the related redemption payment in an amount equal to a
percentage of the original principal amount of the bond set forth in the table
below. The paying agent will deduct the penalty from your redemption payment.
Redemption Penalty
Date of Redemption (percentage of principal amount)
------------------ --------------------------------
December 2001 and 10%
June 2002
December 2002 and 9%
June 2003
December 2003 and 8%
June 2004
December 2004 and 7%
June 2005
December 2005 and 6%
June 2006
December 2006 and 5%
June 2007
IBF VI has complete discretion on the basis of the information provided
or factors unrelated to your personal circumstances to accept or reject the
request for hardship redemption. Bonds will be redeemed as of the end of the
month in which the request for redemption is made. The amount of bonds
redeemed for hardship reasons in each calendar year may not exceed 10% of the
aggregate principal amount of the bonds outstanding on the first day of each
calendar year. In the event requests for hardship redemption during a year
exceed the 10% limitation, redemption will be made on a "first come - first
served" basis among the holders of the bonds requesting redemption.
In the event of the death of a holder, a joint holder, or the owner of an
individual retirement account holding a bond, the successor in interest may
tender the bond for redemption at any time during the six-month period
following the date of death. Bonds tendered and accepted for redemption under
hardship circumstances or death of a holder will be redeemed as of the end of
the month in which the request for redemption is made.
Redemption Price. The redemption price of the bonds will be equal to 100%
of the principal amount of your bond plus any related accrued or accreted
interest through the date of redemption. The related prospectus supplement
will provide a table showing redemption prices of the accretion subordinated
bonds on June 30, 2001, of each following June 30 prior to maturity and at the
maturity date.
Payment of all principal and interest due on the bonds will be made on
the redemption date with respect to a redemption by IBF VI. In the case of a
hardship redemption, payment of principal and interest due on the bonds will
be made on or before the end of the following month.
Future borrowing
IBF VI and its subsidiaries may borrow additional funds in the future.
IBF VI can pledge all of its assets, including the assets acquired with the
proceeds of the offering, as security on any future borrowing, such as
short-term warehouse borrowings and collateralized mortgage bonds. In these
circumstances, payment of the bonds could be subordinated to payment of future
borrowings by IBF VI.
Upon a distribution of assets, dissolution, winding up, liquidation or
reorganization of IBF VI, upon an assignment for the benefit of creditors, or
if the principal of the bonds has been declared due and payable and the
declaration has not been rescinded or annulled, then under these circumstances
all senior debt may be required to be repaid in full before any payment of
principal or interest on the bonds can be made. Any subordination will not
prevent a default under the indenture. See "-- Events of Default" below.
Limitation on restricted payments
IBF VI cannot, while any of your bonds are outstanding
o declare or pay any dividend, either in cash or property, on any
shares of its capital stock, except dividends or other distributions
payable solely in shares of capital stock of IBF VI,
o purchase, redeem or retire any shares of its capital stock or any
warrants, rights or options to purchase or acquire any shares of its
capital stock, or
o make any other payment or distribution, either directly or
indirectly, in respect of its capital stock,
if a default will occur on the bonds after giving effect to the transaction.
Notwithstanding the foregoing, IBF VI may make a previously declared
distribution on its capital stock if at the date of the declaration the
distribution was permitted under this restriction.
Furthermore, IBF VI cannot pay the management fee to IBF Management or
any of its affiliates to the extent IBF VI has an accumulated deficit for any
period with respect to which the management fee is payable. As a practical
matter, this means stated interest on the bonds and the other operating
expenses will be paid before the management fee.
Limitations on transactions with affiliates
IBF VI may not participate in a transaction with an affiliate, except in
good faith and on terms that are no less favorable to IBF VI than those that
could have been obtained in a comparable transaction on an arm's-length basis
from a person not an affiliate of IBF VI.
IBF VI may not liquidate or dissolve itself, sell or dispose of
substantially all of its assets except to create liquidity to pay the bonds,
or make any material change in its business. IBF VI may merge or consolidate
with another entity if the merger or consolidation will not materially change
the business of IBF VI, the new entity fully assumes all obligations of IBF
VI, and after giving effect to the transaction no default shall exist.
Events of default
An event of default under the indenture includes:
o failure to pay the principal on the bonds when due at maturity, upon
redemption, or upon repayment, as provided in the indenture;
o failure to pay any interest on the bonds when due, which default
continues for 30 days;
o failure to perform any other covenant set forth in the indenture for
30 days after receipt of written notice from the indenture trustee
or holders of at least 30% in principal amount of the outstanding
bonds under the indenture specifying the default and requiring IBF
VI to remedy the default;
o certain events of insolvency, receivership, or reorganization of IBF
VI or any of its subsidiaries, and
o entry of a final judgment, decree or order against IBF VI or any of
its subsidiaries for the payment of money in excess of $5,000,000 in
certain circumstances.
If an event of default occurs, the indenture trustee may at its
discretion proceed to protect and enforce its rights and the rights of the
holders. The indenture trustee is required to enforce these rights at the
written request of holders of a majority of the outstanding bonds and upon
being indemnified to its satisfaction. If a default occurs, either the
indenture trustee or the holders of at least 30% of the outstanding bonds may
accelerate the maturity of all outstanding bonds. Prior to any judgment or
decree for the payment of money being obtained, the holders of a majority of
the outstanding bonds may waive a default resulting in acceleration of the
bonds, but only if any other defaults have been remedied or waived.
IBF VI must furnish quarterly, to the indenture trustee an officers'
certificate stating whether, to the best of the knowledge of the officers
executing the certificate, IBF VI is in default under any of the provisions of
the indenture and describing any existing defaults.
A holder will not have any right to institute any proceeding with respect
to the indenture or for any remedy thereunder, unless
o the holder has previously given to the indenture trustee written
notice of a default;
o the holders of at least 30% of the outstanding bonds have made a
written request and offered reasonable indemnity to the indenture
trustee to institute the proceedings;
o the indenture trustee has failed to institute the proceeding within
60 days; and
o the indenture trustee has not received from the holders of a
majority of the outstanding bonds a direction inconsistent with the
request.
However, you have an absolute right to receive payment of principal and
interest on your bond on or after the due dates and to institute suit for the
enforcement of any of these payments.
Modification and waiver
With certain limited exceptions which permit modification of the
indenture by IBF VI and indenture trustee without the consent of any holders
of the bonds, the indenture may be modified by IBF VI with the consent of
holders of not less than a majority of the outstanding bonds, if the bonds are
affected by the modification. No change can be made without your consent if
the effect is to:
o change the maturity date of principal or the payment date of any
interest on your bond;
o reduce the principal of, or the rate of interest on, your bond;
o change the coin or currency in which any portion of the principal
of, or interest on, your bond is payable;
o impair your right to institute suit for the enforcement of any of
these payments;
o reduce the percentage of holders of the outstanding bonds necessary
to modify the indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding bonds necessary to waive any past default.
The holders of a majority of the outstanding bonds may waive compliance
by IBF VI with certain restrictive provisions of the indenture.
Satisfaction and discharge of indenture
The indenture provides that IBF VI may terminate its obligations under
the indenture with respect to all bonds which have become due and payable by
delivering to the indenture trustee, in trust for this purpose, money and/or
government obligations which, through the payment of interest and principal,
will provide money in an amount sufficient to discharge the entire
indebtedness on the bonds. Defeasance of the bonds requires delivery to the
indenture trustee of an opinion of independent counsel that holders of the
outstanding bonds will not recognize income, gain or loss for federal income
tax purposes as a result of the deposit and termination and certain other
conditions.
The indenture trustee
Continental Stock Transfer & Trust Company is the indenture trustee under
the indenture. Its principal corporate trust office is located at 2 Broadway,
New York, New York 10004. The indenture trustee is not responsible for any
investment decisions of IBF VI and shall not be held responsible or liable for
any of those decisions.
Forward-Looking Statements
Some of the information in this prospectus may contain forward-looking
statements. You can identify these statements by phrases such as "will likely
result, " "may," "are expected to," "is anticipated," "estimate," "projected,"
"intends to" or other similar words. Forward-looking statements are not
guarantees of future performance and have certain risks and uncertainties,
including but not limited to the following:
o market conditions and real estate values in the areas where IBF VI's
loans are made;
o credit risk related to IBF VI's borrowers;
o IBF VI's dependence on securitizations and short-term warehouse loan
facilities;
o IBF VI's ability to achieve its targeted earnings;
o IBF VI's ability to implement its growth strategy;
o competition;
o IBF VI's dependence on debt financing to fund its operations;
o changes in interest rates;
o IBF VI's ability to implement an effective hedging strategy;
o the geographic concentration of IBF VI's loans;
o state and federal regulation and licensing requirements applicable
to IBF VI's lending activities;
o claims by borrowers or investors;
o dependence on key personnel;
o environmental regulation; and
o the properties of the bonds being offered.
All of the above risks could cause IBF VI's actual results to differ
materially from those presently anticipated. When considering forward-looking
statements, you should keep these risk factors in mind as well as the other
cautionary statements in this prospectus. You should not place undue reliance
on any forward-looking statement.
Use of Proceeds
The following table sets forth IBF VI's best estimate of the net proceeds
and the use of proceeds from the sale of the minimum and maximum amount of
bonds offered. Since the dollar amounts shown in the table are estimates only,
actual use of proceeds may vary from the estimates shown. See "Plan of
Distribution."
<PAGE>
<TABLE>
<CAPTION>
Assuming Minimum Assuming Maximum
Amount of Bonds Sold Amount of Bonds Sold
Amount ($) Percent(1) Amount ($) Percent(1)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Gross proceeds $500,000 100.0% $50,000,000 100.0%
Offering expenses
Commissions 40,000 4,500,000
Other expenses of issuance 50,000(2) 980,000
-------- ----- ----------- -----
Net proceeds after offering expenses $410,000 82.0% $44,520,000 89.0%
======== ===== =========== =====
Use of net proceeds
Acquisition of loans and investments $385,000 77.0% $40,820,000 81.6%
Marketing costs - 0(2) 950,000 1.9%
Computers and office equipment - 0(2) 250,000 0.5%
Working capital reserves 25,000 5.0% 2,500,000 5.0%
-------- --- ----------- ---
$410,000 82.0% $44,520,000 89.0%
======= ==== ========== ====
</TABLE>
---------------------
(1) Percentages rounded to nearest one-tenth of one percent.
(2) Certain offering expenses and other costs will be paid by InterBank
without reimbursement from IBF VI if only the minimum amount of bonds
are sold. Some portion of these costs will also be paid by Interbank
if more than the minimum amount and less than the maximum amount of
bonds are sold. However, in no event will less than 82% of the gross
proceeds of the offering be made available for working capital
reserves and acquisitions of loans and investments by IBF VI.
The net proceeds of this offering will be received and held in trust for
the benefit of investors to be used only for the purposes set forth in this
prospectus. Pending such use, the net proceeds will be invested in short-term,
interest bearing securities .
Management's Discussion and Analysis
of Liquidity and Capital Resources
IBF VI has no operating history. IBF VI currently has only nominal assets
and has received no income. To date, IBF VI's expenses have related to its
organization and expenses incurred in connection with the registration of the
bonds. For the year ended December 31, 1999, IBF VI reported a net loss of
$35,574, compared to a net loss of $5,000 during the period June 8, 1998 to
December 31, 1998. IBF VI's general and administrative expenses increased by
$30,574, primarily as a result of an increase in management fees and related
overhead as IBF VI's organizational and developmental activities accelerated
and as a result of a full year expenses in 1999 compared to a seven-month
period in 1998.
In the future, IBF VI's revenues will be derived solely from its
investments in residential and commercial mortgage loans, other real estate
related assets and other commercial loans and short term investments. IBF VI's
future expenses will increase substantially as bonds are sold under this
offering and will include management fees under the management agreement with
IBF Management, interest on the bonds offered by this prospectus, interest on
warehouse lines of credit and collateralized mortgage bonds and operating
expenses such as attorney fees, marketing expenses and corporate income taxes.
See "Management - Compensation".
The principal sources of IBF VI's funds will be the proceeds of this
offering, the proceeds of the private purchase by InterBank of IBF VI's
preferred stock described below and short and long-term borrowings
collateralized by the mortgage loans and other real estate related assets and
the investment revenues described above.
Management expects that some of the loans made or acquired by IBF VI with
the proceeds of the offering will generate revenue in the first year following
the offering in amounts sufficient to cover interest expense on the bonds and
operating expenses. After the payment of any senior obligations, revenue will
be applied first to payment of interest on the bonds and other expenses not
covered by the management fee, and second to payment of the management fee to
IBF Management. The management fee will be deferred if revenue is not
sufficient to pay the fee after paying interest and other expenses.
Provided at least the minimum amount of bonds is sold, management
believes the net proceeds will be adequate to implement its loan business and
generate revenue sufficient to meet the interest and operating expenses of IBF
VI without seeking additional financing. Fixed interest expense on the bonds
in the first year following the offering is not expected to exceed $5 million,
and operating expenses, including the management fee, are not expected to
exceed $1.1 million. If the maximum amount of bonds is sold in the offering
and IBF VI is able to achieve its target return, gross revenue would be
approximately $7.8 million, which management expects to be sufficient to meet
IBF VI's obligations on the bonds.
InterBank is expected to acquire cumulative preferred stock in one or
more private transactions during the period the bonds are offered under this
prospectus. The amount of the initial preferred stock sold to InterBank will
be determined at the time an initial pool of mortgage loans is identified for
purchase by IBF VI through its wholly owned subsidiary, IBF VI - Asset
Securitization Corp. or "IBF VI SPV", and will equal the difference between
the acquisition price of the mortgage loans and the proceeds IBF VI or IBF VI
SPV expects to obtain through short-term warehouse financing or the issuance
of collateralized mortgage bonds. The initial proceeds from the sale of
preferred stock is expected to be between approximately $2.5 million and $5.0
million. In addition, InterBank may obtain additional preferred stock of IBF
VI on future dates as may be required for IBF VI to make additional leveraged
acquisitions.
IBF VI's profits are likely to be adversely affected during any period of
rapid changes, either upward or downward, in interest rates. Any future rise
in interest rates may adversely affect the following:
o borrower demand for IBF VI's lending products;
o IBF VI's cost of funds;
o the spread between the rate of interest IBF VI receives on loans and
interest rates IBF VI must pay under its outstanding credit
facilities and debt securities; and
o the profit IBF VI will realize from offerings of collateralized
mortgage bonds or sales of loans.
Any future decrease in interest rates could also reduce the amounts which
IBF VI may earn on our newly originated loans. This could reduce the spread
between the interest IBF VI earns on loans and the interest IBF VI pays under
its outstanding credit facilities and the debt. A decline in interest rates
could also decrease the size of the loan portfolio by increasing the level of
prepayments, because borrowers tend to refinance as interest rates fall.
