<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 23, 2000)
[INTERBANK LOGO]
$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 ACCRETED REDEMPTION
REDEMPTION DATE PRINCIPAL AMOUNT INTEREST PRICE
--------------- ---------------- -------- ----------
<S> <C> <C> <C>
June 30, 2001............................................... $1,000 $ 93.29 $1,093.29
June 30, 2002............................................... 1,000 122.35 1,215.64
June 30, 2003............................................... 1,000 136.05 1,351.69
June 30, 2004............................................... 1,000 151.27 1,502.96
June 30, 2005............................................... 1,000 168.20 1,671.15
June 30, 2006............................................... 1,000 187.02 1,858.18
December 31, 2006 - Stated Maturity......................... 1,000 101.22 1,959.40
</TABLE>
This table assumes you purchased your bond on August 1, 2000. Interest will
begin accruing on a bond from the date of its issuance by IBF VI. Your actual
redemption schedule will be different if you purchase your bond on any other
date and will be given to you when you purchase your bond.
AN OFFER CAN ONLY BE MADE BY THE PROSPECTUS DATED AUGUST 23, 2000,
DELIVERED WITH A COPY OF THIS PROSPECTUS SUPPLEMENT. SEE "RISK FACTORS" FOR
CERTAIN INFORMATION YOU SHOULD CONSIDER BEFORE YOU PURCHASE BONDS.
NATIONAL SECURITIES CORPORATION
The date of this prospectus supplement is August 23, 2000.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
PROSPECTUS
Prospectus Summary.................................... 1
Risk Factors.......................................... 3
Description of the Bonds.............................. 7
Forward-Looking Statements............................ 13
Use of Proceeds....................................... 14
Management's Discussion and Analysis of Liquidity and
Capital Resources.................................... 15
Operating Policies and Objectives..................... 16
Investment Guidelines................................. 18
Risk Management....................................... 27
Significant Acquisitions.............................. 31
Management............................................ 32
Regulatory Matters.................................... 40
Certain Relationships and Related Transactions........ 42
Indemnification....................................... 43
Certain Legal Aspects of Mortgage Loans and Real
Property Investments................................. 43
Certain United States Federal Income Tax
Considerations....................................... 46
Plan of Distribution.................................. 49
Investor Suitability and Minimum Investment
Requirements; Subscription Procedures................ 50
Legal Matters......................................... 52
Experts............................................... 52
Additional Information................................ 53
Appendix I -- Audited Financial Statements............ I-1
Appendix II -- Interim Financial Statements........... II-1
</TABLE>
<PAGE> 3
PROSPECTUS
$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 2 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 23, 2000.
<PAGE> 4
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:
- 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;
- Purchasing and originating other commercial real estate related loans and
commercial loans that are collateralized by non-real estate property;
- Issuing nonrecourse collateralized mortgage bonds and entering into
short-term financings secured by, and used to finance the purchase of,
its loans;
- 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.
1
<PAGE> 5
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 $15,000 or more 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
- require delivery by you of a request for hardship
exemption,
- be reduced by a penalty described in this
prospectus,
- be at the discretion of IBF VI, and
- be limited to 10% of the aggregate principal
amount of the bonds for each calendar year.
No Rating The bonds are not rated.
2
<PAGE> 6
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 THE 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 25% 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.
3
<PAGE> 7
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.
4
<PAGE> 8
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 TO 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:
- the sale of unsecured subordinated debt securities;
- short term borrowings secured by mortgage loans used to purchase mortgage
loans or "warehouse credit facilities";
- lines of credit; and
- 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
5
<PAGE> 9
loans earlier than intended which could have a negative effect on our results of
operations and financial condition and our ability to pay interest and principal
on your bonds.
IF WE ARE REQUIRED TO REGISTER AS AN INVESTMENT COMPANY UNDER THE
INVESTMENT COMPANY ACT, WE WOULD BECOME SUBJECT TO RESTRICTIONS THAT WOULD
PREVENT US FROM OPERATING PROFITABLY ENOUGH TO REPAY YOUR BONDS. We must
maintain an exemption from the Investment Company Act of 1940 so as not to
become regulated as an investment company. If we are unable to satisfy an
exemption from the Investment Company Act and must register as an investment
company, we will be unable to achieve our business plan, including our desired
leverage and yield objectives, and engaging in transactions with affiliates,
among other restrictions. These restrictions could prevent us from fully
repaying your bonds. Section 3(c)(5)(C) of the Investment Company Act excludes
from regulation entities that are primarily engaged in the business of
purchasing or otherwise acquiring "mortgages and other liens on and interests in
real estate." In order to qualify for this exemption, we, together with our
wholly-owned subsidiaries, must, among other things, at all times hold not less
than 80% of our total assets as qualifying mortgage loans and mortgage-related
assets. We refer you to the discussion under "Regulatory Matters -- Investment
Company Act exemption" later in this prospectus where this exemption is
discussed in greater detail.
