As filed with the Securities and Exchange Commission July 12, 2000
File No. 333-71091
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Amendment No. 4
IBF VI -- SECURED LENDING CORPORATION
(Name of small business issuer as specified in its charter)
Delaware 52-2139510
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1733 Connecticut Avenue, N.W.
Washington, DC 20009
(202) 588-7500
(Address and telephone number of registrant's principal executive offices
and principal place of business)
Simon A. Hershon
IBF VI -- Secured Lending Corporation
1733 Connecticut Avenue, N.W.
Washington, DC 20009
(202) 588-7500
(Name, address and telephone number of agent for service)
Copies to:
H. John Steele, Esq. Arthur Don, Esq.
Brown & Wood LLP Steve Curtis, Esq.
1666 K Street, N.W. D'Ancona & Pflaum LLC
Washington, DC 20006-1208 111 East Wacker Drive, Suite 2800
(202) 533-1460 Chicago, IL 60601
(202) 533-1399 fax (312) 602-2000
(312) 602-3000 fax
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
The securities being registered on the Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
------------------------------------- ------------------ ------------------------ ------------------------ -----------------
Title of each class of securities Dollar amount to Proposed maximum Proposed maximum Amount of
to be registered be registered offering price per unit aggregate offering registration fee
price
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<S> <C> <C> <C> <C>
Current Interest Subordinated
Bonds
Accretion Subordinated
Bonds $50,000,000 $1,000 $50,000,000 $13,900*
------------------------------------- ------------------ ------------------------ ------------------------ -----------------
</TABLE>
*Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
IBF VI - SECURED LENDING CORPORATION
Cross-Reference Sheet Showing Location in Prospectus,
Filed as Part of Registration Statement, of Information
Required by Form SB-2
<TABLE>
<CAPTION>
Item
Number in
Form SB-2 Item Caption in Form SB-2 Location in Prospectus
--------- ------------------------- ----------------------
<S> <C> <C>
1 Front of Registration Statement and Outside Front Cover of
Prospectus....................................................... Front Cover Page
2 Inside Front and Outside Back Cover Pages of Prospectus.......... Inside Front Cover Page; Back
Cover Page
3 Summary Information and Risk Factors............................. Prospectus Summary; Risk Factors
4 Use of Proceeds.................................................. Use of Proceeds
5 Determination of Offering Price.................................. Not Applicable
6 Dilution......................................................... Not Applicable
7 Selling Security Holders......................................... Not Applicable
8 Plan of Distribution............................................. Front Cover Page; Plan of
Distribution
9 Legal Proceedings................................................ Management
10 Directors, Executive Officers, Promoters and Control Persons..... Prospectus Summary; Certain
Relationships and Related
Transactions
11 Security Ownership of Certain Beneficial Owners and Management...
Prospectus Summary; Certain
Relationships and Related
Transactions
12 Description of Securities........................................ Description of the Bonds; Cover
Page of Registration Statement;
Cover Page of Prospectus;
Prospectus Summary; Risk
Factors; Investor Suitability
and Minimum Investment
Requirements; Subscription
Procedures
13 Interest of Named Experts and Counsel............................ Not Applicable
14 Disclosure of Commission Position on Indemnification for
Securities Act Liabilities....................................... Risk Factors
15 Organization within Last Five Years.............................. Prospectus Summary; Certain
Relationships and Related
Transactions
16 Description of Business.......................................... Front Cover Page; Prospectus
Summary; Management's Discussion
and Analysis of Liquidity and
Capital Resources; Management;
Certain Relationships and
Related Transactions; Risk
Management; Operating Policies
and Objectives; Investment
Guidelines; Risk Factors;
Additional Information
17 Management's Discussion and Analysis or Plan of Operation........ Operating Policies and
Objectives; Management's
Discussion and Analysis of
Liquidity and Capital Resources
18 Description of Property.......................................... Prospectus Summary; Risk
Factors; Use of Proceeds;
Investment Guidelines; Initial
Mortgage Loan Acquisitions;
Management; Certain Legal
Aspects of Mortgage Loans and
Real Property Investments
19 Certain Relationships and Related Transactions................... Management; Certain
Relationships and Related
Transaction
20 Market for Common Equity and Related Stockholder Matters......... Prospectus Summary; Certain
Relationships and Related
Transactions
21 Executive Compensation........................................... Not Applicable
22 Financial Statements............................................. Appendix I and Appendix II to
the Prospectus
23 Changes In and Disagreements With Accountants on Accounting and
Final Disclosure................................................. Not Applicable
24 Indemnification of Officers and Directors........................ Part II of Registration Statement
25 Other Expenses of Issuance and Distribution...................... Part II of Registration Statement
26 Recent Sales of Unregistered Securities.......................... Part II of Registration Statement
27 Exhibits......................................................... Exhibits to Registration
Statement
28 Undertakings..................................................... Part II of Registration Statement
</TABLE>
<PAGE>
[Form of Prospectus Supplement]
PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus dated July __, 2000)
$50,000,000
IBF VI -- SECURED LENDING CORPORATION
CURRENT INTEREST SUBORDINATED BONDS - DUE 2006
ACCRETION SUBORDINATED BONDS - DUE 2006
Interest Rates
The Current Interest Subordinated Bonds due December 31, 2006 offered
hereby will bear interest at the rate of ____% per annum. The Accretion
Subordinated Bonds due December 31, 2006 offered hereby will accrete interest
at the rate of ____% per annum, compounded quarterly. If an election is made
to pay current interest on any Accretion Subordinate Bonds, such bonds will
bear interest at the rate of ____% 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.
Accretion Bond Redemption
Redemption Date Principal Amount Accreted Interest Price
June 30, 2001............ $1,000 $ $
June 30, 2002............ 1,000
June 30, 2003............ 1,000
June 30, 2004............ 1,000
June 30, 2005............ 1,000
June 30, 2006............ 1,000
December 31, 2006
(Stated Maturity)........ 1,000
An offer can only be made by the prospectus dated July __, 2000,
delivered in conjunction with this prospectus supplement. See "Risk Factors"
for certain information you should consider before you purchase bonds.
[The maturity date and interest rates for the bonds offered by this
prospectus supplement are available through __________, 200_.]
NATIONAL SECURITIES CORPORATION
The date of this prospectus supplement is ___________, 2000.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS [LOGO]
$50,000,000
IBF VI -- SECURED LENDING CORPORATION
CURRENT INTEREST SUBORDINATED BONDS
ACCRETION SUBORDINATED BONDS
IBF VI - Secured Lending Corporation is offering its Current Interest
Subordinated Bonds and its Accretion Subordinated Bonds. There is no market
for you to resell your bonds.
We will provide the maturity date and the interest rates currently being
offered on the bonds in a prospectus supplement to this prospectus. You should
read this prospectus and the prospectus supplement carefully before you
invest.
See "Risk Factors" beginning on page 3 for certain information you should
consider before you purchase bonds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
-------------- ---------------------- ------------------- ------------------
Price To Sales Proceeds To
Public Commission Company
-------------- ---------------------- ------------------- ------------------
Per bond 100% 8% 92%
-------------- ---------------------- ------------------- ------------------
-------------- ---------------------- ------------------- ------------------
Minimum $500,000 $40,000 $460,000
-------------- ---------------------- ------------------- ------------------
-------------- ---------------------- ------------------- ------------------
Maximum $50,000,000 $4,000,000 $46,000,000
-------------- ---------------------- ------------------- ------------------
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 June
30, 2001.
NATIONAL SECURITIES CORPORATION
The date of this prospectus is July __, 2000.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY..........................................................1
RISK FACTORS................................................................2
DESCRIPTION OF THE BONDS....................................................8
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......................................................17
RISK MANAGEMENT............................................................25
SIGNIFICANT ACQUISITIONS...................................................27
MANAGEMENT.................................................................28
REGULATORY MATTERS.........................................................35
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................34
INDEMNIFICATION............................................................35
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND REAL PROPERTY INVESTMENTS......36
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS....................38
PLAN OF DISTRIBUTION.......................................................40
INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS;
SUBSCRIPTION PROCEDURES....................................................42
LEGAL MATTERS..............................................................43
EXPERTS....................................................................43
ADDITIONAL INFORMATION.....................................................44
Appendix I - Audited Financial Statements.................................I-1
Appendix II - Interim Financial Statements...............................II-1
Appendix III - Subscription Agreement...................................III-1
<PAGE>
PROSPECTUS SUMMARY
The Issuer
The issuer, IBF VI - Secured Lending Corporation, is a Delaware
corporation organized on June 8, 1998. The issuer changed its name from IBF VI
Participating Income Corporation on May 11, 2000. The issuer is a direct,
wholly owned subsidiary of InterBank Funding Corporation, a Delaware
corporation, and an affiliate of IBF Management Corp. and InterBank
Consultants, Inc. The principal offices of the issuer and its affiliates are
located at 1733 Connecticut Avenue, N.W., Washington, DC 20009, telephone
number (202) 588-7500.