Operating Policies and Objectives
IBF VI was established to purchase and manage several categories of
commercial mortgage loans, residential subprime mortgage loans and real estate
related assets and commercial non-real estate loans that will be identified,
managed and actively serviced by IBF Management, IB Consultants and third
party contractors. Any reference to the operations, investments and
acquisitions of IBF VI made in this prospectus shall include the operations,
investments and acquisitions of any of IBF VI's subsidiaries as well. IBF VI
will seek to generate cash flow primarily from the following:
(1) by originating and acquiring whole mortgage loans, which may include
commercial mortgages and subprime residential mortgages, and
(2) secondarily, from investments in
(A) subordinated interests in collateralized mortgage securities;
(B) investments that are subordinated to first lien mortgage loans
on commercial and multifamily residential properties or
"mezzanine investments;"
(C) construction loans and foreign real estate loans; and
(D) other commercial loans.
IBF VI may decide in the future to pursue other available acquisition
opportunities it deems suitable for its portfolio. At least 80% of IBF VI's
assets will be mortgage loans secured by first and second liens on commercial
and residential real estate. The remainder, 20% or less, of IBF VI's assets
will be invested in other real estate related assets and other commercial
loans. Within the 80% mortgage loan category, IBF VI will seek to purchase up
to approximately $200 million of mortgage loans and has a great deal of
discretion in determining whether to invest in commercial or residential
mortgage loans and within those categories which types of commercial
properties and residential properties will secure those mortgage loans. Within
the 20% category, IBF VI may purchase up to $50 million -- depending upon the
amount of mortgage loans acquired -- and will also have a great deal of
discretion in the types of permitted investments.
IBF VI will seek to maximize yield by managing credit risk through credit
underwriting. IBF VI plans to make acquisition decisions through asset and
collateral analysis, evaluating investment risks and potential rewards on a
case-by-case basis. To the extent that IBF VI's assets become concentrated in
a few states or a particular region, the return on investment will become more
dependent on the economy of those states or that region. Additionally, IBF
VI's ability to achieve its targeted yields or to recover on its investments
will be adversely affected if IBF VI's evaluation of the collateral is
incorrect, the collateral loses value or the process of collection on the
collateral is longer or more costly than anticipated when the investment is
acquired.
To create yields commensurate with its investment objectives, IBF VI
intends to pledge its mortgage loans as collateral for warehouse lines of
credit and collateralized mortgage bonds. There is no limit on the amount of
indebtedness of this type IBF VI can incur. IBF VI intends to leverage its
investments in an amount to be determined by IBF Management. If borrowing
costs increase, or if the cash flow generated by IBF VI's assets decrease, IBF
VI's use of leverage will increase the likelihood that IBF VI will experience
reduced or negative cash flow and reduced liquidity. IBF VI intends to use the
proceeds from those borrowings to invest in additional mortgage loans,
mortgage-backed securities and other assets and, in turn, to borrow against
those newly acquired assets. IBF VI's strategy is to repeat this process to
the extent opportunities to use leverage are available and IBF Management
determines and advises that using leverage is prudent and consistent with
maintaining an acceptable level of risk until IBF VI has significantly
leveraged its portfolio of mortgage loans. IBF VI's ability to complete
offerings of collateralized mortgage bonds depends on, among other things,
conditions in the securities markets generally and conditions in the
asset-backed securities markets specifically and the credit quality of IBF
VI's loan portfolios. If IBF VI is unable to issue collateralized mortgage
bonds, IBF VI will have difficulty repaying short-term credit facilities and
purchasing a sufficiently large amount of mortgage loans to meet its earnings
objectives.
To accomplish the leverage requirements described above, IBF VI will
establish IBF VI SPV as a special purpose financing entity. Institutional
lenders and statistical rating organizations who would make the financing
available to meet the leveraging objectives require a senior security interest
in the loans securing their debt facilities ahead of all general unsecured
creditors, such as the bondholders. The establishment of IBF VI SPV -- with
its sole purpose being the acquisition of loan pools and obtaining financing
-- will satisfy those institutional security interest objectives and provide
IBF VI with additional institutional sources of financing that would not
otherwise be available to it. Generally, activities relating to the
acquisition of assets and obtaining institutional senior financing by IBF VI
throughout this prospectus will be conducted in large part by IBF VI SPV.
In originating and acquiring its loans and investments, IBF VI will
compete with institutions purchasing similar assets, many of which have
established operating histories and procedures, may have access to greater
capital and other resources, and may have other advantages over IBF VI in
conducting certain businesses and providing certain services. IBF VI may not
be able to acquire sufficient loans and investments at spreads above its cost
of funds to achieve its yield and net income objectives.
IBF VI will contract for the servicing of securitizable mortgage loans
with third-party servicers, which are likely to be companies who sell the
loans to IBF VI. Since many borrowers require notices and reminders to keep
their mortgage loans current and to prevent delinquencies and foreclosures and
since the servicers IBF VI hires will provide these reminders and take
necessary remedial actions, IBF VI's earnings will be heavily dependent on the
servicers' success. If the servicers do not perform well, IBF VI may have
difficulty meeting its earnings objectives.
Investment Guidelines
General
The following is a summary of the guidelines setting forth the general
parameters for IBF VI's investments, borrowings and operations. IBF Management
has substantial discretion in applying these guidelines and making investment
decisions, although their discretion is constrained by the ongoing Investment
Company Act compliance requirement that IBF VI and its wholly owned
subsidiaries maintain a mortgage loan to total asset composition of at least
80%. See "Regulatory Matters - Investment Company Act Exemption" herein.
These guidelines will apply to loan originations and acquisitions and to
investments in real estate related assets, including subordinated interests,
mezzanine investments and commercial loans. Pending investment of its funds in
longer term investments as provided for in the guidelines, and in a manner
consistent with its intended reliance on the mortgage loan exception above,
IBF VI intends to invest those funds in readily marketable securities or
interest-bearing deposit accounts.
IBF VI is permitted to take an opportunistic approach to its investments,
and may acquire any of the types of assets described in the guidelines if it
and IBF Management determine that the investments would be in IBF VI's best
interests. IBF VI, in consultation with IBF Management, may establish
underwriting criteria for evaluating potential investments and, if the
underwriting criteria are established, IBF VI, in consultation with IBF
Management, may modify the underwriting criteria at any time and from time to
time. IBF VI's policy generally is to offer a price for each asset that it
contemplates acquiring that is not greater than the price that IBF Management
estimates to be sufficient to generate an acceptable risk-adjusted return to
IBF VI from the acquisition of that asset.
Purchase of loans from affiliates and loans made to affiliates
IBF VI may purchase loans and investments from affiliates of IBF
Management and IBF VI, and make loans to affiliates. In the same manner as
will apply to the purchase of mortgage loans and other investments from third
parties, the price at which mortgage loans and other investments will be
purchased from affiliates will be based on whether the price is fair and the
investment otherwise is suitable and in the best interests of IBF VI. To
determine whether the price of an investment from an affiliate or otherwise is
fair, IBF Management may consider a number of factors, which may include an
appraisal by an appraiser who is certified or licensed in the state and whose
compensation is not dependent on the transaction. Where possible, the price
that IBF VI will pay for loans and other assets acquired from affiliates will
be determined by reference to the prices most recently paid to the affiliates
for similar assets, adjusted for differences in the terms of those
transactions and for changes in market conditions between the dates of the
relevant transactions. If no previous sales of similar assets have occurred,
IBF VI will attempt to determine a market price for the asset by an
alternative method, such as obtaining a broker's price opinion or an
appraisal, if it can do so at a reasonable cost. Investors should understand,
however, that these determinations are estimates and are not bona fide third
party offers to buy or sell. It is the intention of IBF VI that the agreements
and transactions, including the sale of loans, mortgage-backed securities and
other investments, taken as a whole, between IBF VI on the one hand and its
affiliates on the other hand are fair to both parties.
IBF VI may make loans to affiliates if those loans fall within the
principal categories of assets described below. Loans to affiliates may
include commercial mortgage loans that are made to affiliates to acquire or
refinance a commercial property and other commercial loans made to affiliates.
Loans made to affiliates will not exceed 10% of the combined assets of IBF VI
and its wholly owned subsidiaries. Loans made by IBF VI to affiliates will be
underwritten pursuant to the same guidelines and on financial terms that are
no less favorable to IBF VI than loans made to unaffiliated third parties.
Investment Activities
The discussion below describes the principal categories of assets that
IBF VI intends to originate or acquire. IBF VI and its wholly owned
subsidiaries intend to invest at least 80% of their combined assets at all
times in the first two categories of assets described below.
Commercial Mortgage Loans. IBF VI will originate or acquire first and
second lien commercial mortgage loans. A substantial portion of these
mortgages are expected to be institutional quality mortgage loans, meaning
they will meet the institutional investor and rating agency criteria to serve
as collateral for collateralized mortgage bonds. The purchase price of the
loans is expected to be provided in large part from warehouse lines of credit
and the issuance of collateralized mortgage bonds.
Acquisitions. IBF VI will purchase non-performing and performing
commercial mortgage loans from government agencies, financial institutions and
affiliates. Acquiring non-performing loans at discounts may provide
opportunities for IBF VI to achieve its desired rates of return. Accordingly,
IBF VI will attempt to identify and purchase non-performing loans that have
the potential through its rehabilitation and collection activities, including
foreclosure, to generate its desired rates of return. IBF VI will also attempt
to purchase performing loans at a discount that, coupled with stated interest
on the loans, have the potential to achieve IBF VI's desired rates of return.
Before acquiring any loan, IBF VI will review the loan documents, the
borrower's payment history, the borrowers' financial condition and the value
of the collateral securing the loan. Sources of information that may be
examined in determining the fair market value of a real property may include
one or more of the following:
o current and historical operating statements;
o existing or new appraisals;
o sales comparables;
o industry statistics and reports regarding operating expenses, such
as those compiled by the Institute of Real Estate Management and the
Building Owners and Managers Association;
o existing leases and market rates for comparable leases;
o deferred maintenance observed during site inspections or described
in structural and engineering reports; and
o correspondence and other documents and memoranda found in the files
of the seller of the loan secured by that real property or other
relevant parties.
After completing its evaluation and assessing the potential for satisfying its
desired rates of return, IBF VI will determine a price at which it would be
willing to purchase the loan. As a general guideline, IBF VI will set its bid
for non-performing loans at a price that management believes could provide a
30 percent rate of return, and for performing loans could provide an 18
percent rate of return. If management believes that particular risk attributes
for a loan would justify a higher or lower target return, such as the value of
the underlying collateral being high compared to the debt obligation or a
guarantor's ability to repay the loan as evidenced by a strong credit history,
a higher or lower bid price and higher or lower projected return may be
acceptable to IBF VI.
In addition, IBF Management is expected to develop projections of net
operating income and cash flows with respect to operating properties securing
loans, taking into account lease rollovers, tenant improvement costs and
leasing commissions. IBF Management will compare its estimates of revenue and
expenses to historical operating statements and estimates provided in
appraisals and general industry and regional statistics. Market capitalization
rates and discount rates will then be applied to the cash flow projections to
estimate values. These values will then be compared to available appraisals
and market sale comparables to determine recommended bid prices for each
asset. The amount offered by IBF VI generally will take into account projected
holdings periods, capital costs and projected profit expectations, and will be
the price that IBF Management estimates is sufficient to generate an
acceptable risk-adjusted return on IBF VI's investment.
Once IBF VI has acquired non-performing loans, it will attempt to enhance
its overall rate of return by restructuring or refinancing the loans through
workouts with borrowers. If restructuring or refinancing is not possible, IBF
VI will seek to obtain ownership of the underlying collateral through
foreclosure and collection proceedings. Non-performing loans restructured or
refinanced may be serviced by IBF Management and packaged for sale to
non-affiliated third parties as performing loans. Collateral acquired through
foreclosure will be liquidated with a view to minimizing the time the
investment is held and maximizing the return on the investment.
Direct originations. IBF VI also intends to originate loans primarily
secured by commercial real estate. The targeted market will include borrowers
that, because of time constraints, credit factors, desired loan amount, or
other circumstances, may be unable to obtain sought-after financing from
traditional lenders. IBF VI will obtain leads for these loans through
institutions such as banks, general lenders of corporate obligations, mortgage
lenders, and real estate and finance companies. IBF VI will primarily make
loans secured by real estate, and secondarily loans secured by other assets.
Before originating a loan, IBF VI intends to perform a thorough review of
the value of the collateral securing the loan and the borrower's ability to
repay the loan. In addition to its own review, IBF VI will obtain independent
appraisals of the related real property securing all mortgage loans. For loans
secured by other personal property, IBF VI may rely solely on its own internal
evaluation of the value of the collateral or obtain independent appraisals of
the collateral.
Generally, IBF VI will obtain Phase I environmental assessments on
commercial properties prior to originating the related loan. The purpose of
Phase I environmental assessments is to identify existing and potential
environmental contamination that is made apparent from historical reviews of
the properties, reviews of certain public records, preliminary investigations
of the sites and surrounding properties and screening for the presence of
hazardous substances, toxic substances and underground storage tanks. However,
IBF VI may choose not to obtain Phase I environmental assessments on certain
commercial properties prior to its origination and to originate loans without
Phase I environmental assessments on the underlying property if it deems that
to do so is prudent. Further, even if a Phase I environmental assessment is
obtained, the assessment may not reveal all existing and potential
environmental risks and liabilities, and there may unknown material
environmental obligations or liabilities.
IBF VI will also generally require borrowers to obtain and maintain a
standard hazard insurance policy in an amount equal to the lower of the unpaid
principal amount of the related loan and the replacement value of the
improvements on the mortgaged property.
As a general guideline, IBF VI will attempt to make secured loans with a
stated interest rate of at least 18 percent per annum. IBF VI will also charge
a loan origination fee of not less than one percent of the total loan, which
will typically be added to the principal amount financed. Therefore, the
actual amount funded at the time the loan is originated will be less than the
principal amount of the loan on which IBF VI will receive interest.
Typically, repayment will be made from the sale of the collateral or by a
refinancing by the borrower. If one of these methods of repayment becomes
unfeasible, IBF VI will attempt to restructure or refinance the loan. If
restructuring or refinancing becomes unfeasible, IBF VI will seek ownership of
the underlying collateral through sale, liquidation, or collection of the
outstanding collateral.
Residential Mortgage Loans. IBF VI may purchase pools of first and junior
lien residential mortgage loans made to high credit borrowers and to credit
impaired borrowers. The residential loans will be originated by unaffiliated
third parties generally under guidelines that are primarily intended to
evaluate the value and adequacy of the mortgaged property as collateral, the
borrower's credit standing and repayment ability which will depend, among
other things, on loan-to-value ratio, debt-to-income ratio, credit history,
stability of employment, and time in residence at the applicant's current
address. Generally, the originator will review and verify the loan applicant's
sources of income other than under stated income programs, calculate the
amount of income from all of the sources indicated on the loan application,
review the credit history of the applicant and calculate the debt-to-income
ratio to determine the applicant's ability to repay the loan, and review an
appraisal of the mortgaged property. The guidelines may be less stringent than
the standards generally acceptable to Freddie Mac and Fannie Mae with regard
to the borrower's credit standing and repayment ability. Borrowers may have
payment histories and debt ratios which would not satisfy Freddie Mac and
Fannie Mae underwriting guidelines and may have a record of major derogatory
credit items such as outstanding judgments or prior bankruptcies. The
guidelines will generally require verification of employment and income, title
insurance on all mortgage loans secured by liens on real property, and fire
and extended coverage casualty insurance be maintained on the secured property
in an amount at least equal to the principal balance of the related
single-family loan or the replacement cost of the property, whichever is less.