After the commencement of the sale of bonds under this prospectus, we may
be required to temporarily invest bond proceeds in short-term liquid investments
until we identify qualifying mortgage loans for purchase. We will not purchase
any non-qualifying loans or investments during such period. Nevertheless, we may
be required to rely on Rule 3a-2 of the Investment Company Act, which provides a
temporary exception not to exceed one year from the Investment Company Act for
companies that have a bona fide intent to be engaged primarily, as soon as is
reasonably possible, in a business other than that of investing, reinvesting,
owning, holding or trading in securities but who temporarily fall within the
definition of an investment company. Reliance upon the rule is permitted only
once every three years. Therefore, if we rely on Rule 3a-2 during the initial
investment period, we will not have it available to us for three years.
If a substantial portion of our qualifying mortgage loans were to be
prepaid or liquidated during the first three years, we, together with our wholly
owned subsidiaries, may have to purchase or sell assets that we would not
ordinarily purchase or sell in the normal course of business. If we or our
wholly owned subsidiaries were required to sell assets, they may have to be sold
sooner than they otherwise would. These sales may be at depressed prices, and we
may not realize anticipated benefits from, or may incur losses on, these
investments. Some investments may not be sold due to contractual or legal
restrictions or the inability to locate a suitable buyer. Moreover, we may incur
tax liabilities when we sell assets. We may also be unable to buy additional
assets that may be important to our operating strategy to achieve sufficient
yields on our investments to repay the bonds. If we are unable to purchase or
sell assets to meet the exemption, we may be required to register under the
Investment Company Act, with the significant adverse consequences described
above.
6
<PAGE> 10
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.
7
<PAGE> 11
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:
- the original principal amount; and
- 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:
- 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
- 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;
- would not be deductible on a current accrual basis; or
8
<PAGE> 12
- 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.
<TABLE>
<CAPTION>
REDEMPTION PENALTY
DATE OF REDEMPTION (PERCENTAGE OF PRINCIPAL AMOUNT)
------------------ --------------------------------
<S> <C>
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%
</TABLE>
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.
9
<PAGE> 13
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
- 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,
- 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
- 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.
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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:
- failure to pay the principal on the bonds when due at maturity, upon
redemption, or upon repayment, as provided in the indenture;
- failure to pay any interest on the bonds when due, which default
continues for 30 days;
- 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 25% in principal amount of the outstanding bonds
under the indenture specifying the default and requiring IBF VI to remedy
the default;
- certain events of insolvency, receivership, or reorganization of IBF VI
or any of its subsidiaries, and
- 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 25% 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
- the holder has previously given to the indenture trustee written notice
of a default;
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<PAGE> 15
- the holders of at least 25% of the outstanding bonds have made a written
request and offered reasonable indemnity to the indenture trustee to
institute the proceedings;
- the indenture trustee has failed to institute the proceeding within 60
days; and
- 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:
- change the maturity date of principal or the payment date of any interest
on your bond;
- reduce the principal of, or the rate of interest on, your bond;
- change the coin or currency in which any portion of the principal of, or
interest on, your bond is payable;
- impair your right to institute suit for the enforcement of any of these
payments;
- reduce the percentage of holders of the outstanding bonds necessary to
modify the indenture; or
- 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.