Business
The issuer will engage either directly, or through one or more wholly
owned affiliates, in one or more of the following businesses:
o Purchasing and originating loans secured more than 100% by the
value of commercial and residential real estate, which may
include distressed properties, properties located outside the
United States and residential mortgage loans made to borrowers
whose credit standing would not qualify them for bank, Fannie
Mae or Freddie Mac guidelines;
o Purchasing and originating other commercial real estate related
loans and commercial loans that are collateralized by non-real
estate property;
o Investing in subordinated interests in residential or commercial
mortgage-backed securities;
o Issuing nonrecourse collateralized mortgage bonds and entering
into short-term financings secured by, and used to finance the
purchase of, its loans;
o Through a management agreement with its affiliate, IBF
Management Corp., and through management or servicing agreements
with one or more unaffiliated parties, manage and service its
loans.
The issuer's investment objective is to purchase and originate loans that
will produce an average annual percentage rate of return of at least 18
percent. The issuer will attempt to obtain such yields through a combination
of origination fees, stated interest, discount fees and leverage. This
strategy requires that the issuer 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 the
issuer will acquire or make.
The Offering
Bonds Offered Up to $50,000,000 aggregate principal amount of
Current Interest Subordinated Bonds and Accretion
Subordinated Bonds. Each class of bonds will be
general unsecured, subordinated debt of the issuer.
Denominations The minimum principal amount of bonds you can
purchase is $5,000 unless there is a higher
requirement in your state of residence. However, the
minimum purchase for individual retirement accounts
and Keogh plans is $2,000. After the minimum
purchase, sales will be made in increments of $1,000.
Maturity Date The bonds will mature no later than December 31,
2007, as set forth in the related prospectus
supplement.
Interest For the Current Interest Subordinated Bonds, interest
accrues at the stated rate set forth in the related
prospectus supplement and is payable quarterly,
unless you purchase more than $15,000 of bonds and
elect to receive interest monthly. Stated interest
will have a priority in payment over management fees
due to IBF Management Corp. 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 the issuer. The original issue discount
on the Accretion Subordinated Bonds is the difference
between the original principal amount and the
redemption price.
Redemption The issuer 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 be
o Subject to delivery by you of a request for
hardship exemption,
o Subject to a penalty described in this prospectus,
o At the discretion of the issuer, and
o Limited to 10% of the aggregate principal amount of
the bonds for each calendar year.
No Rating The bonds are not rated.
RISK FACTORS
Before you invest in our bonds, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included in this
prospectus before you decide to purchase any of the bonds we are offering.
Risks Related to the Offering
The bonds offered by this prospectus are not insured against loss. No
governmental or private agency insures the bonds offered by this prospectus.
The holder of the bonds is dependent solely upon sources such as our earnings,
proceeds from the sale or securitization of loans from our portfolio, our
working capital and other sources of funds, including proceeds from the
continuing sale of subordinated debt and lines of credit for repayment of
principal at maturity and the ongoing payment of interest of the bonds.
The bonds are unsecured and second in right of repayment to our senior
debt borrowed from institutional lenders. The bonds offered by this prospectus
will be subordinated, or second in right of repayment, to our senior debt.
There is no limitation on the amount of senior debt we can incur. 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. These borrowings do not have to be
specifically designated as "senior debt." If we were to become insolvent, our
senior debt would have to be paid in full prior to payment of the bonds during
our liquidation. In addition, any indebtedness of our subsidiary, other than
the senior debt, will have rights upon liquidation or dissolution of the
subsidiary prior to payment being made to the holders of the bonds. There may
not be adequate funds remaining to pay the principal and interest on the
bonds.
You may never be able to resell your bonds because there is no secondary
market for bonds. There is no public market for the bonds. According, you may
never be able to resell your bonds and should purchase the bonds only if you
are prepared to make a long-term investment with the expectation of holding
the bonds until maturity.
A default by us in paying interest or principal on your bonds could
result in the acceleration of the maturity of your bonds and a termination of
your investment. If we default in our obligation to pay you interest or
principal on the bonds or there is a default under the indenture, the
indenture trustee or the holders of 30% of the outstanding bonds acting
together may accelerate the due date of all principal and interest on the
bonds. Although the holders of a majority of the bonds outstanding could vote
to waive the default, if they are unwilling to do so your investment in the
bonds would be terminated through prepayment, which may or may not result in
full payment on the bonds, even if you would prefer that your investment
continue until the original maturity.
All payments of principal and interest on the Accretion Subordinated
Bonds is due at maturity. Unless redeemed earlier or an election is made to
pay current interest, all payments of principal and interest on the Accretion
Subordinated Bonds will be due on the maturity date. If we do not have a
significant amount of earnings by the maturity date, you may not collect all
of the interest as well as all of the principal due on your bonds since
interest payments are not made during the term of the Accretion Subordinated
Bonds even though you will be required to pay taxes on the interest income as
it accretes.
Risks Related to Our Business
Collateral on the loans and investments may not be sufficient or
liquidation proceeds received timely enough to allow us to achieve the yield
on our investments required to repay the bonds. We will acquire and make loans
and investments primarily on the basis of our assessment that the value of the
collateral pledged as security, which in most cases will be real estate or
mortgages, will exceed the amount of the loan.
Our ability to achieve our targeted yields or to recover on our
investments will be adversely affected if:
o our evaluation of the collateral is incorrect;
o we fail for any reason to hold a perfected security interest;
o the collateral loses value;
o the process of collection on the collateral is longer or more
costly than anticipated when the investment is acquired; or
o business or property values are affected by general economic
conditions where properties are concentrated.
Loans in foreign countries may cause losses due to changes in foreign
laws or in foreign markets. If we originate or purchase loans secured by real
property located in foreign countries we could suffer losses due to adverse
changes in foreign laws, local economic markets and currency conversion and
foreign taxes.
Significant competition could adversely affect our business. In
originating and acquiring our loans and investments, we 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 us in conducting certain
businesses and providing certain services. We may not be able to acquire
sufficient loans and investments at spreads above our cost of funds to achieve
our yield and net income objectives and this could keep us from being able to
repay the bonds in full.
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 fully
repay the 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 fully repay
the bonds.
We may suffer greater losses 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 have a
substantial adverse effect on our financial condition and our ability to repay
your bonds.
The existence of conflicts of interest could negatively affect the
quality of our loans and investments and our return on investment. Simon A.
Hershon and Ehud D. Laska, both officers and directors of the issuer, are the
owners of InterBank Funding Corporation, which is the sole stockholder of the
issuer. Simon A. Hershon is also the sole stockholder of IBF Management Corp.
and InterBank Consultants, Inc. InterBank Funding Corporation owns other
business entities that acquire and make loans for their own accounts, and many
investments appropriate for the issuer 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 such 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 Funding Corporation or
acquire investments from InterBank Funding Corporation. 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 the amount available to pay principal and interest on the
bonds.
Our business objectives will not be met if external management fails to
perform. We will contract with IBF Management Corp. to manage our day-to-day
business affairs and will rely on IBF Management Corp. as our principal source
of investment opportunities. We do not expect to employ full-time personnel
and will, therefore, rely on the facilities, personnel and resources of IBF
Management Corp. and InterBank Consultants, Inc., with whom IBF Management
Corp. will subcontract for services, to conduct our operations. We will not be
able to meet our investment and yield objectives if;
o IBF Management Corp. and InterBank Consultants, Inc. do not hire and
retain knowledgeable personnel;
o IBF Management Corp. does not cause such personnel to focus
their attention on the affairs of the issuer rather than the
affairs of its other affiliates; or
o IBF Management Corp. terminates the management agreement between the
issuer and IBF Management Corp. and no suitable replacement is found
to manage our business.
Environmental risks of ownership of properties could adversely affect our
business. 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 such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible
for, the presence of such hazardous or toxic substances. Therefore, an
environmental liability could have a material adverse effect on our ability to
foreclose on a loan, the underlying value of the real property securing a loan
or investment we make and our income and cash available for payment to
bondholders.
Our loans and investments may be adversely affected if insurance does not
cover losses on the security for our loans. Although we try to obtain, or
cause to be obtained, insurance coverage of the type and in the amount
customarily obtained by owners of properties similar to the commercial
properties and residential properties securing our loans, 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. Insurance proceeds may not be adequate for us recover the full
amount of our loan with respect to affected commercial property and
residential properties, and could cause us to suffer losses.
Subordinated loans on real estate are subject to higher risks of loss and
could adversely affect our business. 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 such real
estate. Loans that are subordinate to first liens on real estate are subject
to 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 such 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 such impairment in value.
Bankruptcy proceedings by borrowers could adversely affect our business.
If a borrower becomes the subject of a bankruptcy proceeding, our ability to
recover on that loan may be significantly delayed, and the aggregate amount
ultimately collected may be substantially less than the amount owed, resulting
in unanticipated losses.
Hedging - Our business may be adversely affected if our hedging strategy
is not successful. If we purchase loans for issuance of collateralized
mortgage bonds, but such 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.
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. We plan to purchase subordinate interests
in pools of loans that have been pledged as collateral for senior, secured
debt securities. These interests are subject to 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.
Worse than expected performance of servicers we hire would adversely
affect our business. We intend to contract for the servicing of our mortgage
loans with third-party servicers. Since many borrowers require notices and
reminders to keep their mortgage loans current and to prevent delinquencies
and foreclosures and since the servicers we hire will provide such reminders
and take necessary remedial actions, our earnings will be heavily dependent on
the servicers' success. If the servicers do not perform well, we may suffer
losses on our investment in the loans being serviced.