The originators will generally grade all mortgage loans using a credit grading
matrix. Each originator's credit grading may have variations but generally
will establish "A" as the highest and "D" as the lowest category with two or
more categories in between.
"A" category loans will generally permit the highest loan-to-value ratio,
the lowest back end debt ratio, the most restrictive mortgage and trade line
credit delinquencies and will generally have the lowest interest rates. "D"
category loans will generally permit the lowest loan-to-value ratio, the
highest back end debt ratio, the least restrictive mortgage and trade line
credit delinquency history and generally have the highest interest rates.
Categories in between these levels will have appropriate variations in the
factors described above. IBF VI will purchase mortgage loans from originators
who originate loans in all credit categories but which primarily originate "A"
and "B" category loans with typically less than 25% of their loans being "C"
category loans and less than 10% of their loans being "D" category loans. IBF
VI does not intend to acquire subprime residential loans with a loan-to-value
ratio at or in excess of 100%.
Any residential loan may generally be prepaid in full or in part at any
time, although IBF VI will attempt to acquire as large a percentage as
possible of its loans that provide for the payment by the borrower of a
prepayment charge in limited circumstances on certain full or partial
prepayments made generally anywhere from one to five years from the date of
execution of the related note.
The originators will generally make representations and warranties to IBF
VI in respect of the acquired loans that include, among other things, that:
o the information with respect to each loan is true and correct as of
the specified date;
o each mortgaged property is improved by a one- to four-family
residential dwelling, which may include condominiums, townhouses and
manufactured housing permanently attached to foundations;
o each mortgage loan had, at the time of origination, either an
attorney's certification of title or a title search or title policy;
o each mortgage loan was secured by a valid and subsisting first or
second lien of record on the mortgaged property subject in all cases
only to the exceptions to title set forth in the title insurance
policy, if any, with respect to the related mortgage loan;
o the originator held good and indefeasible title to, and was the sole
owner of, each mortgage loan; and
o each mortgage loan was originated under applicable law and is the
valid, legal and binding obligation of the related borrower.
If the originator cannot cure a breach of any representation or warranty made
by it in respect of a mortgage loan that materially and adversely affects IBF
VI's interest, the originator will be obligated to repurchase the mortgage
loan. If the originator fails to repurchase a mortgage loan, IBF VI will
suffer any loss related to the mortgage loan.
Other Real Estate Related Assets and Other Commercial Loans. IBF VI
intends to limit its investment in other real estate related assets and other
commercial loans, to no more than 20% of its portfolio. Investments in other
real estate related assets and other commercial loans will generally have
loan-to-value ratios of no more than 90%, if secured by real estate. IBF VI's
policy will be to conduct an investigation and evaluation of other real estate
related assets and other commercial loans before purchasing these assets.
Evaluation of potential properties will be conducted primarily by IBF
Management's employees who specialize in the analysis of those types of
assets, often with further specialization based on geographic or
collateral-specific factors. IBF VI expects IBF Management to use third
parties, such as brokers who are familiar with the property's type and
location, to assist it in conducting an evaluation of the value of the
property, and, depending on the circumstances, to use subcontractors, such as
local counsel and engineering and environmental experts, to assist in the
evaluation and verification of information and the gathering of other
information not previously made available by the potential seller. "Other real
estate related assets" and "other commercial loans" may include the following:
Subordinate interests. IBF VI may purchase subordinate mortgage-backed
securities in pools of loans that IBF VI did not acquire and securitize
itself. Mortgage-backed securities generally are issued either as
collateralized mortgage obligations or pass-through certificates.
Mortgage-backed securities are debt obligations of special purpose
corporations, owner trusts or other special purpose entities secured by
commercial mortgage loans or mortgage-backed securities. Mortgage-backed
securities may be issued or sponsored by private originators of, or investors
in, mortgage loans, including savings and loan associations, mortgage bankers,
commercial banks, investment banks and other entities. Mortgage-backed
securities are not guaranteed by an entity having the credit status of a
governmental agency or instrumentality and generally are structured with one
or more of the types of credit enhancement described below. In addition,
mortgage-backed securities may be illiquid.
In most mortgage loan securitizations, a series of mortgage-backed
securities is issued in multiple classes in order to obtain investment-grade
ratings for the senior classes and thus increase their marketability. Each
class of mortgage-backed securities may be issued with a specific fixed or
variable coupon rate and has a stated maturity or final scheduled distribution
date. Principal prepayments on the mortgage loans comprising the mortgage
collateral may cause the mortgage-backed securities to be retired
substantially earlier than their stated maturities or final scheduled
distribution dates although, with respect to commercial mortgage loans, there
generally are penalties for or limitations on the ability of the borrower to
prepay the loan. Interest is paid or accrued on mortgage-backed securities on
a periodic basis, typically monthly.
The credit quality of mortgage-backed securities depends on the credit
quality of the underlying mortgage collateral. Among the factors determining
the credit quality of the underlying mortgage loans will be the ratio of the
mortgage loan balances to the value of the properties securing the mortgage
loans, the purpose of the mortgage loans, the amount and terms of the mortgage
loans, the geographic diversification of the location of the properties and,
in the case of commercial mortgage loans, the credit-worthiness of tenants.
Moreover, the principal of and interest on the underlying mortgage loans may
be allocated among the several classes of a mortgage-backed securities in many
ways, and the credit quality of a particular class results primarily from the
order and timing of the receipt of cash flow generated from the underlying
mortgage loans.
Subordinate mortgage-backed securities carry significant credit risks.
Typically, in a "senior-subordinated" structure, the subordinate
mortgage-backed securities provide credit protection to the senior classes by
absorbing losses from loan defaults or foreclosures before those losses are
allocated to senior classes. Moreover, typically, as long as the more senior
tranches of securities are outstanding, all prepayments on the mortgage loans
generally are paid to those senior tranches. In some instances, particularly
with respect to subordinate mortgage-backed securities in commercial
securitizations, the holders of subordinate mortgage-backed securities are not
entitled to receive scheduled payments of principal until the more senior
tranches are paid in full. Because of this structuring, subordinate
mortgage-backed securities in a typical securitization have a substantially
greater risk of non-payment than are those more senior tranches. Accordingly,
the subordinate mortgage-backed securities are assigned lower credit ratings,
or no ratings at all.
Neither the subordinate mortgage-backed securities nor the underlying
mortgage loans are guaranteed by agencies or instrumentalities of the U.S.
government or by other governmental entities and, accordingly, have credit
risks. As a result of the typical "senior-subordinated" structure, the
subordinate mortgage-backed securities will be extremely sensitive to losses
on the underlying mortgage loans. For example, if IBF VI owns a $10 million
subordinate mortgage-backed securities consisting of $100 million of
underlying mortgage loans, a 7% loss on the underlying mortgage loans will
result in a 70% loss on the subordinate mortgage-backed securities.
Accordingly, the holder of the subordinate mortgage-backed securities is
particularly interested in minimizing the loss frequency -- the percentage of
the loan balances that default over the life of the mortgage collateral -- and
the loss severity -- the amount of loss on a defaulted mortgage loans, i.e.,
the principal amount of the mortgage loan unrecovered after applying any
recovery to the expenses of foreclosure and accrued interest -- on the
underlying mortgage loans.
The loss frequency on a pool of mortgage loans will depend upon a number
of factors, most of which will be beyond the control of IBF VI or the
applicable servicer. Among other things, the default frequency will reflect
broad conditions in the economy generally and real estate particularly,
economic conditions in the local area in which the underlying mortgaged
property is located, the loan-to-value ratio of the mortgage loan, the purpose
of the loan, and the debt service coverage ratio. The loss severity will
depend upon many of the same factors described above, and will also be
influenced by the servicer's ability to foreclose on the defaulted mortgage
loan and sell the underlying mortgaged property. Legal issues may extend the
time of foreclosure proceedings or may require the expenditure of additional
sums to sell the underlying mortgaged property, in either case increasing the
amount of loss with respect to the loan. The underwriting standards that will
be used by IBF VI in evaluating mortgage loans will be similar to the
guidelines described above with respect to commercial mortgage loans acquired
by IBF VI.
The subordinate mortgage-backed securities to be acquired by IBF VI
generally will not have been registered under the Securities Act of 1933, as
amended, but instead will initially have been sold in private placements,
which will have more limited marketability and liquidity. The subordinate
interests may generate "phantom income" that bears no relationship to the
actual economic income attributable to the subordinate interest and may also
be issued at a significant discount to their outstanding principal balance,
which gives rise to original issue discount for federal income tax purposes.
As a result, IBF VI could be required to borrow funds or to liquidate assets
in order to pay interest on the bonds.
Mezzanine investments. IBF VI may make investments that are subordinated
to first lien mortgage loans on commercial and multifamily real estate. For
example, on a commercial property secured by a first lien mortgage loan with a
principal balance equal to 70% of the value of the property, IBF VI could lend
the owner of the property, typically a partnership, an additional 15% to 20%
of the value of the property. Typically, the loan would be secured either by a
second lien position on the property, or a partnership or other ownership
interest in the owner. If the ownership interest is pledged, IBF VI would be
in a position to take over the operation of the property in the event of a
default on the loan. These types of mezzanine investments generally would
provide IBF VI with the right to receive a stated interest rate on the loan
balance and may also include a percentage of gross revenues from the property,
payable to IBF VI on an ongoing basis, and/or a percentage of any increase in
value of the property, payable upon maturity or refinancing of the loan, or
otherwise would allow IBF VI to charge an interest rate that would provide an
attractive risk-adjusted return. Mezzanine investments may also take the form
of preferred equity, which will have a claim against both the operating cash
flow and liquidation proceeds from the specific real estate assets. Before
originating mezzanine investments, IBF VI intends to perform certain credit
underwriting to attempt to evaluate future performance of the collateral
supporting the investment, which will include a review of the following:
o the underlying collateral of each loan, including property
characteristics, location, creditworthiness of tenants and
economics;
o the relative principal amounts of the loan, including the
loan-to-value and debt service coverage ratios;
o the borrower and manager's ability to manage the property and make
debt service payments; and
o the mortgage loan's purpose and documentation.
The mezzanine investments will be on commercial and multi-family properties
that generally will have loan-to-value ratios of no more than 90% and debt
service coverage ratios of no less than 1.05x.
Construction loans. IBF VI may take advantage of opportunities to provide
construction loans on commercial property, taking a first lien mortgage to
secure the debt.
Foreign real estate loans. IBF VI may originate or acquire mortgage loans
secured by real estate located outside the United States. IBF VI has not
imposed any limits with respect to the amounts that it could invest in foreign
mortgages in the aggregate, any particular type of foreign mortgaged property,
or properties located in any particular country. Investing in mortgages
located in foreign countries creates risks associated with the uncertainty of
foreign laws, markets and risks related to currency conversion and possible
taxation by foreign jurisdictions. IBF Management has limited experience in
investing in foreign mortgages. IBF VI may be required to pay foreign income
tax with respect to its investments in foreign mortgages.
Other Mortgage-Backed Securities. IBF VI may create or acquire
interest-only securities that have characteristics of subordinate
mortgage-backed securities, known as subordinate interest-only securities. A
subordinate interest-only security is entitled to no payments of principal;
moreover, interest on a subordinate interest-only security often is withheld
in a reserve fund or spread account and is used to fund required payments of
principal and interest on the more senior classes. Once the balance in the
spread account reaches a certain level, interest on the subordinate
interest-only security is paid to its holders.
These subordinate interest-only securities provide credit support to the
senior classes, and thus bear substantial credit risk. Moreover, because a
subordinate interest-only security receives only interest payments, its yield
is extremely sensitive to changes in the weighted average life of the class,
which in turn is dictated by the rate of prepayments, including as a result of
defaults, on the underlying loans. Some subordinate mortgage-backed securities
may generate "phantom income" which bears no relationship to the actual
economic income attributable to the subordinate interest-only securities.
IBF VI may invest not only in classes of subordinate interest-only
securities but also in other classes of mortgage-backed securities, such as
interest-only and inverse interest-only securities. These investments will
differ from IBF VI's subordinate mortgage-backed securities because they
generally are not the "first loss" position, have credit ratings of "AAA"
through "BB" and are not commercially oriented.
Other Commercial Loans. IBF VI may originate or acquire commercial loans
secured by non-real estate assets. These loans will be underwritten based on
the asset collateral value, borrower's payment history and financial condition
and operating cash flow available for debt service.
Risk Management
The following describes some of the investment management practices that
IBF VI may employ from time to time to earn income, facilitate portfolio
management -- including managing the effect of maturity or interest rate
sensitivity -- and mitigate risk -- such as the risk of changes in interest
rates and risks associated with certain property types. IBF VI may amend or
deviate from these policies or adopt other policies in the future.
Leverage and borrowing
IBF VI intends to leverage a substantial amount of its assets through the
issuance of collateralized mortgage bonds, reverse repurchase agreements,
warehouse lines of credit, bank credit facilities, mortgage loans on real
estate and other borrowings, when there is an expectation that the leverage
will benefit IBF VI. If changes in market conditions cause the cost of this
type of financing to increase relative to the income that can be derived from
securities purchased with the proceeds, IBF VI may reduce the amount of
leverage it utilizes. Leverage creates an opportunity for increased income
but, at the same time, creates special risks. For example, leverage magnifies
changes in the net worth of IBF VI and affects the amounts available for
payment to bondholders. Although the amount owed will be fixed, IBF VI's
assets may change in value during the time the debt is outstanding. Leverage
will create interest expenses for IBF VI which can exceed the revenues from
the assets retained. To the extent the revenues derived from assets acquired
with borrowed funds exceed the interest expense IBF VI will have to pay, IBF
VI's net income may be greater than if borrowing had not been used.
Conversely, if the revenues from the assets acquired with borrowed funds are
not sufficient to cover the cost of borrowing, the net income of IBF VI will
be less than if borrowing had not been used.
Collateralized mortgage bonds through IBF VI - Asset Securitization Corp. and
warehouse lines of credit
IBF VI may originate or purchase mortgage loans and through IBF VI - SPV
issue collateralized mortgage bonds. During the period in which IBF VI is
acquiring mortgage loans for these bond issuances, IBF VI is likely to borrow
funds secured by the related loans under warehouse lines of credit. IBF VI has
not yet established any of these types of credit lines. The principal balance
of the collateral will typically exceed the principal balance of the
collateralized mortgage bonds. While the debt is outstanding, IBF VI's ability
to dispose of the loans will be limited. Once the collateralized mortgage
bonds are paid in full, IBF VI will have unlimited ability to dispose of or
refinance the loans.