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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:
- market conditions and real estate values in the areas where IBF VI's
loans are made;
- credit risk related to IBF VI's borrowers;
- IBF VI's dependence on securitizations and short-term warehouse loan
facilities;
- IBF VI's ability to achieve its targeted earnings;
- IBF VI's ability to implement its growth strategy;
- competition;
- IBF VI's dependence on debt financing to fund its operations;
- changes in interest rates;
- IBF VI's ability to implement an effective hedging strategy;
- the geographic concentration of IBF VI's loans;
- state and federal regulation and licensing requirements applicable to IBF
VI's lending activities;
- claims by borrowers or investors;
- dependence on key personnel;
- environmental regulation; and
- 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
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<PAGE> 17
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) 980,000
-------- ----- ----------- -----
Net proceeds after offering expenses............. $410,000 82.0% $44,520,000 89.0%
======== ===== =========== =====
Use of net proceeds
Acquisition of loans and investments........... $385,000 77.0% $40,820,000 81.6%
Marketing costs................................ -0(2) 950,000 1.9%
Computers and office equipment................. -0(2) 250,000 0.5%
Working capital reserves....................... 25,000 5.0% 2,500,000 5.0%
-------- ----- ----------- -----
$410,000 82.0% $44,520,000 89.0%
======== ===== =========== =====
</TABLE>
---------------
(1) Percentages rounded to nearest one-tenth of one percent.
(2) Certain offering expenses and other costs will be paid by InterBank without
reimbursement from IBF VI if only the minimum amount of bonds are sold. Some
portion of these costs will also be paid by Interbank if more than the
minimum amount and less than the maximum amount of bonds are sold. However,
in no event will less than 82% of the gross proceeds of the offering be made
available for working capital reserves and acquisitions of loans and
investments by IBF VI.
The net proceeds of this offering will be received and held in trust for
the benefit of investors to be used only for the purposes set forth in this
prospectus. Pending such use, the net proceeds will be invested in short-term,
interest bearing securities.
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<PAGE> 18
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
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<PAGE> 19
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:
- borrower demand for IBF VI's lending products;
- IBF VI's cost of funds;
- 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
- 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;"
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(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.
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<PAGE> 21
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.
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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.
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<PAGE> 23
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:
- current and historical operating statements;
- existing or new appraisals;
- sales comparables;
- 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;
- existing leases and market rates for comparable leases;
- deferred maintenance observed during site inspections or described in
structural and engineering reports; and
- 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.
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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.
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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
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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:
- the information with respect to each loan is true and correct as of the
specified date;
- 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;
- each mortgage loan had, at the time of origination, either an attorney's
certification of title or a title search or title policy;
- 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;
- the originator held good and indefeasible title to, and was the sole
owner of, each mortgage loan; and
- 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
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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
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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
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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:
- the underlying collateral of each loan, including property
characteristics, location, creditworthiness of tenants and economics;
- the relative principal amounts of the loan, including the loan-to-value
and debt service coverage ratios;
- the borrower and manager's ability to manage the property and make debt
service payments; and
- 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.
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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.
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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:
- borrower defaults, bankruptcies, fraud losses and special hazard losses
that are not covered by standard hazard insurance;
- 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;
- IBF VI's short-term variable borrowing costs could exceed the income
earned on the loans acquired with the borrowed funds;
- 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
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- 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.
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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:
- generally larger loan balances;
- dependency on successful operation of the property securing the mortgage
and tenants operating businesses in that property for repayment;
- loan terms that often require little or no amortization and, instead,
provide for balloon payments at stated maturity;
- 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;
- national, regional and local economic conditions, which may be adversely
affected by plant closings, industry slowdowns and other factors;
- local real estate conditions, such as an oversupply of housing, retail,
industrial, office or other commercial space;
- potential environmental or other legal liabilities;
- changes or continued weakness in specific industry segments;
- perceptions by prospective tenants and, in the case of retail properties,
retailers and shoppers, of the safety, convenience, services and
attractiveness of the property;
- the willingness and ability of the property's owner to provide capable
management and adequate maintenance;
- construction quality, age and design;
- demographic factors;
- the non-recourse nature of commercial real estate loans;
- retroactive changes to building or similar codes; and
- increases in operating expenses such as energy costs.
Construction loans and mezzanine investments may also pose additional risk
of loss related to:
- dependency on successful completion and operation of the project for
repayment;
- difficulties in estimating construction or rehabilitation costs;
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- 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;
- possible foreclosure by the holder of the senior loan resulting in a
mezzanine investment becoming unsecured; and
- 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:
- 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;
- 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%;
- 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);
- the average principal balance of commercial mortgage loans will be less
than $500,000 and residential mortgages loans will be less than $200,000;
- the weighted average term to stated maturity will range from 180 to 360
months; and
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- 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.
