As filed with the Securities and Exchange Commission August 15, 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. 6
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
----------------------------------------------------------------------------------------------------------------------------
Title of each class of securities Dollar amount to Proposed maximum Proposed maximum Amount of
to be registered be registered offering price per unit aggregate offering registration fee
price
============================================================================================================================
<S> <C> <C> <C> <C>
Current Interest Subordinated Bonds
Accretion Subordinated Bonds $50,000,000 $1,000 $50,000,000 $13,900*
----------------------------------------------------------------------------------------------------------------------------
*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 18, 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> <C> <C>
June 30, 2001.............. $1,000 $93.29 $1,093.29
June 30, 2002.............. 1,000 123.48 1,216.77
June 30, 2003.............. 1,000 137.46 1,354.23
June 30, 2004.............. 1,000 152.96 1,507.19
June 30, 2005.............. 1,000 170.23 1,677.42
June 30, 2006.............. 1,000 189.47 1,866.89
December 31, 2006 - Stated
Maturity.............. 1,000 102.62 1,969.51
</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 18, 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.
<TABLE>
<CAPTION>
Price To Sales Proceeds To
Public Commission Company
<S> <C> <C> <C>
Per bond 100% 8% 92%
Minimum $500,000 $40,000 $460,000
Maximum $50,000,000 $4,000,000 $46,000,000
</TABLE>
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 18, 2000.
<PAGE>
Table of Contents
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Prospectus Summary..........................................................................1
Risk Factors................................................................................2
Description of the Bonds....................................................................6
Forward-Looking Statements.................................................................12
Use of Proceeds............................................................................13
Management's Discussion and Analysis of Liquidity and Capital Resources...................13
Operating Policies and Objectives..........................................................15
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 Procedure...........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
</TABLE>
<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 primariliy 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
June 2002 10%
December 2002 and
June 2003 9%
December 2003 and
June 2004 8%
December 2004 and
June 2005 7%
December 2005 and
June 2006 6%
December 2006 and
June 2007 5%
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."
<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) 5.0 980,000 5,0%
--------- ------ ------------ --------
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 invested in short-term,
interest bearing securities pending the uses described above.
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>
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.
<TABLE>
<CAPTION>
Payee Amount ($) Purpose
----- ---------- -------
<S> <C> <C> <C>
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)
</TABLE>
--------------------------
(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 and an additional amount equal to 2.0 percent of IBF VI's annual net
income for each calendar year in which the bonds are outstanding, which is
referred to in this prospectus as the "Profit Participation". In addition, IBF
VI will reimburse National for all out-of-pocket expenses on an accountable
basis. 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, a 0.5 percent due diligence
fee and the Profit Participation.
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 and the Profit Participation 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.
<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
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1999
------------------------------------------ ------------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 1,000 $189,122
TOTAL CURRENT ASSETS 1,000 189,122
DEBT ISSUANCE COSTS 26,276 180,322
DUE FROM AFFILIATE 249,000
----------- ---------
$276,276 $369,444
=========== =========
STOCKHOLDER'S EQUITY
COMMON STOCK, $1 par value, 1,000 shares authorized, $ 1,000 $ 1,000
issued and outstanding
ADDITIONAL PAID-IN CAPITAL $280,276 $409,018
ACCUMULATED DEFICIT (5,000) (40,574)
----------- ---------
$276,276 $369,444
=========== =========
</TABLE>
<PAGE>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
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>
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 Total
Common Stock Paid in Accumulated Stockholder's
------------ Capital Deficit Equity
Shares Amount ------- ------- ------
------ ------
<S> <C> <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>
<TABLE>
<CAPTION>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
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>
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
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- -------------
(unaudited)
ASSETS
-----
CURRENT ASSETS
<S> <C> <C>
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
============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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)
<S> <C> <C>
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)
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
(Unaudited)
Common Stock Additional Total
------------ 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>
<TABLE>
<CAPTION>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
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
<TABLE>
<CAPTION>
<S> <C> <C>
___
|___| 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.
Investor 1 (First, Middle I., Last):
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Investor 2 (First, Middle I., Last):
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Registration For The Investment (How The Investment Should Be Titled):
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Check One Of The Following:
Investor Residence Address 1:
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
___
|___| U.S. Citizen
___
Investor Residence Address 2: |___| Resident Alien
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
___
|___| Foreign Resident; Country
-----------------
___
City, State ZIP Code |___| 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 Corpoation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[Outside back cover]
================================================== ===========================================
<S> <C>
Until November 16, 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 $50,000,000
in addition to the 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
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 Prospectus
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.
August 18, 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.
<TABLE>
<CAPTION>
ITEM 27. EXHIBITS
Exhibits.
Exhibit No. SEC Ref. No. Title of Document Location
<S> <C> <C> <C>
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 15,
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 15, 2000
------------------------------------------------
Simon A. Hershon, President
and Director
By: /s/ Ehud D. Laska August 15, 2000
------------------------------------------------
Ehud D. Laska, Director
By: /s/ Robert L. Olson August 15, 2000
------------------------------------------------
Robert L. Olson, Chief Financial Officer