Reverse repurchase agreements
IBF VI or IBF VI SPV may enter into reverse repurchase agreements, which
are agreements under which IBF VI would sell assets to a third party with the
commitment that IBF VI may repurchase the assets from the purchaser at a fixed
price on an agreed date. Reverse repurchase agreements may be characterized as
loans to IBF VI from the other party that are secured by the underlying
assets. The repurchase price reflects the purchase price plus an agreed market
rate of interest.
Bank credit facilities
IBF VI or IBF VI SPV intends to borrow money through various bank credit
facilities, which will have varying fixed or adjustable interest rates and
varying maturities. IBF VI has not yet established any bank credit facilities
of this type.
Risks during accumulation period
During the accumulation period while IBF VI owns mortgage loans but has
not yet issued mortgage backed securities backed by the loans, IBF VI will
retain risks related to:
o borrower defaults, bankruptcies, fraud losses and special hazard
losses that are not covered by standard hazard insurance;
o IBF VI's use of short-term floating rate borrowings to acquire long
term mortgages, including some of which will bear fixed rates of
interest, which could expose us to a maturity mismatch;
o IBF VI's short-term variable borrowing costs could exceed the income
earned on the loans acquired with the borrowed funds;
o financing agreements IBF VI may enter which are periodically marked
to market by the lender, and a decline in the value of loans pledged
to secure financing agreements which may require additional
collateral or additional payments to be made under the agreements;
and
o the unavailability of renewals of or substitutes for maturing or
called short term borrowings for any reason, which may require IBF
VI to sell assets quickly to repay those borrowings resulting in
losses associated with forced sales of illiquid collateral to repay
borrowings.
Any losses during the accumulation period could keep IBF VI from
achieving its earnings objectives.
To address some of these risks, IBF VI may engage in a variety of
interest rate management techniques for the purpose of managing the effective
maturity or interest rate of its assets or liabilities. These techniques also
may be used to attempt to protect against declines in the market value of IBF
VI's assets resulting from general trends in debt markets or to change the
duration of or interest rate risk associated with IBF VI's borrowings. Any
transaction of this type has risks, and may limit the potential earnings on
IBF VI's investment in real estate related assets. These techniques may
include puts and calls on securities or indices of securities, Eurodollar
futures contracts and options on Eurodollar futures contracts, interest rate
swaps or other transactions of this type.
IBF VI may also use hedging techniques to mitigate potential risks, and
not for speculative purposes, e.g., with respect to indebtedness, to limit,
fix or cap the interest rate on variable interest rate indebtedness. IBF VI
may utilize interest rate swaps, options on interest rate swaps,
treasury-locks, options on treasuries and interest rate caps or floors, to
protect the value of fixed rate mortgage loans originated and held for
securitization. IBF VI plans to issue collateralized mortgage bonds backed by
pools of mortgage loans that it originates or acquires. Changes in interest
rates during the time IBF VI is holding mortgage loans for securitization will
impact the net proceeds and terms available from the issuance of
collateralized mortgage bonds. The intent of IBF VI's hedging strategy will be
to produce an aggregate gain or loss which approximates the gain or loss in
securitization proceeds caused by changes in interest rates between the time
the mortgage loan is funded and the time IBF VI issues collateralized mortgage
bonds. All hedge agreements related to a securitized pool of loans will be
terminated concurrently with the securitization.
Insurance
IBF VI will try to obtain, or cause the borrowers on its loans to obtain,
insurance coverage of the type and in the amount customarily obtained by
owners of properties similar to the commercial properties and residential
properties securing its loans. However, borrowers may not comply with our
requirements and there are certain types of losses, generally of a
catastrophic nature, such as earthquakes, floods and hurricanes, that may be
uninsurable or too costly to justify insuring. If uninsured losses occur on
the security for IBF VI's loans and investments, IBF VI may suffer losses and
have difficulties achieving its earnings objectives.
Commercial mortgage loan risk management
Property values and net operating income derived from commercial
properties are volatile and commercial mortgage loans may be adversely
affected by a number of factors and risks, including, but not limited to:
o generally larger loan balances;
o dependency on successful operation of the property securing the
mortgage and tenants operating businesses in that property for
repayment;
o loan terms that often require little or no amortization and,
instead, provide for balloon payments at stated maturity;
o certain factors outside IBF VI's control or the control of the
borrower such as governmental regulations, zoning, tax laws or rent
control laws in the case of multifamily mortgage loans;
o national, regional and local economic conditions, which may be
adversely affected by plant closings, industry slowdowns and other
factors;
o local real estate conditions, such as an oversupply of housing,
retail, industrial, office or other commercial space;
o potential environmental or other legal liabilities;
o changes or continued weakness in specific industry segments;
o perceptions by prospective tenants and, in the case of retail
properties, retailers and shoppers, of the safety, convenience,
services and attractiveness of the property;
o the willingness and ability of the property's owner to provide
capable management and adequate maintenance;
o construction quality, age and design;
o demographic factors;
o the non-recourse nature of commercial real estate loans;
o retroactive changes to building or similar codes; and
o increases in operating expenses such as energy costs.
Construction loans and mezzanine investments may also pose additional
risk of loss related to:
o dependency on successful completion and operation of the project for
repayment;
o difficulties in estimating construction or rehabilitation costs;
o loan terms that often require little or no amortization, providing
instead for additional advances to be made and for a balloon payment
at a stated maturity date;
o possible foreclosure by the holder of the senior loan resulting in a
mezzanine investment becoming unsecured; and
o higher loan-to-value ratios.
IBF VI will adopt the commercial loan underwriting guidelines discussed
above in its attempt to mitigate some of the risks of commercial mortgage
lending. However, many of the factors described above may not be within IBF
VI's control or readily assessable and, therefore, the underwriting guidelines
may not protect IBF VI from losses.
Significant Acquisitions
IBF VI and its wholly owned subsidiaries have commenced discussions with
originators and are reviewing pools of commercial mortgage loans and single
family mortgage loans, although no commitments have been made for any
acquisitions. IBF VI and its wholly owned subsidiaries intend to collectively
purchase up to $200 million of single family residential mortgage loans or
commercial mortgage loans within four months of the date of this prospectus.
This would take the form of one purchase or a series of purchases over several
months. The mortgaged properties securing the mortgage loans will consist
primarily of either (i) a variety of commercial property types or (ii)
single-family residences -- which may be detached, part of a multifamily
dwelling, a condominium unit, a townhouse, a manufactured home or a unit in a
planned unit development. The residential mortgaged properties may be
owner-occupied properties, which include second and vacation homes, or
non-owner occupied investment properties.
IBF VI expects the mortgage loans to generally contain the following
characteristics:
o some of the mortgage loans are expected to contain a prepayment fee
clause. Prepayment fee clauses generally require the mortgagor to
pay a fee upon early prepayment of the related loan;
o on the average, the combined loan-to-value ratios or CLTV's (based
upon the appraised values of the related mortgaged properties at the
time of origination) are expected to be at or below approximately
90%;
o the mortgage loans will be secured by a large number of commercial
properties or single family homes located in at least 20 states
(although some states may account for significant levels of
concentration);
o the average principal balance of commercial mortgage loans will be
less than $500,000 and residential mortgages loans will be less than
$200,000;
o the weighted average term to stated maturity will range from 180 to
360 months; and
o at least 80% of the mortgage loans will be secured by first liens,
and the remainder by second liens.
There are several originators of residential mortgage loans who are
expected to make pools of loans available for purchase by IBF VI and its
wholly owned subsidiaries. IBF VI is also seeking warehouse financing and
discussing collateralized mortgage bond financing alternatives with
institutional financing sources to assist in funding the acquisition of a pool
or pools of loans of the type described above.
IBF VI will file with the Securities and Exchange Commission a Current
Report on Form 8-K for any significant acquisitions of assets or any
significant financing made available to IBF VI. The Form 8-K will be provided
to the indenture trustee and will be available to bondholders by making a
request to the indenture trustee or by reviewing the Form 8-K at the
Securities and Exchange Commission's facilities or at the Securities and
Exchange Commission's website, each as identified under the caption
"Additional Information" in this prospectus. In addition, the indenture
trustee will be given an updated list of loans and investments made by IBF VI,
which will be updated monthly. Investors wishing to obtain a copy of this list
may do so by contacting the indenture trustee directly.
Management
Employees
IBF VI does not have, and does not expect to have, any full time
employees. No salaries will be paid to the executive officers of IBF VI. All
personnel services required for IBF VI's operations will be provided by IB
Consultants through the management agreement with IBF Management.
IBF VI's business will be managed by the officers and directors of IB
Consultants and IBF Management. The following persons are the officers and
directors of IBF VI, IBF Management and IB Consultants:
<TABLE>
<CAPTION>
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
Simon A. Hershon 52 CEO, President and Director of IBF VI June 1998
CEO, President and Director of IBF Management
Ehud D. Laska 50 Executive Vice President and Director June 1998
Ivan M. Krasner 48 Senior Vice President September 1998
Robert L. Olson 57 Chief Financial Officer May 2000
Todd D. Snyder 36 Vice President and General Counsel September 2000*
</TABLE>
---------
* Mr. Snyder has entered into an employment agreement commencing September
2000.
Biographies
The following are brief biographies of the officers and directors:
Simon A. Hershon has, for the past 22 years, been the President and
C.E.O. of InterBank, IB Consultants, InterBank/Brener Brokerage Services,
Inc., American Eagle Funding, LLC, InterBank Capital Group, IBF Securities,
Inc., IBF Management, InterBank Funding Special Purpose Corporation, IBF VI
Special Purpose Corporation II, IBF Special Purpose Corporation III, IBF VI
Participating Income Fund, IBF - Alternative Investment Fund, and IBF Special
Purpose Corporation VII. These companies offer financial advisory, asset
management, merchant banking, and investment services to business,
institutions and individuals in the hospitality, real estate, finance, and
communications industries. Through IB Consultants, Mr. Hershon has been
involved in numerous corporate and bond financings and provided advisory
services in connection with the largest bankruptcy in Washington, D.C.
history, which totaled over $2.0 billion. Mr. Hershon was also involved,
through InterBank/Brener Brokerage Services, Inc., in over $5.0 billion of
hotel transactions. Mr. Hershon's education and professional experience
combine to provide InterBank's clientele with an in depth understanding of
institutional and corporate finance, real estate finance and development, and
hospitality turn-arounds. Mr. Hershon graduated from the U.S. Naval Academy
and subsequently served in nuclear powered submarines in the U.S. Navy. He
received both a Masters and Doctorate in Business Administration from Harvard
University where he concentrated in finance and graduated with honors.
Ehud D. Laska has served as President of American Eagle Funding, LLC, and
Managing Director of the InterBank Capital Group since January 1996. Through
these firms, Mr. Laska specializes in building up companies through same
industry consolidation and acquisitions. Mr. Laska has also served as the
Chairman of Coleman & Company Securities, Inc., a member firm of the National
Association of Securities Dealers, Inc., since May 1996. Mr. Laska has also
served as a director of Headway Corporate Resources, Inc., a publicly held
corporation engaged in human resource management, since August 1993. From
August 1994 to February 1996, Mr. Laska served as a managing director at the
investment-banking firm of Continuum Capital, Inc. While serving as a Managing
Director with Tallwood Associates, Inc., a boutique investment banking firm,
from May 1992 to August 1994, Mr. Laska founded the Private Equity Finance
Group, which merged with Continuum Capital, Inc. in August 1994. Prior to
1992, Mr. Laska was a senior investment banker with the Wall Street firms of
CS/First Boston, Drexel Burnham Lambert, Paine Webber, and Laidlaw Equities.
Mr. Laska has also served as vice president and deputy chief financial officer
at Citibank, N.A. from 1984 to 1987. Mr. Laska graduated from the University
of Massachusetts with a Bachelor of Science in Engineering and holds an
Masters of Science degree in engineering from Brown University and a Masters
of Business Administration from Stanford University.
Ivan M. Krasner has been employed since September 1998 by IBF Securities,
Inc., where he is responsible for managing the marketing operations of
InterBank's business activities. Mr. Krasner has over 20 years experience in
the development, strategic positioning, and marketing of financial service
products. Most recently, Mr. Krasner was Vice President of Orbitex Management,
a European-based mutual fund group specializing in global sector funds, from
September 1997 to August 1998. From September 1996 to August 1997, Mr. Krasner
was a founding partner and Senior Vice President of The Net Collaborative, a
consultancy of industry experts bringing internet solutions to large financial
service institutions. From October 1983 to December 1995, Mr. Krasner was
employed in various positions by PLM International, a major originator of
equipment leasing programs. Mr. Krasner graduated from C.W. Post College with
a Bachelor of Arts in Philosophy and attended the Strategic Marketing
Management Program at the Harvard Business School.
Robert L. Olson has served as Chief Financial Officer since May 2000. Mr.
Olson has over 20 years experience in developing financial controls and
procedures for companies in various industries. Most recently, Mr. Olson
served as Vice President of Finance for The Energy Grid, Inc., a start up
company in the energy, gas and telecommunications industries, from March 1999
to May 2000. From September 1997 to March 1999, Mr. Olson served as Vice
President of Finance for Global Intellicom, Inc., a publicly-traded technology
firm. From June 1990 to September 1997, Mr. Olson served as Vice President of
Finance for Trafalgar Ltd., a manufacturer, wholesaler and retailer of leather
products. From 1977 to June 1990, Mr. Olson served as a Vice President of
Finance or Chief Financial Officer for various companies involved primarily in
retailing and manufacturing. Mr. Olson graduated from Long Island University
with a Bachelor of Science in Accounting.
Todd D. Snyder will serve as Vice President and General Counsel for
InterBank, IB Consultants and IBF VI beginning September 2000. Prior to
joining InterBank, Mr. Snyder practiced corporate and securities law in
Washington, DC. Prior to practicing law, Mr. Snyder's experience includes
acting as due diligence officer for a broker-dealer where he was responsible
for the review and analysis of various securities offerings. Mr. Snyder is
also a certified public accountant. Mr. Snyder earned his Bachelor of Arts,
Bachelor of Science and Juris Doctor from the University of Maryland.
IBF Management
IBF Management, formed in December 1998, succeeded to the business of IB
Consultants. Since December 1990, InterBank, IB Consultants and their
affiliates and successors, including IBF Management, have been in the business
of providing crisis management and turnarounds, asset restructuring, workouts,
and corporate and real estate finance. InterBank and its affiliates have 32
employees.
Since 1977, InterBank, its predecessors, affiliates and successors
completed over $3 billion in restructurings and workouts including the
restructuring of mortgage backed bonds and real estate-backed municipal
securities. In addition, InterBank assisted clients in the development of over
100 real estate projects. In addition, InterBank provided workout services in
the largest personal bankruptcy case in the Washington metropolitan area,
which involved over 200 partnerships.