Possible losses on mortgage loans during warehousing period could
adversely affect our business. We intend to acquire and accumulate mortgage
loans for securitization. During the accumulation period, we could suffer
losses due to:
o borrower defaults, bankruptcies, fraud losses and special hazard
losses that are not covered by standard hazard insurance;
o our use of short-term floating rate borrowings to acquire long
term mortgages, including some of which will bear fixed rates of
interest, which could expose us to a maturity mismatch;
o our short-term variable borrowing costs could exceed the income
earned on the loans acquired with the borrowed funds;
o reverse repurchase agreements which are periodically marked to
market by the repurchase lender, and a decline in the value of
loans pledged to secure reverse repurchase agreements which may
result in margin calls; and
o the unavailability of renewals of or substitutes for maturing or
called short term borrowings for any reason, which may require
us to sell assets quickly to repay those borrowings resulting in
losses associated with forced sales of illiquid collateral to
repay borrowings.
Lending to credit-impaired borrowers may result in higher delinquencies
in our managed portfolio which could adversely impact our business. 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.
Our reliance upon the issuance of collateralized mortgage bonds may
result in fluctuating operating results. We may rely on securitizations to
generate cash proceeds for:
o repayment of our warehouse credit facilities;
o repayment of other borrowings; and
o origination of additional loans.
Our ability to complete securitizations depends on several conditions,
including:
o conditions in the securities markets generally;
o conditions in the asset-backed securities markets specifically; and
o the credit quality of our loan portfolios.
Any substantial impairment of our securitization market for loans could have a
material adverse effect on our results of operations and financial condition.
We are dependent upon the availability of financing to fund our
operations. For our ongoing operations, we are dependent upon frequent
financings, including:
o the sale of unsecured subordinated debt securities;
o warehouse credit facilities;
o lines of credit; and
o funds received from the securitization of loans.
Any failure to obtain adequate funding under a warehouse credit facility
or other borrowings could hurt our cash flow and profitability. To the extent
that we are not successful in maintaining or replacing existing subordinated
debt securities upon maturity, we would have to limit our loan originations or
sell loans earlier than intended. Limiting our originations or our earlier
sales of loans could have a negative effect on our results of operations and
financial condition.
A change in market interest rates may adversely affect our profits. Our
profits are likely to be adversely affected during any period of rapid
changes, either upward or downward, in interest rates. Any future rise in
interest rates may adversely affect the following:
o borrower demand for our lending products;
o our cost of funds;
o the spread between the rate of interest we receive on loans and
interest rates we must pay under our outstanding credit
facilities and debt securities; and
o the profit we will realize from securitizations or sales of loans.
Any future decrease in interest rates could also reduce the amounts which
we may earn on our newly originated loans. This could reduce the spread
between the interest we earn on loans and the interest we pay under our
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.
DESCRIPTION OF THE BONDS
The bonds will be issued under an indenture between IBF VI - Secured
Lending Corporation, 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 "Trust Indenture Act"). 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 the issuer 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 are
subject to redemption 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 thereafter. 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 certificated form without coupons.
The issuer 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.
The Current Interest Subordinated Bonds will pay interest at the rate set
forth in the related prospectus supplement. If you purchase at least $15,000
of Current Interest Subordinated Bonds, the fixed interest is paid to you
monthly or quarterly, as you elect. If you purchase less than $15,000 of
bonds, then you will be paid interest quarterly. The interest payment will be
made to the holder of record as of the last day of the calendar month prior to
the interest payment date, which is the end of the applicable monthly or
quarterly period. In the event an interest payment date falls on a day other
than a business day, interest will be paid on the next business day.
The Accretion Subordinated Bonds will pay all principal and accreted
interest on the maturity date or on any earlier redemption date. Interest will
accrete at the rate set forth in the related prospectus supplement compounded
on each quarterly interest accrual date. You should be aware that the
difference between the price at which you purchase Accretion Subordinated
Bonds and the redemption price will be considered original issue discount and
must be included in your gross income for tax purposes.
Interest on the bonds will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Principal and interest will be payable at
the office of the indenture trustee in New York, New York.
Election to receive current interest on Accretion Subordinated Bonds
You may elect to receive current interest quarterly on your Accretion
Subordinated Bonds at the interest rate set forth in the related prospectus
supplement by submitting a request to the indenture trustee during the month
of December of each year prior to maturity. Once you elect to receive current
interest on your Accretion Subordinated Bonds, you will not have the option to
rescind your election.
The issuer 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, the issuer may elect to pay interest quarterly on the Accredited
Subordinated Bonds at the interest rate set forth in the related prospectus
supplement instead of accreting interest.
In the case of either election, the principal amount will be restated and
will be calculated by adding the following:
o the original principal amount; and
o the amount of accreted interest which had accrued (i) through
December 31 of the year you exercise your option or (ii) in the
case of the issuer, through the date on which the issuer
exercises the option.
A tax event occurs when the issuer receives an opinion from an
experienced independent tax counsel stating that:
o any amendment, or change or announced prospective change in the
laws or regulations of the United States or any of its political
subdivisions or taxing authorities of the United States; or
o any amendment, change, interpretation or application of the laws
or regulations by any legislative body court government agency
or regulatory authority.
which, if enacted, presents more than an insubstantial risk that interest,
including accreted interest, payable on the Accretion Subordinated Bonds
either;
o would not be deductible on a current accrual basis; or
o would not be deductible under any other method;
in whole or in part, by the issuer for federal income tax purposes.
Redemption
After June 30, 2001, the issuer 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 the issuer during any June and December
thereafter. 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 the issuer on the hardship situation.
Any request for redemption under hardship circumstances will be subject to a
redemption penalty equal to a percentage of the original principal amount of
the bond set forth in the table below. The indenture trustee will deduct the
penalty from your redemption payment.
Redemption Penalty
Date of Redemption (percentage of principal amount)
------------------ --------------------------------
December 2001 and
June 2002 10%
December 2002 and
June 2003 9%
December 2003 and
June 2004 8%
December 2004 and
June 2005 7%
December 2005 and
June 2006 6%
December 2006 and
June 2007 5%
The issuer has complete discretion on the basis of the information
provided or factors unrelated to your personal circumstances to accept or
reject the request for hardship redemption. Bonds will be redeemed as of the
end of the month in which the request for redemption is made. The amount of
bonds redeemed for hardship reasons in each calendar year may not exceed 10%
of the aggregate principal amount of the bonds outstanding on the first day of
each calendar year. In the event requests for hardship redemption during a
year exceed the 10% limitation, redemption will be made on a "first come -
first served" basis among the holders of the bonds requesting redemption.
In the event of the death of a holder, a joint holder, or the owner of an
individual retirement account holding a bond, the successor in interest may
tender the bond for redemption at any time during the six-month period
following the date of death. Bonds tendered and accepted for redemption under
hardship circumstances or death of a holder will be redeemed as of the end of
the month in which the request for redemption is made.
Redemption Price. The redemption price of the bonds will be equal to 100%
of the principal amount of your bond plus any related accrued or accreted
interest through the date of redemption. The related prospectus supplement
will provide a table showing redemption prices of the Accretion Subordinated
Bonds on June 30, 2001, of each following June 30 prior to maturity and at the
maturity date.
Payment of all principal and interest due on the bonds will be made on
the redemption date with respect to a redemption by the issuer. 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
The issuer and its subsidiaries may borrow additional funds in the
future. The issuer 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 the issuer.
Upon a distribution of assets, dissolution, winding up, liquidation or
reorganization of the issuer, upon an assignment for the benefit of creditors,
or if the principal of the bonds has been declared due and payable and such
declaration has not been rescinded or annulled, then in any such instance 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
The issuer cannot, while any of your bonds are outstanding
o declare or pay any dividend, either in cash or property, on any
shares of its capital stock, except dividends or other
distributions payable solely in shares of capital stock of the
issuer,
o purchase, redeem or retire any shares of its capital stock or
any warrants, rights or options to purchase or acquire any
shares of its capital stock, or
o make any other payment or distribution, either directly or
indirectly, in respect of its capital stock,
if a default will occur on the bonds after giving effect to the transaction.
Notwithstanding the foregoing, the issuer 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, the issuer cannot pay the management fee to IBF Management
Corp. ("IBF Management") or any of its affiliates to the extent the issuer has
an accumulated deficit for any period with respect to which the management fee
is payable. As a practical matter, this means stated interest on the bonds and
the other operating expenses will be paid before the management fee.
Limitations on transactions with affiliates
The issuer may not participate in a transaction with an affiliate, except
in good faith and on terms that are no less favorable to the issuer than those
that could have been obtained in a comparable transaction on an arm's-length
basis from a person not an affiliate of the issuer.
The issuer 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. The issuer may merge or
consolidate with another entity; provided that such merger or consolidation
will not materially change the business of the issuer, the new entity fully
assumes all obligations of the issuer, and after giving effect to the
transaction no default shall exist.