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IBF VI's business will be managed by the officers and directors of IB
Consultants and IBF Management. The following persons are the officers and
directors of IBF VI, IBF Management and IB Consultants:
<TABLE>
<CAPTION>
NAME AGE POSITION SINCE
---- --- ---------------------------------- ---------------
<S> <C> <C> <C>
Simon A. Hershon.................. 52 CEO, President and Director of IBF June 1998
VI CEO, President and Director of
IBF Management
Ehud D. Laska..................... 50 Executive Vice President and June 1998
Director
James J. Hoban.................... 50 Senior Vice President January 1999
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
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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 a Master of
Science degree in engineering from Brown University and a Master of Business
Administration from Stanford University.
JAMES J. HOBAN has been employed since January 1999 by IBF Securities, Inc.
where he is responsible for managing the overall sales and marketing of
investment securities for InterBank affiliates. Prior to joining InterBank, Mr.
Hoban held senior executive positions in sales, marketing, and product
development for Providian Capital Management, PLM International, and Sun America
Capital. Mr. Hoban earned his Bachelor and MBA degrees from the University of
Southern California.
IVAN M. KRASNER has been employed by IBF Securities, Inc. since September
1998 and is responsible for regional sales of investment securities for
InterBank affiliates. 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.
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<PAGE> 38
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:
- underwriting, originating and acquiring mortgage loans and other real
estate related assets;
- 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
- 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
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<PAGE> 39
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:
- 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;
- 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;
- 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;
- counseling IBF VI in connection with policy decisions;
- maintaining IBF VI's exemption from regulation as an investment company;
- 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;
- 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;
- 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;
- 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;
- contracting, as necessary, with third parties for master and special
servicing of assets acquired by IBF VI;
- 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;
- causing IBF VI to qualify to do business in all applicable jurisdictions;
- 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;
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<PAGE> 40
- 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
- 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
- IBF Management and IB Consultants do not hire and retain knowledgeable
personnel;
- 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
- 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
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<PAGE> 41
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 in mortgages and other liens on and
interests in real estate and real estate related investments. See "Regulatory
Matters -- Investment Company Act exemption."
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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.
INTERBANK FUNDING CORPORATION
INDIVIDUAL FUNDS ANALYSIS
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
NUMBER OF COUPON
CONSECUTIVE INTEREST PRINCIPAL
INTEREST PAYMENTS REDEMPTIONS
DATE OF GROSS INTEREST PAYMENTS AS OF ADDITIONAL AS OF
FUND NAME INCEPTION AMOUNT SOLD(1) RATE MADE JUNE 30, 2000 INTEREST JUNE 30, 2000
--------- --------- -------------- -------- ----------- ------------- ---------- -------------
<S> <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
SPC II 01/21/97 5,000,000 12% 38 1,685,515 91,248 N/A
SPC III 04/10/98 10,000,000 12% 24 1,771,567 58,883 N/A
PIF IV 02/17/98 28,329,000 12% 27 3,709,821 89,775 N/A
AIF V 09/09/99 1,841,000 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
----------- --- --- ---------- -------- ----------
Total $67,992,000 $9,373,731 $329,918 $1,059,000
=========== === === ========== ======== ==========
<CAPTION>
TOTAL AVG.
FUND NAME YIELD(2)
--------- ----------
<S> <C>
SPC I 12.90%
SPC II 12.75%
SPC III 12.67%
PIF IV 12.51%
AIF V N/A
SPC VII 11.53%
-----
Total
=====
</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.
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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
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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:
- Truth-in-Lending Act and Regulation Z, including the Home Ownership and
Equity Protection Act of 1994;
- The Equal Credit Opportunity Act and Regulation B, as amended;
- The Real Estate Settlement Procedures Act and Regulation X;
- The Home Mortgage Disclosure Act; and
- 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
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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>
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, $ 2,500 to $250,000 Finders fees(2)
Inc.............................
</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.
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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,
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<PAGE> 47
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
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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
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<PAGE> 49
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
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<PAGE> 50
(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
47
<PAGE> 51
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
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<PAGE> 52
individual who is present in the United States for 183 days or more in the
taxable year of the disposition and the gain is derived from sources within the
United States. Certain other exceptions may be applicable, and a non-U.S. Holder
should consult its tax advisor in this regard.
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the bonds to registered owners who are not
"exempt recipients" and who fail to provide certain identifying
information -- such as the registered owner's taxpayer identification number or
a Form W-8BEN -- in the required manner. Generally, individuals are not exempt
recipients, whereas corporations and certain other entities generally are exempt
recipients.