IBF VI will enter into the management agreement with IBF Management for a
term expiring on the maturity or other redemption of the bonds. IBF Management
will be primarily involved in three activities:
o underwriting, originating and acquiring mortgage loans and other
real estate related assets;
o asset/liability management, financing, management and disposition of
loans, including credit and prepayment risk management, collection
of payments, enforcement of remedies, foreclosure and property
disposition and related services; and
o capital management, oversight of IBF VI's structuring, analysis,
capital raising and investor relations activities.
In conducting these activities, IBF Management will formulate operating
strategies for IBF VI, arrange for the acquisition of assets by IBF VI,
monitor the performance of IBF VI's loans and provide certain administrative
and managerial services in connection with the operation of IBF VI. IBF
Management will be required to manage the business affairs of IBF VI in
conformity with the policies that are approved and monitored by IBF VI's board
of directors. IBF Management will be required to prepare regular reports for
IBF VI that will review IBF VI's acquisitions of assets, portfolio composition
and characteristics, credit quality, performance and compliance with the
policies approved by IBF VI.
At all times, IBF Management will be required to follow the direction and
oversight of IBF VI and will perform the functions and have the authority set
forth in the management agreement. IBF Management will be responsible for the
day-to-day operations of IBF VI and will perform the services activities
relating to IBF VI's assets and operations as may be appropriate, including:
o providing a complete program of investing and reinvesting the
capital and assets of IBF VI in pursuit of its investment objectives
and under policies adopted by IBF VI from time to time;
o serving as IBF VI's consultant with respect to formulation of
investment criteria and preparation of policy guidelines by IBF VI's
board of directors;
o assisting IBF VI in developing criteria for mortgage asset purchase
commitments that are specifically tailored to IBF VI's investment
objectives and making available to IBF VI its knowledge and
experience with respect to mortgage loans, other real estate related
assets and commercial loans;
o counseling IBF VI in connection with policy decisions;
o maintaining IBF VI's exemption from regulation as an investment
company;
o representing IBF VI in connection with the purchase and commitment
to purchase or sell mortgage loans and other real estate related
assets and commercial loans;
o furnishing reports and statistical and economic research to IBF VI
regarding IBF VI's activities and the services performed for IBF VI
by IBF Management;
o monitoring and providing to IBF VI on an ongoing basis price
information and other data, obtained from certain nationally
recognized dealers that maintain markets in mortgage assets; and
providing data and advice to the board of directors in connection
with the identification of these dealers;
o administering the day-to-day operations of IBF VI and performing and
supervising the performance of such other administrative functions
necessary in the management of IBF VI as may be agreed upon by IBF
Management and IBF VI;
o contracting, as necessary, with third parties for master and special
servicing of assets acquired by IBF VI;
o communicating on behalf of IBF VI with the holders of the equity and
debt securities of IBF VI as required to satisfy the reporting and
other requirements of any governmental bodies or agencies and to
maintain effective relations with these holders;
o causing IBF VI to qualify to do business in all applicable
jurisdictions;
o assisting IBF VI in complying with all regulatory requirements
applicable to IBF VI in respect of its business activities,
including preparing or causing to be prepared all financial
statements required under applicable regulations and contractual
undertakings and all reports and documents, if any, required under
the Securities Exchange Act of 1934, as amended;
o performing such other services as may be required from time to time
for management and other activities relating to the assets of IBF VI
as the board of directors shall reasonably request or IBF Management
shall deem appropriate under the particular circumstances; and
o using all reasonable efforts to cause IBF VI to comply with all
applicable laws.
IBF Management will subcontract with IB Consultants to perform all of the
duties set forth above on its behalf. The subcontract with IB Consultants will
not relieve IBF Management from any of its liabilities under the management
agreement.
IBF VI has the right at any time during the term of the management
agreement to terminate the management agreement without the payment of any
termination fee upon, among other things, a material breach by IBF Management
of any provision contained in the management agreement that remains uncured at
the end of the applicable cure period, including the failure of IBF Management
to use reasonable efforts to comply with IBF VI's investment policy and
guidelines.
The management agreement may not be assigned by either party without the
consent of the other party.
Under the management agreement, IBF VI will rely on the facilities,
personnel and resources of IBF Management and IB Consultants. IBF VI may not
be able to meet its investment and yield objectives if
o IBF Management and IB Consultants do not hire and retain
knowledgeable personnel;
o IBF Management does not cause its personnel to focus their attention
on the affairs of IBF VI rather than the affairs of its other
affiliates; or
o IBF Management terminates the management agreement between IBF VI
and IBF Management and no suitable replacement is found to manage
our business.
If IBF Management does not perform as anticipated, IBF VI's operations
may not generate earnings sufficient to repay the bonds.
Compensation
IBF Management is a Delaware corporation in which Simon A. Hershon is the
sole officer, director, and stockholder. No executive compensation will be
paid directly by IBF VI to its officers. IBF Management will bear all costs of
operating IBF VI. IBF Management will receive an annual management fee payable
on each quarter end for its services equal to two percent (2%) of the
principal amount of the bonds for providing all administrative support
required to operate IBF VI. The management fee will cover items such as wages
and salaries of employees of IB Consultants responsible for IBF VI's daily
operations, fees and expenses of agents and independent contractors providing
administrative support for IBF VI's operations, office space, and all overhead
expenses. The management fee does not cover IBF VI's legal and accounting
fees, filing fees, investment transaction costs, taxes, officer and director
liability insurance, and other administrative expenses. The annual management
fee is subordinated to interest and principal due on the bonds and is payable
out of working capital reserves.
Prior experience of InterBank, IBF Management and IB Consultants
The information contained in this section of the prospectus is included
solely to enable prospective investors to have information which can be used
to evaluate the experience of IBF Management in investing in real estate
related assets and other commercial loans for its affiliated funds.
The prior performance information included in this prospectus is
historical and investors should not construe the inclusion of this information
as implying or indicating in any manner that IBF VI will make investments
which are comparable to those made by the affiliates discussed below, or that
the results achieved by IBF VI will in any way resemble or be comparable to
those achieved by these affiliates. Investors in bonds will not be acquiring
any interest in the affiliates described below. In addition, the real estate
markets have generally been favorable during much of the period for which data
is provided. Therefore, the following information may not be indicative of the
results that will be experienced by IBF Management in connection with its
management of IBF VI's assets.
InterBank is the parent corporation of six private affiliated
corporations listed in the table below, formed by InterBank to acquire
performing and non-performing loans, originate loans, and invest in equity and
debt securities. Each of these affiliated private investment funds obtained
capital by offering and selling notes or equity interests to investors in
private placements with maturities ranging from May, 2001 to December, 2005.
These investment funds have sold approximately $67,992,000 of notes and
approximately $1,841,000 of equity securities to date. The origination and
acquisition businesses of each of the investment funds is managed by IBF
Management.
Generally, InterBank has acted as the lead lender on loans originated or
acquired, and the investment funds have purchased participations in the loans.
Allocation of loans among the affiliates is based on the amount of capital
each of the investment funds has available to acquire loan investments and
other factors considered important to IBF Management.
All interest due on the securities issued by the investment funds has
been paid in a timely manner. None of the principal of the securities issued
by the investment funds has become due, although SPC I issued a notice of
redemption and redeemed a portion of its notes on June 30, 2000 in the amount
of $1,059,000.
The operating and investment strategy employed for the affiliated
investment funds will differ from those that will be employed by IBF VI
because of IBF VI's need to maintain an exemption from registration under the
Investment Company Act of 1940, as amended. IBF Management will monitor the
types of assets maintained in IBF VI's portfolio to ensure that it is not
deemed to be an investment company under the Investment Company Act, due to
its intention to maintain at least 80% of its assets consist of mortgages and
other liens on and interests in real estate and real estate related
investments. See "Regulatory Matters -- Investment Company Act exemption."
As of March 31, 2000, the affiliated investment funds owned approximately
$50 million book value of assets under management being managed by IBF
Management and IB Consultants, including approximately $15.7 million of
mortgage loans and approximately $21.7 million of other commercial loans.
All of the investment funds with the exception of AIF V have similar
investment objectives, which is to invest in smaller properties and
underperforming or otherwise distressed real property. Although the investment
objectives of these investment funds are not identical to those of IBF VI,
they are similar, and IBF VI believes that prior performance information about
these investment funds may be material to a prospective investor. Certain
information relating to those six investment funds is set forth below.
<TABLE>
<CAPTION>
Interbank Funding Corporation
Individual Funds Analysis
As of June 30, 2000
----------- ----------- ------------- ---------- -------------- -------------- ------------- -------------- ------------
Number of Coupon
Consecutive Interest Principal
Gross Interest Payments Redemptions
Date of Amount Interest Payments as of June Additional as of June Total Avg.
Fund Name Inception Sold(1) Rate Made 30, 2000 Interest 30, 2000 Yield(2)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPC I 01/31/96 $2,500,000 12% 50 $1,175,203 $79,012 $1,059,000 12.90%
----------- ----------- ------------- ---------- -------------- -------------- ------------- -------------- ------------
SPC II 01/21/97 5,000,000 12% 38 1,685,515 91,248 N/A 12.75%
----------- ----------- ------------- ---------- -------------- -------------- ------------- -------------- ------------
SPC III 04/10/98 10,000,000 12% 24 1,771,567 58,883 N/A 12.67%
----------- ----------- ------------- ---------- -------------- -------------- ------------- -------------- ------------
PIF IV 02/17/98 28,329,000 12% 27 3,709,821 89,775 N/A 12.51%
----------- ----------- ------------- ---------- -------------- -------------- ------------- -------------- ------------
AIF V 09/09/99 1,841,000 N/A N/A N/A N/A N/A N/A
----------- ----------- ------------- ---------- -------------- -------------- ------------- -------------- ------------
SPC VII 05/10/99 20,322,000 11% 12 1,031,625 11,000 N/A 11.53%
----------- ----------- ------------- ---------- -------------- -------------- ------------- -------------- ------------
Total $67,992,000 $9,373,731 $329,918 $1,059,000
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting offering expenses.
(2) Includes coupon interest and additional interest and is calculated on
annualized bond equivalent yield basis.
Competition
The business IBF VI proposes to engage in is highly competitive. IBF VI
will compete for its loan investments with a number of national, local, and
regional companies that pursue similar loan acquisition and origination
business. Some of these companies may possess substantially greater financial,
marketing, technical, personnel and other resources than IBF VI. In addition,
IBF VI's future profitability will be directly related to the targeted yield
relative to that of its competitors. Competitors may have access to capital at
a lower cost than the capital available to IBF VI through the bonds described
in this prospectus and, therefore, would have a competitive advantage in
making and acquiring loans at lower yields than IBF VI can accept.
Legal proceedings
Neither IBF VI, IBF VI SPV, IBF Management nor IB Consultants is a party
to any pending legal proceedings except for normal collection actions on their
loan portfolios. To the knowledge of management, no legal proceedings are
threatened against any of them.
Offices
The principal executive offices and principal place of business of IBF VI
will be located at the offices of InterBank, IBF Management and IB Consultants
at 1733 Connecticut Avenue, N.W., Washington, DC 20009. Management believes
that the office space available at this location is adequate for its
foreseeable needs.
Regulatory Matters
Investment Company Act exemption
IBF VI at all times intends to conduct its business so as not to become
regulated as an investment company under the Investment Company Act.
Accordingly, IBF VI does not expect to be subject to the restrictive
provisions of the Investment Company Act. Section 3(c)(5)(C) of the Investment
Company Act excludes from regulation entities that are primarily engaged in
the business of purchasing or otherwise acquiring "mortgages and other liens
on and interests in real estate." In order to qualify for this exemption, IBF
VI, together with its wholly-owned subsidiaries, must, among other things,
maintain the following asset composition: (1) Section 3(c)(5)(C) requires that
55% of the assets consist of mortgages and other liens on and interests in
real estate -- the "55% test" -- and that the remaining 45% of the
consolidated assets must consist primarily of real estate-type interests --
the "45% test"; (2) with respect to the 55% test the collateral for the real
estate loans must meet certain criteria; (3) these criteria include that (i)
the loan be secured by a mortgage or deed of trust on one or more tracts or
parcels of real estate, (ii) 100% of the principal amount of the loan be
secured by real estate at the time of origination, and (iii) 100% of the fair
market value of the loan be secured by real estate at the time the company
receives the loan; (4) with respect to the 45% test, at least 25% of the
consolidated assets must be in real estate-type interests (subject to
reduction to the extent that it invests more than 55% of its total assets
meeting the 55% test) and no more than 20% of the consolidated assets may
include miscellaneous investments.
IBF VI and its wholly-owned subsidiaries intend to satisfy these
requirements by at all times holding not less than 80% of their total assets
as qualifying mortgage loans. However, after the commencement of the sale of
bonds under this prospectus, IBF VI may be required to temporarily invest bond
proceeds in short-term liquid investments until IBF VI identifies qualifying
mortgage loans for purchase. IBF VI will not purchase any non-qualifying loans
or investments during such period. Nevertheless, IBF VI may be required to
rely on Rule 3a-2 of the Investment Company Act, which provides a temporary
exception not to exceed one year from the Investment Company Act for companies
that have a bona fide intent to be engaged in an excepted activity but who
temporarily fail to meet the requisite asset composition requirement. Reliance
upon the rule is permitted only once every three years. Therefore, if IBF VI
relies on Rule 3a-2 during the initial investment period, IBF VI will not have
available to it the ability to rely on Rule 3a-2 if, unexpectedly, a
substantial portion of its qualifying mortgage loans were to be prepaid or
liquidated within the three year period commencing on the date that Rule 3a-2
is first relied upon by IBF VI and IBF VI is unable to purchase a sufficient
amount of qualifying mortgage loans to maintain the asset composition
requirement.
In order to avoid regulation under the Investment Company Act, IBF VI and
its wholly owned subsidiaries may have to purchase or sell assets that they
would not ordinarily purchase or sell in the normal course of business. If IBF
VI or its wholly owned subsidiaries were required to sell assets, they may
have to sell them sooner than they otherwise would. These sales may be at
depressed prices, and IBF VI and its wholly owned subsidiaries may not realize
anticipated benefits from, or may incur losses on, these investments. Some
investments may not be sold due to contractual or legal restrictions or the
inability to locate a suitable buyer. Moreover, they may incur tax liabilities
when they sell assets. IBF VI may also be unable to buy additional assets that
may be important to its operating strategy to achieve sufficient yields on its
investments to repay the bonds.
Other government regulation and licensing requirements
IBF VI's lending business may become supervised by and required to follow
extensive regulation and licensing by federal, state and local governmental
authorities and other various laws and judicial and administrative decisions
imposing requirements and restrictions on all or part of IBF VI's home equity
and first mortgage lending activities. IBF VI's anticipated mortgage lending
activities will be regulated under various federal laws, including the
following:
o Truth-in-Lending Act and Regulation Z, including the Home Ownership
and Equity Protection Act of 1994;
o The Equal Credit Opportunity Act and Regulation B, as amended; o The
Real Estate Settlement Procedures Act and Regulation X;
o The Home Mortgage Disclosure Act; and
o The Fair Debt Collection Practices Act.