Events of default
An event of default under the indenture includes:
o failure to pay the principal on the bonds when due at maturity, upon
redemption, or upon repayment,
as provided in the indenture;
o failure to pay any interest on the bonds when due, which default
continues for 30 days;
o failure to perform any other covenant set forth in the indenture
for 30 days after receipt of written notice from the indenture
trustee or holders of at least 30% in principal amount of the
outstanding bonds under the indenture specifying the default and
requiring the issuer to remedy such default;
o certain events of insolvency, receivership, or reorganization of the
issuer or any of its subsidiaries, and
o entry of a final judgment, decree or order against the issuer 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 such rights at the
written request of holders of a majority of the outstanding bonds and upon
being indemnified to its satisfaction. If a default occurs, either the
indenture trustee or the holders of at least 30% of the outstanding bonds may
accelerate the maturity of all outstanding bonds. Prior to any judgment or
decree for the payment of money being obtained, the holders of a majority of
the outstanding bonds may waive a default resulting in acceleration of the
bonds, but only if any other defaults have been remedied or waived.
The issuer must furnish quarterly, to the indenture trustee an officers'
certificate stating whether, to the best of the knowledge of the officers
executing such certificate, the issuer is in default under any of the
provisions of the indenture and describing any existing defaults.
A holder will not have any right to institute any proceeding with respect
to the indenture or for any remedy thereunder, unless
o the holder has previously given to the indenture trustee written
notice of a default;
o the holders of at least 30% of the outstanding bonds have made a
written request and offered reasonable indemnity to the
indenture trustee to institute such proceedings;
o the indenture trustee has failed to institute such proceeding within
60 days; and
o the indenture trustee has not received from the holders of a
majority of the outstanding bonds a direction inconsistent with
such 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 such payments.
Modification and waiver
With certain limited exceptions which permit modification of the
indenture by the issuer and indenture trustee without the consent of any
holders of the bonds, the indenture may be modified by the issuer with the
consent of holders of not less than a majority of the outstanding bonds, if
the bonds are affected by the modification. No change can be made without your
consent if the effect is to:
o change the maturity date of principal or the payment date of any
interest on your bond;
o reduce the principal of, or the rate of interest on, your bond;
o change the coin or currency in which any portion of the principal
of, or interest on, your bond is payable;
o impair your right to institute suit for the enforcement of any such
payment;
o reduce the percentage of holders of the outstanding bonds necessary
to modify the indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding bonds necessary to waive any past default.
The holders of a majority of the outstanding bonds may waive compliance
by the issuer with certain restrictive provisions of the indenture.
Satisfaction and discharge of indenture
The indenture provides that the issuer 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 such 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 is subject to 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 such deposit and termination and certain other
conditions.
The Indenture Trustee
Continental Stock Transfer & Trust Company is the indenture trustee under
the indenture. Its principal corporate trust office is located at 2 Broadway,
New York, New York 10004. The indenture trustee is not responsible for any
investment decisions of the issuer and shall not be held responsible or liable
for any such 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 are subject to certain risks and
uncertainties, including but not limited to the following:
o market conditions and real estate values in the areas where the
issuer's loans are made;
o credit risk related to the issuer's borrowers;
o the issuer's dependence on securitizations and short-term warehouse
loan facilities;
o the issuer's ability to achieve its targeted earnings;
o the issuer's ability to implement its growth strategy;
o competition;
o the issuer's dependence on debt financing to fund its operations;
o changes in interest rates;
o the issuer's ability to implement an effective hedging strategy;
o the geographic concentration of the issuer's loans;
o state and federal regulation and licensing requirements applicable
to the issuer's lending activities;
o claims by borrowers or investors;
o dependence on key personnel;
o environmental regulation; and
o the properties of the bonds being offered.
All of the above risks could cause the issuer's actual results to differ
materially from those presently anticipated. When considering forward-looking
statements, you should keep these risk factors in mind as well as the other
cautionary statements in this prospectus. You should not place undue reliance
on any forward-looking statement.
USE OF PROCEEDS
The following table sets forth the issuer'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
Funding Corporation without reimbursement from the issuer if only the
minimum amount of bonds are sold. Some portion of these costs will
also be paid by Interbank Funding Corporation if more than the
minimum amount and less than the maximum amount of bonds are sold,
provided that 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 the issuer.
The net proceeds of this offering will be invested in short-term,
interest bearing securities pending the uses described above.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF LIQUIDITY AND CAPITAL RESOURCES
The issuer has no operating history. The issuer currently has only
nominal assets and has received no income. To date, the issuer'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, the issuer
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. The issuer's general and
administrative expenses increased by $30,574, primarily as a result of an
increase in management fees and related overhead as the issuer'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, the issuer'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. The
issuer's future expenses will increase substantially as bonds are sold
pursuant to 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 the issuer's funds will be the proceeds of this
offering, the proceeds of the private purchase by InterBank of the issuer'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 the issuer
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 the
issuer 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 the issuer is able to achieve its target return, gross revenue
would be approximately $7.8 million, which management expects to be sufficient
to meet the issuer's obligations on the bonds.
InterBank Funding Corporation ("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 the issuer through its
wholly owned subsidiary, IBF VI - Asset Securitization Corp., and will equal
the difference between the acquisition price of the mortgage loans and the
proceeds the issuer or IBF VI - Asset Securitization Corp. 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 the issuer on
future dates as may be required for the issuer to make additional leveraged
acquisitions.
OPERATING POLICIES AND OBJECTIVES
The issuer 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, InterBank Consultants, Inc.
("IB Consultants") and third party contractors. Any reference to the
operations, investments and acquisitions of the issuer made in this prospectus
shall include the operations, investments and acquisitions of any of the
issuer's subsidiaries as well. The issuer will seek to generate cash flow
primarily from the following:
(i) by originating and acquiring whole mortgage loans, which may
include commercial mortgages and subprime residential mortgages,
and
(ii) secondarily, from investments in
(A) subordinated interests in collateralized mortgage
securities;
(B) mezzanine investments in commercial and multifamily
residential properties;
(C) construction loans and foreign real estate loans; and
(D) other commercial loans.
The issuer may decide in the future to pursue other available acquisition
opportunities it deems suitable for its portfolio. At least 80% of the
issuer's assets will be mortgage loans secured by first and second liens on
commercial and residential real estate. The remainder, 20% or less, of the
issuer's assets will be invested in other real estate related assets and other
commercial loans. Within the 80% mortgage loan category, the issuer 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, the issuer 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.
The issuer will seek to maximize yield by managing credit risk through
credit underwriting. The issuer 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 the issuer's assets become
concentrated in a few states or a particular region, the return on investment
will become more dependent on the economy of such states or region.
To create yields commensurate with its investment objectives, the issuer
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
such indebtedness the issuer can incur. The issuer 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 the issuer's assets decrease,
the issuer's use of leverage will increase the likelihood that the issuer will
experience reduced or negative cash flow and reduced liquidity. The issuer
intends to use the proceeds from such borrowings to invest in additional
mortgage loans, mortgage-backed securities and other assets and, in turn, to
borrow against those newly acquired assets. The issuer'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 the issuer has
significantly leveraged its portfolio of mortgage loans.
To accomplish the leverage requirements described above, the issuer will
establish IBF VI - Asset Securitization Corp. 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 - Asset Securitization Corp. - with its sole purpose being the
acquisition of loan pools and obtaining financing - will satisfy those
institutional security interest objectives thereby providing the issuer 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 the issuer throughout this
prospectus will be conducted in large part by IBF VI - Asset Securitization
Corp.
INVESTMENT GUIDELINES
General
The following is a summary of the guidelines setting forth the general
parameters for the issuer's investments, borrowings and operations, although
IBF Management has substantial discretion in applying these guidelines and
making investment decisions. Such 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, the issuer intends to invest those funds in readily marketable
securities or interest-bearing deposit accounts.
The issuer 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 such investments would be
in the issuer's best interests. The issuer, in consultation with IBF
Management, may establish underwriting criteria for evaluating potential
investments and, if such underwriting criteria are established, the issuer, in
consultation with IBF Management, may modify such underwriting criteria at any
time and from time to time. The issuer'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 the issuer from the acquisition of that asset.
Purchase from affiliates
The issuer may purchase loans and investments from affiliates of IBF
Management and the issuer, 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 the issuer. 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 the issuer 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 such
transactions and for changes in market conditions between the dates of the
relevant transactions. If no previous sales of similar assets have occurred,
the issuer 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 such determinations are estimates and are not bona fide third
party offers to buy or sell. It is the intention of the issuer that the
agreements and transactions, including the sale of loans, mortgage-backed
securities and other investments, taken as a whole, between the issuer on the
one hand and its affiliates on the other hand are fair to both parties.
Investment Activities
The discussion below describes the principal categories of assets that
the issuer intends to originate or acquire. The issuer intends to invest at
least 80% of its assets at all times in the first two categories of assets
described below.
Commercial Mortgage Loans
The issuer will originate or acquire first and second lien commercial
mortgage loans. A substantial portion of these mortgages are expected to be
institutional quality and 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. The issuer 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 the issuer to achieve its desired rates of return.
Accordingly, the issuer 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.
The issuer will also attempt to purchase performing loans at a discount that,
coupled with stated interest on the loans, have the potential to achieve the
issuer's desired rates of return.