PLAN OF DISTRIBUTION
Except for conditions otherwise set forth in this prospectus and under the
terms and conditions of the indenture and the underwriting agreement between IBF
VI and National Securities Corporation -- referred to in this prospectus as
"National", IBF VI will offer through National as its exclusive agent, on a best
efforts basis, a maximum of $50,000,000 in principal amount of the bonds. The
minimum subscription is $5,000 unless there is a higher requirement in your
state of residence or, in the case of individual retirement accounts and certain
regulated by the Employee Retirement Income Security Act of 1974, as amended, or
"Qualified Plans" including Keogh plans, the minimum subscription is $2,000.
Purchases in excess of the minimum subscription will be made in increments of
$1,000. See "Investor Suitability And Minimum Investment Requirements;
Subscription Procedures."
The commission paid to National is 8.0 percent of the gross offering
proceeds. National may reallow the selling compensation to selected dealers
participating in the offering. Generally, dealers participating in the offering
will receive a 6.5 percent commission and a 0.5 percent due diligence fee.
Coleman & Company Securities, Inc. -- referred to in this prospectus as
"Coleman" -- an affiliate of InterBank and IBF VI, will solicit broker-dealers
to participate in the offering and request that they enter into selling group
agreements with National. The contacts and communications with these
broker-dealers will largely be made by employees of IBF Securities under
direction of Coleman. For these services, Coleman will receive from National out
of its sales commission 0.5 percent of the gross proceeds of the offering as a
finders fee. IBF VI will also compensate the employees of IBF Securities by
paying finders fees for identifying and communicating with broker-dealers in
connection with this offering in the amount of approximately 1.0 percent of the
gross proceeds received on bonds sold by those broker-dealers plus 2.0 percent
of the gross proceeds received on the bonds as unaccountable expense
reimbursement. Coleman may also act as a broker-dealer by signing a selling
group agreement with National and make sales of bonds directly to investors.
Coleman will receive a 7.0 percent commission on bonds sold directly to
investors.
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<PAGE> 53
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
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<PAGE> 54
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:
- 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 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
- that the individual retirement account owner or the participant in the
self-directed Qualified Plan satisfies the foregoing standards, or
- 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.
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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.
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ADDITIONAL INFORMATION
IBF VI has filed a registration statement on Form SB-2 under the Securities
Act, with respect to the bonds offered by this prospectus. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules thereto. For further information with respect to IBF
VI and the bonds offered by this prospectus, reference is made to the
registration statement and the exhibits and schedules filed therewith.
Statements contained in this prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of the related contract or other document
filed as an exhibit to the registration statement. Each of those statements are
qualified in all respects by that reference. A copy of the registration
statement, and the exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Securities and
Exchange Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any part of
the registration statement may be obtained from the Commission upon payment of a
prescribed fee. This information is also available from the Commission's
Internet web site at http://www.sec.gov.
In addition to the above, IBF VI will provide investors with annual reports
of IBF VI which will include certified financial statements.
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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
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<PAGE> 58
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1999
------------------------------- -------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,000 $189,122
TOTAL CURRENT ASSETS 1,000 189,122
DEBT ISSUANCE COSTS 26,276 180,322
DUE FROM AFFILIATE 249,000
------------------------------------------
$276,276 $369,444
==========================================
STOCKHOLDER'S EQUITY
COMMON STOCK, $1 par value, 1,000 shares
authorized, issued and outstanding $ 1,000 $ 1,000
ADDITIONAL PAID-IN CAPITAL $280,276 $409,018
ACCUMULATED DEFICIT (5,000) (40,574)
------------------------------------------
$276,276 $369,444
==========================================
</TABLE>
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<PAGE> 59
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>
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<PAGE> 60
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
JUNE 8, 1998 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional Total
----------------- Paid in Accumulated Stockholder's
Shares Amount Capital Deficit Equity
------ ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance as of June 8, 1998 (inception) -- $ -- $ -- $ -- $ --
Capital Contributions 1,000 1,000 280,276 -- 281,276
Net Earnings for the Period June 8,
1998 to December 31, 1998 -- -- -- (5,000) --
------ ------- --------- -------- ---------
Balance as of December 31, 1998 1,000 1,000 280,276 (5,000) 276,276
Capital Contributions -- -- 128,742 -- 128,742
Net Earnings for the Period January 1,
1999 to December 31, 1999 -- -- -- (35,574) (35,574)
------ ------- --------- -------- ---------
Balance as of December 31, 1999 1,000 $1,000 $ 409,018 $(40,574) $ 369,444
====== ======= ========= ======== =========
</TABLE>
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<PAGE> 61
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
JUNE 8, 1998 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Cumulative
June 8, 1998 to January 1, 1999 to June 8, 1998 to
December 31, 1998 December 31, 1999 December 31, 1999
----------------- ------------------ -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,000) $ (35,574) $ (40,574)
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES (5,000) (35,574) (40,594)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES 0 0 0
NET CASH USED IN INVESTING ACTIVITIES 0 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 281,276 128,742 410,018
Loan to parent (249,000) (335,000) (584,000)
Receipts from loan to parent 584,000 584,000
Debt issuance costs (26,276) (154,046) (180,322)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,000 223,696 229,696
--------- --------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS 1,000 188,122 189,122
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD -- 1,000 --
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,000 $ 189,122 $ 189,122
========= ========= =========
</TABLE>
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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.