IBF VI may also be required to be examined by state regulatory
authorities with respect to originating, processing, underwriting, selling and
servicing home equity loans and first mortgage loans. These rules and
regulations impose licensing obligations, prohibit discrimination, regulate
collection, foreclosure and claims handling, payment features, mandate certain
disclosures and notices to borrowers and, in some cases, fix maximum interest
rates and fees. Failure to comply with these requirements can lead to, among
other remedies, termination or suspension of license, certain rights of
rescission for mortgage loans, class action lawsuits and administrative
enforcement actions. Costs or difficulties in complying with these rules could
adversely affect IBF VI's business.
Certain Relationships and Related Transactions
The following table describes the amount and nature of payments that will
or may be made by IBF VI to InterBank and its affiliates.
Payee Amount ($) Purpose
----- ---------- -------
IBF Management $10,000 to $1,000,000 Annual management fee (1)
IBF Securities $15,000 to $1,575,000 Finders fees for identification
of selected broker-dealers
and unaccountable expense
reimbursement
Coleman & Company
Securities, Inc. $2,500 to $250,000 Finders fees (2)
--------------------------
(1) See "Management - Compensation."
(2) Coleman will receive out of the sales commission payable to National a
finders fee of 0.5% of the gross proceeds from the sale of bonds for its
assistance in identifying selected broker-dealers. Coleman will also
receive 7% of the gross sales price of all bonds sold by Coleman directly
to investors in the offering, but it is not expected that sales by
Coleman to investors will be material.
InterBank is currently the sole stockholder of IBF VI and has the right
to manage the business affairs of IBF VI and to appoint all directors.
Loans made to InterBank or its affiliates will only be made on the same
or similar terms and conditions as loans made to unrelated parties.
InterBank is the sole equity owner of six affiliated investment funds,
which are engaged in loan investment activities that are similar to the
proposed business of IBF VI, and may participate as a controlling stockholder
in other corporations or partnerships formed in the future to pursue loan
origination and acquisition activities similar to that of IBF VI. Simon A.
Hershon and Ehud D. Laska, directors and officers of IBF VI, are the owners of
InterBank. Mr. Hershon is the sole owner of IBF Management, which provides
management services to IBF VI for fees.
Certain conflicts of interest are inherent in the foregoing
relationships, including the selection of loan opportunities for IBF VI and
allocation of management time and resources to the operations of IBF VI.
Although the indenture provides that IBF VI may not participate in a
transaction with an affiliate, except in good faith and on terms that are no
less favorable to IBF VI than those that could have been obtained from a
person not an affiliate of IBF VI, no other policy or restriction has been
adopted by management to resolve conflicts of interest that might arise.
IBF VI will reimburse IBF Management for some or all of the legal and
accounting fees, printing costs and marketing costs paid to third parties by
IBF Management.
IBF VI may purchase loans from affiliates and make loans to affiliates of
InterBank that meet IBF VI's investment guidelines. See "Investment Guidelines
-- Purchase of loans from affiliates and loans made to affiliates."
Indemnification
Delaware law permits a Delaware corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The charter of IBF VI
contains this type of provision which eliminates this liability to the maximum
extent permitted by Delaware law. IBF VI will indemnify IBF Management and IB
Consultants and its officers and directors from any action or claim brought or
asserted by any party by reason of any allegation that IBF Management and IB
Consultants or one or more of its officers or directors is otherwise
accountable or liable for the debts or obligations of IBF VI or its
affiliates. In addition, IBF Management and IB Consultants and its officers
and directors will not be liable to IBF VI, and IBF VI will indemnify IBF
Management and IB Consultants and its officers and directors, for acts
performed in good faith under the management agreement, except for claims
arising from acts constituting bad faith, willful misconduct, gross negligence
or reckless disregard of their duties under the management agreement. In
addition, IBF VI will indemnify, hold harmless and pay reasonable expenses in
advance of final disposition of a proceeding to present or former directors
and officers and certain other parties to the fullest extent permitted from
time to time by Delaware law. It is the position of the Securities and
Exchange Commission that indemnification of directors and officers for
liabilities arising under the Securities Act is against public policy and
unenforceable pursuant to Section 14 of the Securities Act.
Certain Legal Aspects of Mortgage Loans
and Real Property Investments
IBF VI intends primarily to acquire mortgage loans and other real estate
related assets. IBF VI's return on these assets will depend upon, among other
things, the ability of the servicer of the mortgage loans to foreclose upon
the mortgage loans in default and sell the underlying real property. There are
a number of legal considerations involved in the acquisition of mortgage loans
or real estate related assets and the foreclosure and sale of defaulted
mortgage loans, whether individually or as part of a series of mortgage-backed
securities. The following discussion provides general summaries of certain
legal aspects of loans secured by real property and the acquisition of real
property. Because these legal aspects are governed by applicable state law
which laws vary from state to state, the summaries do not purport to be
complete, to reflect the laws of any particular state, or to encompass the
laws of all states. Accordingly, the summaries are qualified in their entirety
by reference to the applicable laws of the states where the property is
located. The summaries are not based upon opinions of legal counsel.
Each mortgage loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the
prevailing practice and law in the state in which the related mortgaged
property is located. Mortgages, deeds of trust and deeds to secure debt are
collectively referred to in the prospectus as "mortgages." The priority of the
lien created or interest granted by a mortgage will depend on the terms of the
mortgage and, in some cases, on the terms of separate subordination agreements
or intercreditor agreements with others that hold interests in the real
property, the knowledge of the parties to the mortgage and, generally, the
order of recordation of the mortgage in the appropriate public recording
office and whether there are any later-arising liens for real estate taxes,
assessments and other charges.
Mortgages that encumber income-producing property often contain an
assignment of rents and leases under which the borrower assigns to the lender
the borrower's right, title and interest as landlord under each lease and the
income derived therefrom, while retaining a revocable license to collect the
rents for so long as there is no default, unless rents are to be paid directly
to the lender. If the borrower defaults, the license terminates and the lender
is entitled to collect the rents. Local law may require that the lender take
possession of the property and/or obtain a court-appointed receiver before
becoming entitled to collect the rents. In addition, the potential payments
from a property may be less than the periodic payments due under the mortgage.
The form of the mortgage or deed of trust used by many lenders confers on
the mortgagee or beneficiary the right both to receive all proceeds collected
under any hazard insurance policy and all awards made in connection with any
condemnation proceedings, and to apply these proceeds and awards to any
indebtedness secured by the mortgage or deed of trust, in the order determined
by the mortgage or beneficiary. Mortgages often provide under certain
circumstances that the proceeds of hazard insurance or condemnation awards may
be used by the borrower to repair the casualty or taking. The laws of certain
states may limit the ability of mortgagees or beneficiaries to apply the
proceeds of hazard insurance or condemnation awards to the secured
indebtedness and instead may require the proceeds of hazard insurance or
condemnation proceeds to be used to repair the casualty or taking unless the
security of the mortgagee or beneficiary has been impaired.
Foreclosure is a legal procedure that allows the lender to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its
obligations under the note or mortgage, the lender has the right to institute
foreclosure proceedings to sell the real property at public auction to satisfy
the indebtedness. Foreclosure procedures vary from state to state, but are
generally time consuming and costly. In addition, certain states may grant a
borrower the right to repay amounts owed and reinstate the loan.
Commercial or multi-family residential mortgage loans acquired by IBF VI
may be nonrecourse loans, with recourse which in the case of default will be
limited to the property and other assets, if any, that were pledged to secure
the mortgage loan. However, even if a mortgage loan by its terms provides for
recourse to the borrower's other assets, a lender's ability to realize upon
those assets may be limited by state law.
Under the federal bankruptcy code and the related state laws, the filing
of a petition in bankruptcy by or against a borrower will stay the sale of the
real property owned by that borrower, as well as the commencement or
continuation of a foreclosure action. In addition, if a court determines that
the value of the mortgage property is less than the principal balance of the
mortgage loan it secures, the court may prevent a lender from foreclosing on
the mortgaged property. As part of a restructuring plan, a court also may
reduce the amount of secured indebtedness to the current value of the
mortgaged property. This type of action would make the lender a general
unsecured creditor for the difference between the current value and the amount
of its outstanding mortgage indebtedness.
A bankruptcy court may also grant a debtor a reasonable time to cure a
payment default on a mortgage loan, reduce monthly payments due on a mortgage
loan, change the rate of interest due on a mortgage loan, or otherwise alter
the mortgage loan's repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to
foreclose on the junior lien. Additionally, the borrower's trustee or the
borrower, as debtor-in-possession, has certain special powers to avoid,
subordinate or disallow debts. In certain circumstances, the claims of the
trustee may be subordinated to financing obtained by a debtor-in-possession
subsequent to its bankruptcy.
Under the federal bankruptcy code and the related state laws, the lender
will be stayed from enforcing a borrower's assignment of rents and leases. The
legal proceedings necessary to resolve these issues can be time consuming and
may significantly delay the receipt of rents. Rents also may escape an
assignment to the extent they are used by the borrower to maintain the
mortgaged property or for other court authorized expenses.
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges that a lender may collect from a borrower
for delinquent payments. Certain states also limit the amounts that a lender
may collect from a borrower as an additional charge if the loan is prepaid.
IBF VI will have certain environmental risks when taking a security
interest in real property, as well as when it acquires any real property.
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic
substances on, under or in the property. These laws often impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of the hazardous or toxic substances. Therefore, an environmental
liability could have a material adverse effect on IBF VI's ability to
foreclose on a loan, the underlying value of the real property securing a loan
or investment IBF VI makes and its income and cash available for payment to
bondholders. Of particular concern may be properties that are or have been
used for industrial, manufacturing, military or disposal activity. In certain
circumstances, IBF VI could determine to abandon a contaminated mortgaged
property as collateral for a loan rather than foreclose and risk liability for
compliance or clean-up costs.
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder or the "ADA", in order to protect individuals with
disabilities, public accommodations -- such as hotels, restaurants, shopping
centers, hospitals, schools and social service center establishments -- must
remove architectural and communication barriers that are structural in nature
from existing places of public accommodation to the extent "readily
achievable." In addition, under the ADA, alterations to a place of public
accommodation or a commercial facility are to be made so that, to the maximum
extent feasible, the altered portions are readily accessible to and usable by
disabled individuals. The "readily achievable" standard takes into account,
among other factors, the financial resources of the affected site, owner,
landlord or other applicable person. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose these requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord.
Certain United States Federal Income Tax Considerations
The following summary of certain United States federal income tax
consequences of the purchase, ownership, and disposition of bonds is based
upon laws, regulations, rulings, and decisions now in effect, all of which may
change - including changes in effective dates - or possible differing
interpretations. It deals only with the purchase and ownership of bonds
acquired at original issuance and held as capital assets. It does not deal
with issues peculiar to holders that are financial institutions, insurance
companies, regulated investment companies, dealers in securities or
currencies, persons holding bonds as a hedge against currency risks or as a
position in a straddle for tax purposes, or persons whose functional currency
is not the United States dollar. Persons considering the purchase of the bonds
should consult their own tax advisors concerning the application of United
States federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the bonds arising
under the laws of any other taxing jurisdiction.
As used in this prospectus, the term "U.S. Holder" means a beneficial
owner of a bond that is for United States federal income tax purposes
(1) a citizen or resident of the United States,
(2) a corporation or partnership created or organized in or under
the laws of the United States, any state or the District of
Columbia,
(3) an estate whose income is required to pay United States federal
income tax regardless of its source, or
(4) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and
one or more United States persons have the authority to control
all substantial decisions of the trust.
Moreover, as used in this prospectus, the term "U.S. Holder" includes any
holder of a bond whose income or gain in respect to its investment in a bond
is effectively connected with the conduct of a U.S. trade or business. As used
in this prospectus, the term "non-U.S. Holder" means a beneficial owner of a
bond that is not a U.S. Holder.
U.S. Holders
Interest and Original Issue Discount. The accretion subordinated bonds
will be issued with original issue discount or OID in an amount equal to the
excess of the stated redemption price at maturity of these bonds over their
issue price. The issue price of a bond is the first price at which a
substantial amount of the bonds in the same issue has been sold, ignoring
sales to bond houses, brokers, or similar persons or organizations acting in
the capacity of underwriters, placement agents, or wholesalers. The accretion
subordinated bonds and the current interest subordinated bonds are separate
issues for this purpose. The stated redemption price at maturity of a bond is
the sum of all amounts payable on the bond other than payments of qualified
stated interest. The term "qualified stated interest" generally means stated
interest that is unconditionally payable in cash at least annually at a single
fixed rate or a qualified variable rate.
The current interest subordinate bonds may be issued with OID to the
extent the principal amount of these bonds exceeds the issue price of the
bonds by more than a statutorily defined de minimis amount -- the bond's
stated redemption price at maturity multiplied by the number of complete years
from the issue date to the maturity date multiplied by 0.25%. Stated interest
on the current interest subordinated bonds will be treated as qualified stated
interest and, as such, will be includible in income by a holder as it is paid
or as it accrues, depending upon the holder's normal method of tax accounting.
A holder of a bond issued with OID must include OID in income as ordinary
interest as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to this income, regardless of the holder's
regular method of tax accounting. Under the constant yield method, the holder
of an accretion subordinated bond generally will have to include in income
increasingly greater amounts of OID in successive quarterly accrual periods.
A holder who purchases a bond - including a purchase at original issuance
- for an amount that is greater than its adjusted issue price will have
purchased the bond at an acquisition premium. The amount of OID which the
holder must include in its gross income with respect to the bond for any
taxable year will be reduced but not below zero - by the portion of the
acquisition premium properly allocable to the period.
Market Discount. If a bond is issued without OID, the bond will be
treated has having market discount if the holder purchased the bond -
including a purchase at original issuance - for a price less than its stated
redemption price at maturity. If a bond is issued with OID, the bond will be
treated as having market discount if the holder purchased the bond - including
a purchase at original issuance - for an amount that is less than the bond's
adjusted issue price on the purchase date. If, however, the amount of market
discount is less than a statutorily defined de minimis amount - the bond's
stated redemption price at maturity multiplied by the number of complete years
from the purchase date to the maturity date multiplied by 0.25% - the amount
of market discount will be treated as zero.
Generally, market discount accrues on a straight line basis over the
remaining term of a bond but a holder may, however, elect to accrue market
discount under a constant yield method. Generally, market discount, unlike
OID, is not includible in income as it accrues. Instead, accrued market
discount is treated as ordinary income at the time a payment, other than
qualified stated interest, is made on the bond or the bond is sold at a gain.
A holder can elect, however, to include market discount in income as it
accrues. If a holder does not make the election to currently include market
discount in income as it accrues, the holder's ability to deduct interest
expense on indebtedness incurred or continued to carry the market discount
bonds may be limited.
Premium. If a holder purchases a current interest subordinated bond -
including a purchase at original issuance - for an amount that is greater than
its stated principal amount, the holder will have purchased the bond with
amortizable bond premium equal in amount to this excess. A holder may elect to
amortize this premium using a constant yield method over the remaining term of
the bond and may offset interest otherwise required to be included in respect
of the bond during any taxable year by the amortized amount of premium.