Before acquiring any loan, the issuer will review the loan documents, the
borrower's payment history, the borrowers' financial condition and the value
of the collateral securing the loan. Sources of information that may be
examined in determining the fair market value of a real property may include
one or more of the following:
o current and historical operating statements;
o existing or new appraisals;
o sales comparables;
o industry statistics and reports regarding operating expenses,
such as those compiled by the Institute of Real Estate
Management and the Building Owners and Managers Association;
o existing leases and market rates for comparable leases;
o deferred maintenance observed during site inspections or described
in structural and engineering reports; and
o correspondence and other documents and memoranda found in the
files of the seller of the loan secured by that real property or
other relevant parties.
After completing its evaluation and assessing the potential for satisfying its
desired rates of return, the issuer will determine a price at which it would
be willing to purchase the loan. As a general guideline, the issuer 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 the issuer.
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 the issuer 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 the issuer's investment.
Once the issuer 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, the issuer 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. The issuer 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. The issuer will obtain leads for these loans through
institutions such as banks, general lenders of corporate obligations, mortgage
lenders, and real estate and finance companies. The issuer will primarily make
loans secured by real estate, and secondarily loans secured by other assets.
Before originating a loan, the issuer 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, the issuer will
obtain independent appraisals of the related real property securing all
mortgage loans. For loans secured by other personal property, the issuer may
rely solely on its own internal evaluation of the value of the collateral or
obtain independent appraisals of the collateral.
Generally, the issuer 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,
the issuer 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.
The issuer 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, the issuer will attempt to make secured loans
with a stated interest rate of at least 18 percent per annum. The issuer 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 the issuer 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, the issuer will attempt to restructure or refinance the loan. If
restructuring or refinancing becomes unfeasible, the issuer will seek
ownership of the underlying collateral through sale, liquidation, or
collection of the outstanding collateral.
Subprime Residential Mortgage Loans
The issuer may purchase pools of first and junior lien residential
mortgage loans made to credit impaired borrowers. The subprime loans will be
originated by unaffiliated third parties generally in accordance with
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 such 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 will generally 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 generally will 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 pursuant to 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. The issuer will purchase mortgage loans from
originators who originate loans in all credit categories but which primarily
originate "A" and "B" category loans with typically less than 25% of their
loans being "C" category loans and less than 10% of their loans being "D"
category loans. The issuer does not intend to acquire subprime residential
loans with a loan-to-value ratio at or in excess of 100%.
Any subprime residential loan may be prepaid in full or in part at any
time, although the issuer will attempt to acquire a large percentage 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 the
issuer in respect of the acquired loans that include, among other things,
that:
o the information with respect to each loan is true and correct as
of the specified date;
o each mortgaged property is improved by a one- to four-family
residential dwelling, which may include condominiums, townhouses
and manufactured housing permanently attached to foundations;
o each mortgage loan had, at the time of origination, either an
attorney's certification of title or a title search or title
policy;
o each mortgage loan was secured by a valid and subsisting first
or second lien of record on the mortgaged property subject in
all cases only to the exceptions to title set forth in the title
insurance policy, if any, with respect to the related mortgage
loan;
o the originator held good and indefeasible title to, and was the
sole owner of, each mortgage loan; and
o each mortgage loan was originated in accordance with 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 the
issuer's interest, the originator will be obligated to repurchase the mortgage
loan. If the originator fails to repurchase a mortgage loan, the issuer will
suffer any loss related to the mortgage loan.
Other Real Estate Related Assets and Other Commercial Loans
The issuer 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. The issuer's policy will be to conduct an investigation and
evaluation of other real estate related assets and other commercial loans
before purchasing such assets. Evaluation of potential properties will be
conducted primarily by IBF Management's employees who specialize in the
analysis of such assets, often with further specialization based on geographic
or collateral-specific factors. The issuer expects IBF Management to use third
parties, such as brokers who are familiar with the property's type and
location, to assist it in conducting an evaluation of the value of the
property, and, depending on the circumstances, to use subcontractors, such as
local counsel and engineering and environmental experts, to assist in the
evaluation and verification of information and the gathering of other
information not previously made available by the potential seller. "Other real
estate related assets" and "other commercial loans" may include the following:
Subordinate interests. The issuer may purchase subordinate
mortgage-backed securities in pools of loans that the issuer 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 such losses are
allocated to senior classes. Moreover, typically, as long as the more senior
tranches of securities are outstanding, all prepayments on the mortgage loans
generally are paid to those senior tranches. In some instances, particularly
with respect to subordinate mortgage-backed securities in commercial
securitizations, the holders of subordinate mortgage-backed securities are not
entitled to receive scheduled payments of principal until the more senior
tranches are paid in full. Because of this structuring, subordinate
mortgage-backed securities in a typical securitization are subject to 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, are subject to
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 the issuer 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 the issuer 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 the issuer in evaluating mortgage loans will be similar to the
guidelines described above with respect to commercial mortgage loans acquired
by the issuer.
The subordinate mortgage-backed securities to be acquired by the issuer
generally will not have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), 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, the issuer could be required to borrow funds
or to liquidate assets in order to pay interest on the bonds.
Mezzanine investments. The issuer may make investments that are
subordinated to first lien mortgage loans on commercial and multifamily real
estate. For example, on a commercial property subject to a first lien mortgage
loan with a principal balance equal to 70% of the value of the property, the
issuer 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 the property subject to the first lien, giving the issuer
a second lien position, or a partnership or other ownership interest in the
owner. If the ownership interest is pledged, the issuer would be in a position
to take over the operation of the property in the event of a default on the
loan. These type of arrangements (hereafter referred to as "mezzanine
investments") generally would provide the issuer 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 the issuer 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 the issuer 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, the issuer intends to perform certain credit underwriting to
attempt to evaluate future performance of the collateral supporting such
investment, which will include a review of the following:
o the underlying collateral of each loan, including property
characteristics, location, creditworthiness of tenants and
economics;
o the relative principal amounts of the loan, including the
loan-to-value and debt service coverage ratios;
o the borrower and manager's ability to manage the property and
make debt service payments; and
o the mortgage loan's purpose and documentation.
The mezzanine investments will be on commercial and multi-family properties
that generally will have loan-to-value ratios of no more than 90% and debt
service coverage ratios of no less than 1.05x.
Construction loans. The issuer 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. The issuer may originate or acquire mortgage
loans secured by real estate located outside the United States. The issuer 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. The issuer may be subject to
foreign income tax with respect to its investments in foreign mortgages.
Other Mortgage-Backed Securities. The issuer may create or acquire
interest-only securities that have characteristics of subordinate
mortgage-backed securities, known as subordinate interest-only securities. A
subordinate interest-only security is entitled to no payments of principal;
moreover, interest on a subordinate interest-only security often is withheld
in a reserve fund or spread account and is used to fund required payments of
principal and interest on the more senior classes. Once the balance in the
spread account reaches a certain level, interest on the subordinate
interest-only security is paid to its holders.
These subordinate interest-only securities provide credit support to the
senior classes, and thus bear substantial credit risk. Moreover, because a
subordinate interest-only security receives only interest payments, its yield
is extremely sensitive to changes in the weighted average life of the class,
which in turn is dictated by the rate of prepayments, including as a result of
defaults, on the underlying loans. Some subordinate mortgage-backed securities
may generate "phantom income" which bears no relationship to the actual
economic income attributable to the subordinate interest-only securities.
The issuer 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 the issuer'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. The issuer may originate or acquire commercial
loans secured by non-real estate assets. Such 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
the issuer 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. The issuer may amend
or deviate from these policies or adopt other policies in the future.
Leverage and borrowing
The issuer 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 such leverage
will benefit the issuer. If changes in market conditions cause the cost of
such financing to increase relative to the income that can be derived from
securities purchased with the proceeds thereof, the issuer 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 the issuer and affects the amounts
available for payment to bondholders. Although the amount owed will be fixed,
the issuer's assets may change in value during the time the debt is
outstanding. Leverage will create interest expenses for the issuer 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
the issuer will have to pay, the issuer'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 the issuer will be less than if borrowing had not
been used.
Collateralized mortgage bonds through IBF VI - Asset Securitization Corp. and
warehouse lines of credit
The issuer may originate or purchase mortgage loans and through IBF VI -
Asset Securitization Corp. issue collateralized mortgage bonds. During the
period in which the issuer is acquiring mortgage loans for such bond
issuances, the issuer is likely to borrow funds secured by such loans pursuant
to warehouse lines of credit. The issuer has not yet established any such
credit lines. The principal balance of the collateral will typically exceed
the principal balance of the collateralized mortgage bonds. While the debt is
outstanding, the issuer's ability to dispose of the loans will be limited.
Once the collateralized mortgage bonds are paid in full, the issuer will have
unlimited ability to dispose of or refinance the loans.
Reverse repurchase agreements
The issuer or IBF VI - Asset Securitization Corp. may enter into reverse
repurchase agreements, which are agreements under which the issuer would sell
assets to a third party with the commitment that the issuer repurchase such
assets from the purchaser at a fixed price on an agreed date. Reverse
repurchase agreements may be characterized as loans to the issuer 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
The issuer or IBF VI - Asset Securitization Corp. intends to borrow money
through various bank credit facilities, which will have varying fixed or
adjustable interest rates and varying maturities. The issuer has not yet
established any such bank credit facilities.