I-6
<PAGE> 63
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.
I-7
<PAGE> 64
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)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $188,884 $189,122
DEBT ISSUANCE COSTS 297,838 180,322
-------- --------
$486,722 $369,444
======== ========
STOCKHOLDERS' EQUITY
COMMON STOCK, $1 par value, 1,000 shares authorized, issued
and outstanding 1,000 1,000
PAID IN CAPITAL 544,534 409,018
ACCUMULATED DEFICIT (58,812) (40,574)
-------- --------
$486,722 $369,444
======== ========
</TABLE>
II-1
<PAGE> 65
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
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>
II-2
<PAGE> 66
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
(Unaudited)
<TABLE>
<CAPTION>
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>
II-3
<PAGE> 67
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Six months ended June 8, 1998 to
June 30, 2000 June 30, 2000
---------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,238) $ (58,812)
Adjustments to reconcile net loss to net cash used in
operating activities
Debt issuance costs (117,516) (297,838)
---------- ----------
NET CASH USED BY OPERATIONS (135,754) (356,650)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH PROVIDED BY FINANCING ACTIVITIES:
Capital contributions 135,516 545,534
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 135,516 545,534
---------- ----------
NET (DECREASE) INCREASE IN CASH (238) 188,884
CASH, beginning of the period 189,122 --
---------- ----------
CASH, end of the period $ 188,884 $ 188,884
========== ==========
Supplemental disclosures of cash flow information:
Taxes paid $ -- $ --
========== ==========
Interest paid $ -- $ --
========== ==========
</TABLE>
II-4
<PAGE> 68
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.
II-5
<PAGE> 69
Until November 21, 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Table of Contents
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
PROSPECTUS
Prospectus Summary............................. 1
Risk Factors................................... 3
Description of the Bonds....................... 7
Forward-Looking Statements..................... 13
Use of Proceeds................................ 14
Management's Discussion and Analysis of
Liquidity and Capital Resources.............. 15
Operating Policies and Objectives.............. 16
Investment Guidelines.......................... 18
Risk Management................................ 27
Significant Acquisitions....................... 31
Management..................................... 32
Regulatory Matters............................. 40
Certain Relationships and Related
Transactions................................. 42
Indemnification................................ 43
Certain Legal Aspects of Mortgage Loans and
Real Property Investments.................... 43
Certain United States Federal Income Tax
Considerations............................... 46
Plan of Distribution........................... 49
Investor Suitability and Minimum Investment
Requirements; Subscription Procedures........ 50
Legal Matters.................................. 52
Experts........................................ 52
Additional Information......................... 53
Appendix I -- Audited Financial Statements..... I-1
Appendix II -- Interim Financial Statements.... II-1
</TABLE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, THAT INFORMATION OR THOSE REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY IBF VI OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION TO ANY PERSON IN ANY JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF IBF VI SINCE THAT DATE.
HOWEVER, IN THE EVENT OF ANY MATERIAL CHANGE DURING THE PERIOD WHEN THIS
PROSPECTUS IS REQUIRED TO BE DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY.
INTERBANK CAPITAL PARTNERS
1733 Connecticut Avenue, NW
Washington, DC 20009-1137
Telephone: 202-588-7500
Out of State: 800-588-7006
Facsimile: 202-588-5088
$50,000,000
IBF VI -- SECURED LENDING CORPORATION
CURRENT INTEREST SUBORDINATED BONDS
ACCRETION SUBORDINATED BONDS
Prospectus
August 23, 2000
[INTERBANK LOGO]