Election to Treat All Interest and Discount as OID. A holder can elect to
treat all items of interest and discount on a bond, adjusted for any item
premium, as OID. If a holder makes this election with respect to a bond, the
holder will report income from the bond as though it had been originally
issued on the purchase date for an issue price equal to the holders purchase
price and no payment due on the bond will be qualified stated interest.
Non-U.S. Holders
Interest or OID paid or accrued on a bond to a non-U.S. Holder will be
considered to be portfolio interest and will not be required to pay United
States federal income tax or withholding tax. To qualify for the exemption
from taxation, the non-U.S. Holder must provide to the person otherwise
required to withhold tax an IRS Form W-8BEN - Certificate of Foreign Status of
Beneficial Owner for United State Tax Withholding - and the beneficial owner
must inform the withholding agent of any change in the information on the
statement within 30 days of the change. If a bond is held through a securities
clearing organization or certain other financial institutions, the
organization or institution may provide a signed statement to the withholding
agent. However, in that case, the signed statement must be accompanied by a
copy of the IRS Form W-8BEN provided by the beneficial owner to the
organization or institution.
Generally, a non-U.S. Holder will not be required to pay federal income
taxes on any amount which constitutes capital gain upon retirement or
disposition of a bond, unless the non-U.S. Holder is an individual who is
present in the United States for 183 days or more in the taxable year of the
disposition and the gain is derived from sources within the United States.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
Backup Withholding
Backup withholding of United States federal income tax at a rate of 31%
may apply to payments made in respect of the bonds to registered owners who
are not "exempt recipients" and who fail to provide certain identifying
information - such as the registered owner's taxpayer identification number or
a Form W-8BEN - in the required manner. Generally, individuals are not exempt
recipients, whereas corporations and certain other entities generally are
exempt recipients.
Plan of Distribution
Except for conditions otherwise set forth in this prospectus and under
the terms and conditions of the indenture and the underwriting agreement
between IBF VI and National Securities Corporation - referred to in this
prospectus as "National", IBF VI will offer through National as its exclusive
agent, on a best efforts basis, a maximum of $50,000,000 in principal amount
of the bonds. The minimum subscription is $5,000 unless there is a higher
requirement in your state of residence or, in the case of individual
retirement accounts and certain regulated by the Employee Retirement Income
Security Act of 1974, as amended, or "Qualified Plans" including Keogh plans,
the minimum subscription is $2,000. Purchases in excess of the minimum
subscription will be made in increments of $1,000. See "Investor Suitability
And Minimum Investment Requirements; Subscription Procedures."
The commission paid to National is 8.0 percent of the gross offering
proceeds. National may reallow the selling compensation to selected dealers
participating in the offering. Generally, dealers participating in the offering
will receive a 6.5 percent commission and a 0.5 percent due diligence fee.
Coleman & Company Securities, Inc. - referred to in this prospectus as
"Coleman" - an affiliate of InterBank and IBF VI, will solicit broker-dealers
to participate in the offering and request that they enter into selling group
agreements with National. The contacts and communications with these
broker-dealers will largely be made by employees of IBF Securities under
direction of Coleman. For these services, Coleman will receive from National
out of its sales commission 0.5 percent of the gross proceeds of the offering
as a finders fee. IBF VI will also compensate the employees of IBF Securities
by paying finders fees for identifying and communicating with broker-dealers
in connection with this offering in the amount of approximately 1.0 percent of
the gross proceeds received on bonds sold by those broker-dealers plus 2.0
percent of the gross proceeds received on the bonds as unaccountable expense
reimbursement. Coleman may also act as a broker-dealer by signing a selling
group agreement with National and make sales of bonds directly to investors.
Coleman will receive a 7.0 percent commission on bonds sold directly to
investors.
Due to the affiliation between IBF VI and Coleman, the offering will be
conducted pursuant to Rule 2720 of the NASD Rules of Conduct, which imposes
certain requirements on the distribution. National has assumed the
responsibilities of acting as the qualified independent underwriter and has
priced the offering and conducted due diligence on IBF VI.
The underwriting agreement and the selling group agreements contain
provisions for the indemnification of National and participating selected
dealers by IBF VI with respect to certain liabilities, including liabilities
arising under the Securities Act.
Until subscriptions for $500,000 of bonds have been accepted by IBF VI,
all funds received by National and selected dealers from subscriptions for
bonds will be placed in an escrow account with Continental Stock Transfer &
Trust Company, as escrow agent. If less than $500,000 of bonds are sold within
three months following the date of this prospectus, unless extended by IBF VI
and National for an additional three months, all proceeds raised will be
promptly returned to investors with interest and without deducting any sales
commissions or expenses of the offering. Investors will not have the use of
their funds and will not be able to obtain return of funds placed in escrow
unless and until the minimum offering period expires. In the event the minimum
amount of bonds is sold within the minimum offering period, the offering will
continue until the earliest of the date all bonds are sold, the date the
offering is terminated by IBF VI, or December 31, 2001. In no event will any
bonds be sold to affiliates of IBF VI in order to reach the minimum.
The offering of the bonds may be withdrawn, cancelled, or modified
without notice. National and IBF VI reserve the right to reject any order for
the purchase of bonds.
Investor Suitability and Minimum Investment Requirements;
Subscription Procedures
General Suitability Considerations
Among the reasons for establishing investor suitability standards and
minimum dollar amounts of investment is that there is no public market for the
bonds and none is expected to develop. Accordingly, only persons able to make
a long-term investment and who have adequate financial means and no need for
liquidity with regard to their investment should purchase the bonds. An
investment in bonds is not appropriate for you if you must rely on cash
distributions with respect to your bonds as your primary, or as an essential,
source of income to meet your necessary living expenses.
Requirements Concerning Minimum Investment and Minimum Investor Net
Worth/Income
Minimum Investment. For investors other than Qualified Plans and
individual retirement accounts, the minimum investment is $5,000 in principal
amount of the bonds. For Qualified Plans and individual retirement accounts,
the minimum investment is $2,000 in principal amount of the bonds. After the
minimum investment, sales will be made in increments of $1,000.
Minimum Net Worth/Income. Except with respect to Qualified Plans and
individual retirement accounts, bonds will be sold to you only if you
represent in writing:
o your net worth is at least $65,000 in excess of the proposed
investment in the bonds and you have an annual gross income of at
least $65,000, or
o irrespective of annual gross income, your net worth is at least
$225,000, or
o that you satisfy the suitability standards imposed by the state in
which you reside, if those standards are more stringent than the
standards set forth above.
All computations of your net worth must exclude the value of your
principal residence, its furnishings, and personal automobiles. All other
assets should be valued at their fair market value.
If an investor is a Qualified Plan or an individual retirement account,
the investor must represent
o that the individual retirement account owner or the participant in
the self-directed Qualified Plan satisfies the foregoing standards,
or
o if other than a self-directed Qualified Plan, that the Qualified
Plan satisfies the foregoing suitability standards.
You must execute a copy of the subscription agreement, the form of which
is attached as Appendix III to this prospectus, to evidence your compliance
with the foregoing standards and the requirements of applicable laws.
How to Subscribe
If you meet the suitability standards set forth above you must do the
following to subscribe to purchase bonds. You must personally execute the
subscription agreement and deliver it to National or the selected dealer
soliciting the investment with payment of the purchase price for the bonds. In
the case of individual retirement accounts and Qualified Plans, both owners
and the plan fiduciary, if any, must sign the subscription agreement. In the
case of grantor trusts or other trusts in which the grantor is the fiduciary,
the grantor must sign the subscription agreement. In the case of other
fiduciary accounts in which the donor does not exercise control and is not a
fiduciary, the plan fiduciary alone may sign the subscription agreement.
All subscription payments should be made payable to "CSTTC - Escrow Agent
for IBF VI." Subscription payments will be deposited in the escrow account no
later than noon of the next business day following receipt. After the minimum
of $500,000 in principal amount of bonds is sold within the minimum offering
period, subscription payments will continue to be deposited and cleared
through the escrow account.
IBF VI and National will promptly review, and accept or reject at their
discretion, each subscription. If a subscription is rejected, the subscription
payment will be promptly refunded, without deduction of any offering expenses
and without payment of interest.
Affiliates of IBF VI, National, and the selected dealers will have the
right, but not the obligation, to subscribe for and purchase bonds for their
own account for investment purposes, under the terms and conditions contained
in this prospectus. These affiliates may purchase bonds prior to sale of the
minimum $500,000 of bonds, which will count toward the achievement of the
minimum requirement. All bonds purchased by these parties will be purchased
solely for investment purposes and not with a present view towards resale or
distribution.
Sales Material
In addition to and apart from this prospectus, IBF VI will utilize
certain sales material in connection with the offering of bonds. This material
may include reports describing IBF VI and a brochure and audio-visual
materials or taped presentations highlighting various features of this
offering. IBF VI and its affiliates may also respond to specific questions
from selected dealers and prospective investors. Business reply cards,
introductory letters or similar materials may be sent to selected dealers for
customer use, and other information relating to this offering may be made
available to selected dealers for their internal use. However, this offering
is made only by means of this prospectus. Except as described in this
prospectus or in supplements hereto, IBF VI has not authorized the use of
other sales materials in connection with this offering. Although the
information contained in this material does not conflict with any of the
information contained in this prospectus, the material does not purport to be
complete and should not be considered as a part of this prospectus or the
registration statement of which this prospectus is a part, or as incorporated
in this prospectus or the registration statement by reference or as forming
the basis of this offering of bonds.
Legal Matters
The legality of the issuance of the bonds offered by this prospectus and
certain other matters will be passed upon for IBF VI by Brown & Wood LLP, 1666
K Street, N.W., Washington, D.C. 20006-1208. Certain matters will be passed
upon for National by its counsel D'Ancona & Pflaum LLC of Chicago, Illinois.
Experts
The financial statements of IBF VI as of December 31, 1999 and 1998,
appearing in this prospectus and registration statement have been audited by
Radin, Glass & Co., LLP, independent auditors, as set forth in their report
appearing elsewhere in this prospectus, and are included in reliance upon this
report given upon the authority of Radin, Glass & Co., LLP as experts in
accounting and auditing.
Additional Information
IBF VI has filed a registration statement on Form SB-2 under the
Securities Act, with respect to the bonds offered by this prospectus. This
prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to IBF VI and the bonds offered by this prospectus,
reference is made to the registration statement and the exhibits and schedules
filed therewith. Statements contained in this prospectus as to the contents of
any contract or any other document referred to are not necessarily complete,
and in each instance reference is made to the copy of the related contract or
other document filed as an exhibit to the registration statement. Each of
those statements are qualified in all respects by that reference. A copy of
the registration statement, and the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of all or
any part of the registration statement may be obtained from the Commission
upon payment of a prescribed fee. This information is also available from the
Commission's Internet web site at http://www.sec.gov.
In addition to the above, IBF VI will provide investors with annual
reports of IBF VI which will include certified financial statements.
<PAGE>
Appendix I - Audited Financial Statements
INDEPENDENT AUDITOR'S REPORT
IBF VI - Secured Lending Corporation
Washington, DC
We have audited the accompanying balance sheets of IBF VI - Secured
Lending Corporation (A Development Stage Enterprise) as of December 31, 1998
and 1999 and the related statement of operations, statement of changes in
stockholder's equity and statement of cash flows for the period June 8, 1998
(inception) to December 31, 1998, the year ended December 31, 1999, and the
period June 8, 1998 (inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the balance sheets referred to above presents fairly, in
all material respects, the financial position of IBF VI - Secured Lending
Corporation (A Development Stage Enterprise) as of December 31, 1998 and 1999
and the results of its operations and its cash flows for the period June 8,
1998 (inception) to December 31, 1998, the year ended December 31, 1999, and
the period June 8, 1998 (inception) to December 31, 1999 in conformity with
generally accepted accounting principles.
RADIN, GLASS & CO., LLP
Certified Public Accountants
New York, NY
February 17, 2000
<PAGE>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
BALANCE SHEET
December 31, 1998 December 31, 1999
----------------- -----------------
ASSETS
------
CURRENT ASSETS:
Cash $ 1,000 $189,122
TOTAL CURRENT ASSETS 1,000 189,122
DEBT ISSUANCE COSTS 26,276 180,322
DUE FROM AFFILIATE 249,000 000,000
------- -------
$276,276 $369,444
======== ========
STOCKHOLDER'S EQUITY
COMMON STOCK, $1 par value, 1,000 shares $ 1,000 $ 1,000
authorized, issued and outstanding
ADDITIONAL PAID-IN CAPITAL $280,276 $409,018
ACCUMULATED DEFICIT (5,000) (40,574)
-------- -------
$276,276 $369,444
======== ========
<PAGE>
<TABLE>
<CAPTION>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
JUNE 8, 1998 TO DECEMBER 31, 1999
Cumulative
June 8, 1998 to January 1, 1999 to June 8,1998 to
December 31, 1998 December 31, 1999 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
EXPENSES $5,000 $35,574 $40,574
NET EARNINGS (LOSSES) $(5,000) $(35,574) $(40,574)
NET EARNINGS (LOSSES) PER SHARE:
EARNINGS PER COMMON SHARE $(5.00) $(35.74) $(40.57)
WEIGHTED AVERAGE SHARES 1,000 1,000 1,000
</TABLE>
<PAGE>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
JUNE 8, 1998 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Additional Accumulated Total
Common Stock Paid in Stockholder's
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance as of June 8, 1998
(inception) - $ - $ - $ - $ -
Capital Contributions 1,000 1,000 280,276 $ - 281,276
Net Earnings for the Period
June 8, 1998 to December
31, 1998 - - - (5,000) -
----------- --------- ---------- -------------- -----------
Balance as of December 31, 1998 1,000 1,000 280,276 (5,000) 276,276
Capital Contributions - - 128,742 - 128,742
Net Earnings for the Period
January 1, 1999 to December 31, - - - (35,574) (35,574)
----------- --------- ---------- -------------- -----------
1999
Balance as of December 31, 1999 1,000 $ 1,000 $ 409,018 $(40,574) $ 369,444
=========== ========= ========== ============== ===========
</TABLE>
<PAGE>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
JUNE 8, 1998 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Cumulative
June 8, 1998 to January 1, 1999 to June 8,1998 to
December 31, 1998 December 31, 1999 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,000) $ (35,574) $ (40,574)
----------------- -------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (5,000) (35,574) (40,594)
----------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES 0 0 0
NET CASH USED IN INVESTING ACTIVITIES 0 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 281,276 128,742 410,018
Loan to parent (249,000) (335,000) (584,000)
Receipts from loan to parent 584,000 584,000
Debt issuance costs (26,276) (154,046) (180,322)
----------------- ------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,000 223,696 229,696
------------------ ------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS 1,000 188,122 189,122
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD - 1,000 -
------------------ ------------- --------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,000 $ 189,122 $ 189,122
================= ============= ==============
</TABLE>
<PAGE>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. INITIATION OF BUSINESS
On June 8, 1998, IBF VI -- Secured Lending Corporation ("IBF VI") was formed
to engage in the business of purchasing, holding and disposing of debt and
equity securities and instruments and other real estate related assets. There
have been no operations from inception through December 31, 1999.