Interest rate management techniques
The issuer 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 the issuer's assets resulting from
general trends in debt markets or to change the duration of or interest rate
risk associated with the issuer's borrowings. Any such transaction is subject
to risks, and may limit the potential earnings on the issuer's investment in
real estate related assets. Such techniques may include puts and calls on
securities or indices of securities, Eurodollar futures contracts and options
on such contracts, interest rate swaps or other such transactions.
Hedging
The issuer may 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. The
issuer 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. The issuer plans to issue collateralized mortgage bonds backed
by pools of mortgage loans that it originates or acquires. Changes in interest
rates during the time the issuer is holding mortgage loans for securitization
will impact the net proceeds and terms available from the issuance of
collateralized mortgage bonds. The intent of the issuer'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 the issuer issues
collateralized mortgage bonds. All hedge agreements related to a securitized
pool of loans will be terminated concurrently with the securitization.
Commercial mortgage loan risk management
Property values and net operating income derived from commercial
properties are subject to volatility and commercial mortgage loans may be
adversely affected by a number of factors and risks, including, but not
limited to:
o generally larger loan balances;
o dependency on successful operation of the property securing the
mortgage and tenants operating businesses therein for repayment;
o loan terms that often require little or no amortization and,
instead, provide for balloon payments at stated maturity;
o certain factors outside the issuer's control or the control of the
borrower such as governmental regulations, zoning, tax laws or
rent control laws in the case of multifamily mortgage loans;
o national, regional and local economic conditions, which may be
adversely affected by plant closings, industry slowdowns and
other factors;
o local real estate conditions, such as an oversupply of housing,
retail, industrial, office or other commercial space;
o potential environmental or other legal liabilities;
o changes or continued weakness in specific industry segments;
o perceptions by prospective tenants and, in the case of retail
properties, retailers and shoppers, of the safety, convenience,
services and attractiveness of the property;
o the willingness and ability of the property's owner to provide
capable management and adequate maintenance;
o construction quality, age and design;
o demographic factors;
o the non-recourse nature of commercial real estate loans;
o retroactive changes to building or similar codes; and
o increases in operating expenses such as energy costs.
Construction loans and mezzanine investments may also pose
additional risk of loss related to:
o dependency on successful completion and operation of the project
for repayment;
o difficulties in estimating construction or rehabilitation costs;
o loan terms that often require little or no amortization,
providing instead for additional advances to be made and for a
balloon payment at a stated maturity date;
o possible foreclosure by the holder of the senior loan resulting in
a mezzanine investment becoming unsecured; and
o higher loan-to-value ratios.
The issuer 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 the issuer's control or readily assessable and, therefore, the
underwriting guidelines may not protect the issuer from losses.
SIGNIFICANT ACQUISITIONS
The issuer 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 the issuer. 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 the
issuer, 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
The issuer does not have, and does not expect to have, any full time
employees. No salaries will be paid to the executive officers of the issuer.
All personnel services required for the issuer's operations will be provided
by IB Consultants through the management agreement with IBF Management.
The issuer'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 the issuer, IBF Management and IB Consultants:
<TABLE>
<CAPTION>
Name Age Position Since
<S> <C> <C> <C>
Simon A. Hershon 52 CEO, President and Director of the issuer June 1998
CEO, President and Director of IBF Management
Ehud D. Laska 50 Executive Vice President and Director June 1998
Ivan M. Krasner 48 Senior Vice President September 1998
Robert L. Olson 57 Chief Financial Officer May 2000
</TABLE>
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, InterBank Consultants, Inc., InterBank/Brener Brokerage
Services, Inc., American Eagle Funding, LLC, InterBank Capital Group, IBF
Securities, Inc., IBF Management Corp., 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 InterBank Consultants,
Inc., Mr. Hershon has been involved in numerous corporate and bond financings
and provided advisory services in connection with the largest bankruptcy in
Washington, D.C. history, which totaled over $2.0 billion. Mr. Hershon was
also involved, through InterBank/Brener Brokerage Services, Inc., in over $5.0
billion of hotel transactions. Mr. Hershon's education and professional
experience combine to provide InterBank's clientele with an in depth
understanding of institutional and corporate finance, real estate finance and
development, and hospitality turn-arounds. Mr. Hershon graduated from the U.S.
Naval Academy and subsequently served in nuclear powered submarines in the
U.S. Navy. He received both a Masters and Doctorate in Business Administration
from Harvard University where he concentrated in finance and graduated with
honors.
Ehud D. Laska has served as President of American Eagle Funding, LLC, and
Managing Director of the InterBank Capital Group since January 1996. Through
these firms, Mr. Laska specializes in building up companies through same
industry consolidation and acquisitions. Mr. Laska has also served as the
Chairman of Coleman & Company Securities, Inc., a member firm of the National
Association of Securities Dealers, Inc., since May 1996. Mr. Laska has also
served as a director of Headway Corporate Resources, Inc., a publicly held
corporation engaged in human resource management, since August 1993. From
August 1994 to February 1996, Mr. Laska served as a managing director at the
investment-banking firm of Continuum Capital, Inc. While serving as a Managing
Director with Tallwood Associates, Inc., a boutique investment banking firm,
from May 1992 to August 1994, Mr. Laska founded the Private Equity Finance
Group, which merged with Continuum Capital, Inc. in August 1994. Prior to
1992, Mr. Laska was a senior investment banker with the Wall Street firms of
CS/First Boston, Drexel Burnham Lambert, Paine Webber, and Laidlaw Equities.
Mr. Laska has also served as vice president and deputy chief financial officer
at Citibank, N.A. from 1984 to 1987. Mr. Laska graduated from the University
of Massachusetts with a Bachelor of Science in Engineering and holds an
Masters of Science degree in engineering from Brown University and a Masters
of Business Administration from Stanford University.
Ivan M. Krasner has been employed since September 1998 by IBF Securities,
Inc., where he is responsible for managing the marketing operations of
InterBank's business activities. Mr. Krasner has over 20 years experience in
the development, strategic positioning, and marketing of financial service
products. Most recently, Mr. Krasner was Vice President of Orbitex Management,
a European-based mutual fund group specializing in global sector funds, from
September 1997 to August 1998. From September 1996 to August 1997, Mr. Krasner
was a founding partner and Senior Vice President of The Net Collaborative, a
consultancy of industry experts bringing internet solutions to large financial
service institutions. From October 1983 to December 1995, Mr. Krasner was
employed in various positions by PLM International, a major originator of
equipment leasing programs. Mr. Krasner graduated from C.W. Post College with
a Bachelor of Arts in Philosophy and attended the Strategic Marketing
Management Program at the Harvard Business School.
Robert L. Olson has served as Chief Financial Officer since May 2000. Mr.
Olson has over 20 years experience in developing financial controls and
procedures for companies in various industries. Most recently, Mr. Olson
served as Vice President of Finance for The Energy Grid, Inc., a start up
company in the energy, gas and telecommunications industries, from March 1999
to May 2000. From September 1997 to March 1999, Mr. Olson served as Vice
President of Finance for Global Intellicom, Inc., a publicly-traded technology
firm. From June 1990 to September 1997, Mr. Olson served as Vice President of
Finance for Trafalgar Ltd., a manufacturer, wholesaler and retailer of leather
products. From 1977 to June 1990, Mr. Olson served as a Vice President of
Finance or Chief Financial Officer for various companies involved primarily in
retailing and manufacturing. Mr. Olson graduated from Long Island University
with a Bachelor of Science in Accounting.
IBF Management
IBF Management, formed in December 1998, succeeded to the business of
InterBank Consultants, Inc. Since December 1990, InterBank, InterBank
Consultants, Inc. 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.
The issuer will enter into the management agreement with IBF Management
for a term expiring on the maturity or other redemption of the bonds. IBF
Management will be primarily involved in three activities:
o underwriting, originating and acquiring mortgage loans and other
real estate related assets;
o asset/liability management, financing, management and
disposition of loans, including credit and prepayment risk
management, collection of payments, enforcement of remedies,
foreclosure and property disposition and related services; and
o capital management, oversight of the issuer's structuring,
analysis, capital raising and investor relations activities.
In conducting these activities, IBF Management will formulate operating
strategies for the issuer, arrange for the acquisition of assets by the
issuer, monitor the performance of the issuer's loans and provide certain
administrative and managerial services in connection with the operation of the
issuer. IBF Management will be required to manage the business affairs of the
issuer in conformity with the policies that are approved and monitored by the
issuer's board of directors. IBF Management will be required to prepare
regular reports for the issuer that will review the issuer's acquisitions of
assets, portfolio composition and characteristics, credit quality, performance
and compliance with the policies approved by the issuer.