IBF VI is a wholly-owned subsidiary of InterBank Funding Corporation.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Development stage - IBF VI is a development stage enterprise and
will continue as a development stage enterprise until such time
as it has significant revenues from operations.
b. Debt issuance costs - Debt issuance costs will be charged
against additional paid-in capital upon successful completion of
IBF VI's proposed public offering. In the event the offering is
not completed, such costs will be charged to expense.
c. Pervasiveness of estimates - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
d. Fiscal year - IBF VI has adopted a fiscal year ending December
31.
3. RELATED PARTY INTERESTS
IBF VI is wholly-owned by InterBank Funding Corporation, affiliates of which,
IBF Management Corp. ("IMC") and InterBank Consultants, Inc. ("IB
Consultants") will receive fees for certain administrative and support
services rendered to IBF VI. The annual management fee will pay for certain
costs of operating IBF VI for which IMC is responsible. A portion of the
management fee will be paid to IB Consultants.
The overhead costs incurred by IBF VI are absorbed by IMC. A charge was made
for the year ended December 31, 1999 in the financial statements for the
amount that management believes is appropriate for such costs, including
payroll, rent, equipment leases and other expenses. The amount of such charge
is recorded as a credit to paid in capital.
4. PROPOSED PUBLIC OFFERING
IBF VI anticipates offering $50,000,000 of Current Interest Subordinated Bonds
and Accretion Subordinated Bonds (collectively, the "bonds") of IBF VI --
Secured Lending Corporation. The bonds may be subordinated to future senior
indebtedness of IBF VI. Any amount of the bonds is redeemable at the option of
IBF VI after June 30, 2001. Bonds may be redeemed at the request of the
registered holders of the bonds ("Holders") under limited circumstances. The
redemption value of each bond is equal to 100% of its principal amount plus
accrued interest.
The minimum principal amount of bonds that may be purchased is $5,000 for all
investors, except for individual retirement accounts and Keogh Plans, for
which the minimum purchase is $2,000.
<PAGE>
Appendix II - Interim Financial Statements
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
BALANCE SHEET
June 30, December 31,
2000 1999
-------- ------------
(unaudited)
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 188,884 $ 189,122
DEBT ISSUANCE COSTS 297,838 180,322
------------ -----------
$ 486,722 $ 369,444
============ ===========
STOCKHOLDERS' EQUITY
--------------------
COMMON STOCK, $1 par value, 1,000 shares
authorized, issued and outstanding 1,000 1,000
PAID IN CAPITAL 544,534 409,018
ACCUMULATED DEFICIT (58,812) (40,574)
------------ -----------
$ 486,722 $ 369,444
============ ===========
<PAGE>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
Cumulative
Six months ended June 8, 1998 to
June 30, 2000 June 30, 2000
------------- -------------
(unaudited) (unaudited)
REVENUE $ -- $ --
EXPENSES
General and administrative expenses 18,238 58,812
----------- ------------
Total expenses $ 18,238 $ 58,812
------------ ------------
NET LOSS $ (18,238) $ (58,812)
=========== ============
Weighted average shares of common stock
outstanding 1,000
Net loss per share $ (18.24)
==========
<PAGE>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1999 1,000 $ 1,000 $ 409,018 $ (40,574) 369,444
Capital contributions -- -- 135,516 -- 135,516
-------- --------
Net loss -- -- -- (18,238) (18,238)
-------- -------- --------- ----------- -------
Balance as of June 30, 2000 1,000 $ 1,000 $ 544,534 $ (58,812) 486,722
======= ======== ========= =========== =======
</TABLE>
<PAGE>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Six months ended June 8, 1998 to
June 30, 2000 June 30, 2000
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,238) $ (58,812)
Adjustments to reconcile net loss to net cash used in operating
activities
Debt issuance costs (117,516) (297,838)
------------- -------------
NET CASH USED BY OPERATIONS (135,754) (356,650)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH PROVIDED BY FINANCING ACTIVITIES:
Capital contributions 135,516 545,534
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 135,516 545,534
------------- -------------
NET (DECREASE) INCREASE IN CASH (238) 188,884
CASH, beginning of the period 189,122 --
CASH, end of the period $ 188,884 $ 188,884
=============== ===============
Supplemental disclosures of cash flow information:
Taxes paid $ -- $ --
=============== ===============
Interest paid $ -- $ --
=============== ===============
</TABLE>
<PAGE>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Item 1. Financial Statements
Reference is made to the financial statements and footnotes included in the
Company's audited report, dated February 17, 2000 for the period June 8, 1998
(inception) through December 31, 1999.
The financial statement for the periods ended June 30, 2000 are unaudited and
include all adjustments which, in the opinion of management, are necessary to
a fair statement of the results of operations for the periods then ended. All
such adjustments are of a normal recurring nature. The results of the
Company's operations for any interim period are not necessarily indicative of
the results of the Company's operations for a full fiscal year.
Item 2. Capital Contributions
InterBank Funding Corporation incurred $135,516 of expenditures on behalf of
the Company.
<PAGE>
Appendix III - Subscription Agreement
IBF VI -- Secured Lending Corporation
Subscription Agreement
__
/__/ Initial Subscription
__
/__/ Additional Investment: Account Number Previously Assigned:
INVESTMENT
___ __ __ __ __ __
I desire to purchase $ /__/__/__/__/__/__/ aggregate principal amount of IBF
VI -- Secured Lending Corporation Current Interest Subordinated Bonds.
___ __ __ __ __ __
I desire to purchase $ /__/__/__/__/__/__/ aggregate principal amount of IBF
VI -- Secured Lending Corporation Accretion Subordinated Bonds.
Make Checks Payable to: CSTTC Escrow Agent for IBF VI -
Secured Lending Corporation
Subscriber Information: Please clearly print name(s) in which Bonds are to be
acquired. All checks and correspondence will go to the Investor Residence
Address unless specified otherwise in the Check Distribution Section.
__
You hereby certify that: /__/ your net worth is at least $65,000 in
excess of the proposed investment in the
bonds and you have an annual gross income
of at least $65,000, or
__
/__/ irrespective of annual gross income, your
net worth is at least $225,000, or
__
/__/ that you satisfy the suitability standards
imposed by the state in which you reside,
if such standards are more stringent than
those set forth above.
All computations of your net worth must exclude the value of your principal
residence, its furnishings, and personal automobiles. All other assets should
be valued at their fair market value.
<TABLE>
<CAPTION>
<S> <C>
Investor 1 (First, Middle I., Last):
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Investor 2 (First, Middle I. Last):
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Registration For The Investment (How The Investment Should Be Titled):
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
</TABLE>
<PAGE>
Investor Residence Address 1:
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Check One Of The Following:
___
Investor Residence Address 2: /__/ U.S. Citizen
___
/__/ Resident Alien
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
City, State ZIP Code
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
|_||_||_||_||_||_||_||_||_||_||_||_||_| |_||_| |_||_||_||_||_|
___
/__/ Foreign Resident;
Country _________
___
/__/ U.S. Citizen residing
outside the U.S.
Occupation:
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Check Distribution Information (if different):
Financial Institution (Bank, Trust Company, etc.):
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Address:
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ___
/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
City, State ZIP Code
___ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
/__/__/__/__/__/__/__/__/__/__/__/__/ /__/__/ /__/__/__/__/__/
Account Number:
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ___
/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Enter the taxpayer identification number. For most individual taxpayers, it is
their Social Security Number. Note: If the purchase is in more than one name,
the number should be that of the first person listed. For IRAs, Keoghs, and
qualified plans, enter both the Social Security Number and the Taxpayer
Identification Number for the plan.
Social Security Number Taxpayer Identification Number (If Applicable)
Form of Ownership (Individual, IRA, Trust, UGMA, Pension Plan, etc.)
------------------------------------------------------------------------------
Broker/Dealer - Registered Representative Information
(To be completed by Registered Representative)
I hereby certify that the investor(s) has read the prospectus and meets the
suitability requirements. Broker/Dealer Firm Name:
Registered Representative:
Branch Address: ______________________________
Telephone Number: ______________________________
Sales Representative Number: ______________________________
Sales Representative Signature: ______________________________
------------------------------------------------------------------------------
Interest Distribution: If you are purchasing $15,000 or more of the Current
Interest Subordinated Bonds, please indicate how you want fixed interest paid:
___ ___
/__/ Monthly /__/ Quarterly
<PAGE>
Subscriber Signature: (the undersigned has the authority to enter into this
subscription agreement on behalf of the person(s) or entity registered above.
I (We) certify under penalty of perjury that this is my (our) correct Social
Security Number (and/or Tax Identification Number) and that interest income on
this account should be reported on this number. I (We) certify, acknowledge
and agree that all information in this statement is true and correct.
Authorized Signature of Investor 1 ______________________ Date ______________
Authorized Signature of Investor 2 ______________________ Date ______________
------------------------------------------------------------------------------
Company's Acceptance (To be completed only by an authorized representative of
the IBF VI - Secured Lending Corporation.) The foregoing subscription is
accepted this ____________ day of ________________, _____
_________________________________________________________________
Authorized Representative of IBF VI - Secured Lending Corporation
------------------------------------------------------------------------------
<PAGE>
[Outside back cover]
<TABLE>
<CAPTION>
<S> <C>
================================================ ================================================
Until November 21, 2000, all dealers that
effect transactions in these securities,
whether or not participating in this
offering, may be required to deliver a
prospectus. This is in addition to the
$50,000,000 dealers' obligation to deliver a
prospectus when acting as underwriters and
with respect to their unsold allotments or
subscriptions.
IBF VI -- Secured Lending Corporation
[logo]
-----------------------
Table of Contents
-----------------------
Current Interest Subordinated
Bonds
Accretion Subordinated
Bonds
------------
Prospectus
------------
No dealer, salesperson or other person has
been authorized to give any information or to
make any representations other than those
contained in this prospectus and, if given or
made, that information or those
representations must not be relied upon as
having been authorized by IBF VI or any
underwriter. This prospectus does not
constitute an offer to sell or a solicitation
of an offer to buy any of the securities
offered hereby to whom it is unlawful to make
such offer in such jurisdiction to any person
in any jurisdiction. Neither the delivery of
this prospectus nor any sale made hereunder
shall, under any circumstances, create any
implication that information contained in
this prospectus is correct as of any time
subsequent to the date of this prospectus or
that there has been no change in the affairs
of IBF VI since that date. However, in the
event of any material change during the period
when this prospectus is required to be
delivered, this prospectus will be amended or
supplemented accordingly.
August 23, 2000
================================================ ================================================
</TABLE>
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Charter of IBF VI - Secured Lending Corporation ("IBF VI") provides
that, to the fullest extent that limitations on the liability of directors and
officers are permitted by the Delaware General Corporation Law (the "DGCL"),
no director or officer of IBF VI shall have any liability to IBF VI or its
stockholders for monetary damages. The DGCL provides that a corporation's
charter may include a provision which restricts or limits the liability of its
directors or officers to the corporation or its stockholders for money damages
except: (1) to the extent that it is provided that the person actually
received an improper benefit or profit in money, property or services, for the
amount of the benefit or profit in money, property or services actually
received, or (2) to the extent that a judgment or other final adjudication
adverse to the person is entered in a proceeding based on a finding in the
proceeding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. IBF VI's Charter and Bylaws provide that IBF VI
shall indemnify and advance expenses to its currently acting and its former
directors to the fullest extent permitted by the DGCL and that IBF VI shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law.
The Charter and Bylaws provide that IBF VI will indemnify its directors
and officers and may indemnify employees or agents of IBF VI to the fullest
extent permitted by law against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with IBF VI. However, nothing in the Charter or Bylaws of IBF VI
protects or indemnifies a director, officer, employee or agent against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. To the extent that a director has been
successful in defense of any proceeding, the DGCL provides that he shall be
indemnified against reasonable expenses incurred in connection therewith.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with this
Registration Statement. IBF VI will pay all expenses of the offering. All of
such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission and NASD.
Securities and Exchange Commission Filing Fee $ 13,900.00
NASD Filing Fee 5,500.00
Printing Fees and Expenses 400,000.00
Legal Fees and Expenses 350,000.00
Accounting Fees and Expenses 50,000.00
Blue Sky Fees and Expenses 25,000.00
Indenture Trustee's and Registrar's Fees 50,000.00
Miscellaneous 85,600.00
--------------------------------------------------- ------------------------
TOTAL $980,000.00
==========
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement,
IBF VI had only one transaction in which it issued its securities. In
connection with the formation of IBF VI, it sold 1,000 shares of its common
stock to InterBank Funding Corporation ("InterBank") to obtain $250,000 of
initial capital. InterBank is the sole stockholder of IBF VI, and two of IBF
VI's officers and directors are the sole owners of InterBank. The transaction
was intended to be exempt from the registration requirements of the Securities
Act of 1933, as amended, by virtue of Section 4(2) thereunder. No underwriters
were involved in connection with the sales of these securities.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
Exhibits.
<S> <C> <C> <C>
Exhibit No. SEC Ref. No. Title of Document Location
1 (1) Underwriting Agreement Amend. 5
Page E-1
2 (1) Selling Group Agreement Amend. 5
Page E-17
3 (3)(i) Certificate of Incorporation, as amended Initial Filing
Page E-17
3(a) (3)(i) Certificate of Amendment to Certificate of Incorporation Amend. 1
Page E-32
3(b) (3)(i) Certificate of Amendment to Certificate of Incorporation Amend. 2
Page E-18
3(c) (3)(i) Certificate of Amendment to Certificate of Incorporation Amend. 3
Page E-1
4 (3)(ii) By-Laws Initial Filing
Page E-21
5 (4) Proceeds Escrow Agreement Amend. 5
Page E-22
6 (4) Indenture, with exhibits Amend. 6
Page E-1
7 (10) Management Agreement Amend. 3
Page E-2
8 (5)(23) Opinion and Consent of Brown & Wood LLP Amend. 4
Page E-1
9 (23) Consent of Radin, Glass & Co., LLP Amend. 4
Page E-3
10 (25) Form T-1, Statement of Eligibility under Initial Filing
the Trust Indenture Act of 1939 Page E-195
</TABLE>
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
persons of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form SB-2 and authorizes this Registration
Statement or Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Washington, D.C., on August 22, 2000.
IBF VI -- SECURED LENDING CORPORATION
By: /s/ Simon A. Hershon
-----------------------
Simon A. Hershon, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the following
persons in the capacities and on the dates indicated.
By: /s/ Simon A. Hershon August 22, 2000
---------------------------------------
Simon A. Hershon, President
and Director
By: /s/ Ehud D. Laska August 22, 2000
---------------------------------------
Ehud D. Laska, Director
By: /s/ Robert L. Olson August 22, 2000
---------------------------------------
Robert L. Olson, Chief Financial Officer
<PAGE>