At all times, IBF Management will be subject to the direction and
oversight of the issuer and will have such functions and authority as set
forth in the management agreement. IBF Management will be responsible for the
day-to-day operations of the issuer and will perform such services activities
relating to the issuer's assets and operations as may be appropriate,
including:
o providing a complete program of investing and reinvesting the
capital and assets of the issuer in pursuit of its investment
objectives and in accordance with policies adopted by the
issuer from time to time;
o serving as the issuer's consultant with respect to formulation
of investment criteria and preparation of policy guidelines by
the issuer's board of directors;
o assisting the issuer in developing criteria for mortgage asset
purchase commitments that are specifically tailored to the
issuer's investment objectives and making available to the
issuer its knowledge and experience with respect to mortgage
loans, other real estate related assets and commercial loans;
o counseling the issuer in connection with policy decisions;
o maintaining the issuer's exemption from regulation as an
investment company;
o representing the issuer in connection with the purchase and
commitment to purchase or sell mortgage loans and other real
estate related assets and commercial loans;
o furnishing reports and statistical and economic research to the
issuer regarding the issuer's activities and the services
performed for the issuer by IBF Management;
o monitoring and providing to the issuer 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 such
dealers;
o administering the day-to-day operations of the issuer and
performing and supervising the performance of such other
administrative functions necessary in the management of the
issuer as may be agreed upon by IBF Management and the issuer;
o contracting, as necessary, with third parties for master and
special servicing of assets acquired by the issuer;
o communicating on behalf of the issuer with the holders of the
equity and debt securities of the issuer as required to
satisfy the reporting and other requirements of any
governmental bodies or agencies and to maintain effective
relations with such holders;
o causing the issuer to qualify to do business in all applicable
jurisdictions;
o assisting the issuer in complying with all regulatory
requirements applicable to the issuer in respect of its
business activities, including preparing or causing to be
prepared all financial statements required under applicable
regulations and contractual undertakings and all reports and
documents, if any, required under the Securities Exchange Act
of 1934, as amended;
o performing such other services as may be required from time to
time for management and other activities relating to the
assets of the issuer as the board of directors shall
reasonably request or IBF Management shall deem appropriate
under the particular circumstances; and
o using all reasonable efforts to cause the issuer 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.
The issuer 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 the issuer's investment policy and
guidelines.
The management agreement may not be assigned by either party without the
consent of the other party.
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 the issuer to its officers. IBF Management will bear all
costs of operating the issuer. 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 the issuer. The management fee will
cover items such as wages and salaries of employees of IB Consultants
responsible for the issuer's daily operations, fees and expenses of agents and
independent contractors providing administrative support for the issuer's
operations, office space, and all overhead expenses. The management fee does
not cover the issuer's legal and accounting fees, filing fees, investment
transaction costs, taxes, officer and director liability insurance, and other
administrative expenses. The annual management fee is subordinated to interest
and principal due on the bonds and is payable out of working capital reserves.
Prior experience of InterBank, IBF Management and IB Consultants
The information contained in this section of the prospectus is included
solely to enable prospective investors to have information which can be used
to evaluate the experience of IBF Management in investing in real estate
related assets and other commercial loans for its affiliated funds.
The prior performance information included in this prospectus is
historical and investors should not construe the inclusion of such information
as implying or indicating in any manner that the issuer will make investments
which are comparable to those made by the affiliates discussed below, or that
the results achieved by the issuer will in any way resemble or be comparable
to those achieved by such 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 the issuer'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 the issuer
because of the issuer's need to maintain an exemption from registration under
the Investment Company Act of 1940, as amended (the "Investment Company Act").
IBF Management will monitor the types of assets maintained in the issuer's
portfolio to ensure that it is not deemed to be an investment company under
the Investment Company Act, due to its intention to maintain at least 80% of
its assets consist of mortgages and other liens on and interests in real
estate and real estate related investments. See "Regulatory Matters -
Investment Company Act exemption."
As of March 31, 2000, the affiliated investment funds owned approximately
$50 million book value of assets under management being managed by IBF
Management and IB Consultants, including approximately $15.7 million of
mortgage loans and approximately $21.7 million of other commercial loans.
All of the investment funds with the exception of AIF V have similar
investment objectives, which is to invest in smaller properties and
underperforming or otherwise distressed real property. Although the investment
objectives of these investment funds are not identical to those of the issuer,
they are similar, and the issuer believes that prior performance information
about these investment funds may be material to a prospective investor.
Certain information relating to those six investment funds is set forth below.
<TABLE>
<CAPTION>
INTERBANK FUNDING CORPORATION
INDIVIDUAL FUNDS ANALYSIS
AS OF JUNE 30, 2000
------------- ---------- -------------- ---------- ------------- -------------- ------------- -------------- ------------
Number of Coupon
Consecutive Interest Principal
Gross Interest Payments Redemptions
Date of Amount Interest Payments as of June Additional as of June Total Avg.
Fund Name Inception Sold(1) Rate Made 30, 2000 Interest 30, 2000 Yield(2)
------------- ---------- -------------- ---------- ------------- -------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPC I 01/31/96 $2,500,000 12% 50 $1,175,203 $79,012 $1,059,000 12.90%
SPC II 01/21/97 5,000,000 12% 38 1,685,515 91,248 N/A 12.75%
SPC III 04/10/98 10,000,000 12% 24 1,771,567 58,883 N/A 12.67%
PIF IV 02/17/98 28,329,000 12% 27 3,709,821 89,775 N/A 12.51%
AIF V 09/09/99 1,841,000 N/A N/A N/A N/A N/A N/A
SPC VII 05/10/99 20,322,000 11% 12 1,031,625 11,000 N/A 11.53%
------------- ---------- -------------- ---------- ------------- -------------- ------------- -------------- ------------
Total $67,992,000 $9,373,731 $329,918 $1,059,000
------------- ---------- -------------- ---------- ------------- -------------- ------------- -------------- ------------
</TABLE>
(1) Before deducting offering expenses.
(2) Includes coupon interest and additional interest and is calculated on
annualized bond equivalent yield basis.
Competition
The business the issuer proposes to engage in is highly competitive. The
issuer 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 the issuer. In
addition, the issuer'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 the issuer
through the bonds described in this prospectus and, therefore, would have a
competitive advantage in making and acquiring loans at lower yields than the
issuer can accept.
Legal proceedings
Neither the issuer, IBF VI - Asset Securitization Corp., 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 the
issuer 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
The issuer at all times intends to conduct its business so as not to
become regulated as an investment company under the Investment Company Act.
Accordingly, the issuer does not expect to be subject to the restrictive
provisions of the Investment Company Act. 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." Under the current interpretations of the staff of the
Securities and Exchange Commission, in order to qualify for this exemption,
the issuer must, among other things, maintain at least 55% of its assets
directly in mortgage loans, qualifying pass-through certificates and certain
other qualifying interests in real estate and an additional 25% of its assets
in real estate related assets. Therefore, in order to remain qualified under
this exemption the issuer's ownership of many mortgage assets be limited by
these provisions. If the issuer fails to qualify for exemption from
registration as an investment company, it would be unable to conduct its
business as described herein. Any such failure to qualify for such exemption
would have a material adverse effect on the issuer.
Other government regulation and licensing requirements
The issuer's lending business may become subject to extensive regulation,
supervision and licensing by federal, state and local governmental authorities
and to various laws and judicial and administrative decisions imposing
requirements and restrictions on all or part of the issuer's home equity and
first mortgage lending activities. The issuer's anticipated mortgage lending
activities will be subject to regulation 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.
The issuer may also become subject to examination by state regulatory
authorities with respect to originating, processing, underwriting, selling and
servicing home equity loans and first mortgage loans. These rules and
regulations impose licensing obligations, prohibit discrimination, regulate
collection, foreclosure and claims handling, payment features, mandate certain
disclosures and notices to borrowers and, in some cases, fix maximum interest
rates and fees. Failure to comply with these requirements can lead to, among
other remedies, termination or suspension of license, certain rights of
rescission for mortgage loans, class action lawsuits and administrative
enforcement actions. Costs or difficulties in complying with these rules could
adversely affect the issuer's business.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following table describes the amount and nature of payments that
will or may be made by the issuer 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, Inc. $2,500 to $250,000 Finders fees (2)
--------------------------
</TABLE>
(1) See "Management - Compensation."
(2) Coleman will receive out of the sales commission payable to National a
finders fee of 0.5% of the gross proceeds from the sale of bonds for its
assistance in identifying selected broker-dealers. Coleman will also
receive 7% of the gross sales price of all bonds sold by Coleman directly
to investors in the offering, but it is not expected that sales by
Coleman to investors will be material.
InterBank is currently the sole stockholder of the issuer and has the
right to manage the business affairs of the issuer 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 the issuer, 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 the
issuer. Simon A. Hershon and Ehud D. Laska, directors and officers of the
issuer, are the owners of InterBank. Mr. Hershon is the sole owner of IBF
Management, which provides management services to the issuer for fees.
Certain conflicts of interest are inherent in the foregoing
relationships, including the selection of loan opportunities for the issuer
and allocation of management time and resources to the operations of the
issuer. Although the indenture provides that the issuer may not participate in
a transaction with an affiliate, except in good faith and on terms that are no
less favorable to the issuer than those that could have been obtained from a
person not an affiliate of the issuer, no other policy or restriction has been
adopted by management to resolve conflicts of interest that might arise.
The issuer 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.
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 the
issuer contains such a provision which eliminates such liability to the
maximum extent permitted by Delaware law. The issuer 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 the issuer or
its affiliates. In addition, IBF Management and IB Consultants and its
officers and directors will not be liable to the issuer, and the issuer will
indemnify IBF Management and IB Consultants and its officers and directors,
for acts performed in good faith pursuant to 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, the issuer 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
The issuer intends primarily to acquire mortgage loans and other real
estate related assets. The issuer's return on such 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 such legal aspects are
governed by applicable state law which laws vary from state to state, the
summaries do not purport to be complete, to reflect the laws of any particular
state, or to encompass the laws of all states. Accordingly, the summaries are
qualified in their entirety by reference to the applicable laws of the states
where the property is located. The summaries are not based upon opinions of
legal counsel.
Each mortgage loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the
prevailing practice and law in the state in which the related mortgaged
property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to 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, pursuant to 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 such proceeds and awards to any
indebtedness secured by the mortgage or deed of trust, in such order as the
mortgage or beneficiary may determine. 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 the
issuer may be nonrecourse loans, as to which recourse in the case of default
will be limited to the property and such other assets, if any, that were
pledged to secure the mortgage loan. However, even if a mortgage loan by its
terms provides for recourse to the borrower's other assets, a lender's ability
to realize upon those assets may be limited by state law.
Under the federal bankruptcy code and the related state laws, the filing
of a petition in bankruptcy by or against a borrower will stay the sale of the
real property owned by that borrower, as well as the commencement or
continuation of a foreclosure action. In addition, if a court determines that
the value of the mortgage property is less than the principal balance of the
mortgage loan it secures, the court may prevent a lender from foreclosing on
the mortgaged property, subject to certain protections available to the
lender. As part of a restructuring plan, a court also may reduce the amount of
secured indebtedness to the current value of the mortgaged property. Such an
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.
The issuer will be subject to environmental risks when taking a security
interest in real property, as well as when it acquires any real property. Of
particular concern may be properties that are or have been used for
industrial, manufacturing, military or disposal activity. In certain
circumstances, a lender could determine to abandon a contaminated mortgaged
property as collateral for its 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 (collectively, 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, such 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 such 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 are
subject to 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 herein, the term "U.S. Holder" means a beneficial owner of a bond
that is for United States federal income tax purposes
(i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in or
under the laws of the United States, any state thereof
or the District of Columbia,
(iii) an estate whose income is subject to United States federal
income tax regardless of its source, or
(iv) 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 herein, 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
herein, 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 ("OID") in an amount equal to the
excess of the stated redemption price at maturity of such 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 such bonds exceeds the issue price of such
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 such income, regardless of such 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 such
holder must include in its gross income with respect to such bond for any
taxable year will be reduced - but not below zero - by the portion of the
acquisition premium properly allocable to the period.
Market Discount. If a bond is issued without OID, the bond will be
treated has having market discount if the holder purchased the bond -
including a purchase at original issuance - for a price less than its stated
redemption price at maturity. If a bond is issued with OID, the bond will be
treated as having market discount if the holder purchased the bond - including
a purchase at original issuancefor 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 such excess. A holder may elect to
amortize such 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 such 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 not subject to 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 such 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 such 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 subject to federal income taxes
on any amount which constitutes capital gain upon retirement or disposition of
a bond, unless such non- U.S. Holder is an individual who is present in the
United States for 183 days or more in the taxable year of the disposition and
such 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
Subject to the conditions set forth in this prospectus and in accordance
with the terms and conditions of the indenture and the underwriting agreement
between the issuer and National Securities Corporation ("National"), the
issuer will offer through National, 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 plans subject to the
Employee Retirement Income Security Act of 1974, as amended ("Qualified
Plans") including Keogh plans, the minimum subscription is $2,000. Purchases
in excess of the minimum subscription will be made in increments of $1,000.
See "Investor Suitability And Minimum Investment Requirements; Subscription
Procedures."
The commission paid to National is 8.0 percent of the gross offering
proceeds and an additional amount equal to 2.0 percent of the issuer's annual
net income for each calendar year in which the bonds are outstanding (the
"Profit Participation"). In addition, the issuer will reimburse National for
all out-of-pocket expenses on an accountable basis. National may reallow the
selling compensation to selected dealers participating in the offering.
Generally, dealers participating in the offering will receive a 6.5 percent
commission, a 0.5 percent due diligence fee and the Profit Participation.
Coleman & Company Securities, Inc. ("Coleman"), an affiliate of InterBank
and the issuer, 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. The issuer will also
compensate the employees of IBF Securities by paying finders fees for
identifying and communicating with broker-dealers in connection with this
offering in the amount of approximately 1.0 percent of the gross proceeds
received on bonds sold by those broker-dealers plus 2.0 percent of the gross
proceeds received on the bonds as unaccountable expense reimbursement. Coleman
may also act as a broker-dealer by signing a selling group agreement with
National and make sales of bonds directly to investors. Coleman will receive a
7.0 percent commission and the Profit Participation on bonds sold directly to
investors.
Due to the affiliation between the issuer 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 the issuer.
The underwriting agreement and the selling group agreements contain
provisions for the indemnification of National and participating selected
dealers by the issuer with respect to certain liabilities, including
liabilities arising under the Securities Act.
Until subscriptions for $500,000 of bonds have been accepted by the
issuer, 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
the issuer 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 the issuer, or June 30, 2001. In no event will any
bonds be sold to affiliates of the issuer in order to reach the minimum.
The offering of the bonds is made subject to prior sale and to
withdrawal, cancellation, or modification of the offer without notice.
National and the issuer reserve the right to reject any order for the purchase
of bonds.
INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS;
SUBSCRIPTION PROCEDURES
General Suitability Considerations
Among the reasons for establishing investor suitability standards and
minimum dollar amounts of investment is that there is no public market for the
bonds and none is expected to develop. Accordingly, only persons able to make
a long-term investment and who have adequate financial means and no need for
liquidity with regard to their investment should purchase the bonds. An
investment in bonds is not appropriate for you if you must rely on cash
distributions with respect to your bonds as your primary, or as an essential,
source of income to meet your necessary living expenses.
Requirements Concerning Minimum Investment and Minimum Investor Net
Worth/Income
Minimum Investment. For investors other than Qualified Plans and
individual retirement accounts, the minimum investment is $5,000 in principal
amount of the bonds. For Qualified Plans and individual retirement accounts,
the minimum investment is $2,000 in principal amount of the bonds. After the
minimum investment, sales will be made in increments of $1,000.
Minimum Net Worth/Income. Except with respect to Qualified Plans and
individual retirement accounts, bonds will be sold to you only if you
represent in writing:
o your net worth is at least $65,000 in excess of the proposed
investment in the bonds and you have an annual gross income of
at least $65,000, or
o irrespective of annual gross income, your net worth is at least
$225,000, or
o that you satisfy the suitability standards imposed by the state
in which you reside, if such standards are more stringent than
those set forth above.
All computations of your net worth must exclude the value of your
principal residence, its furnishings, and personal automobiles. All other
assets should be valued at their fair market value.
If an investor is a Qualified Plan or an individual retirement account,
such investor must represent (i) that the individual retirement account owner
or the participant in the self-directed Qualified Plan satisfies the foregoing
standards, or (ii) 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,
such 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.
The issuer 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 the issuer, 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, subject to the terms and conditions
contained herein. Such 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 such 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, the issuer will utilize
certain sales material in connection with the offering of bonds. This material
may include reports describing the issuer and a brochure and audio-visual
materials or taped presentations highlighting various features of this
offering. The issuer 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 herein or in
supplements hereto, the issuer has not authorized the use of other sales
materials in connection with this offering. Although the information contained
in such material does not conflict with any of the information contained in
this prospectus, such 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 hereby and certain
other matters will be passed upon for the issuer 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 the issuer 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 herein, and are included in reliance upon such report
given upon the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The issuer has filed a registration statement on Form SB-2 under the
Securities Act, with respect to the bonds offered hereby. 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
the issuer and the bonds offered hereby, 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 such contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference. A copy of the registration statement, and the exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Securities and Exchange Commission in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at Seven World Trade Center, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of all or any part of the registration statement may be
obtained from the Commission upon payment of a prescribed fee. This
information is also available from the Commission's Internet web site at
http://www.sec.gov.
<PAGE>
Appendix I - Audited Financial Statements
INDEPENDENT AUDITOR'S REPORT
IBF VI - Secured Lending Corporation
Washington, DC
We have audited the accompanying balance sheets of IBF VI - Secured
Lending Corporation (A Development Stage Enterprise) as of December 31, 1998
and 1999 and the related statement of operations, statement of changes in
stockholder's equity and statement of cash flows for the period June 8, 1998
(inception) to December 31, 1998, the year ended December 31, 1999, and the
period June 8, 1998 (inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the balance sheets referred to above presents fairly, in
all material respects, the financial position of IBF VI - Secured Lending
Corporation (A Development Stage Enterprise) as of December 31, 1998 and 1999
and the results of its operations and its cash flows for the period June 8,
1998 (inception) to December 31, 1998, the year ended December 31, 1999, and
the period June 8, 1998 (inception) to December 31, 1999 in conformity with
generally accepted accounting principles.
RADIN, GLASS & CO., LLP
Certified Public Accountants
New York, NY
February 17, 2000
<PAGE>
<TABLE>
<CAPTION>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
BALANCE SHEET
December 31, 1998 December 31, 1999
----------------- -----------------
ASSETS
------
<S> <C> <C>
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, $ 1,000 $ 1,000
issued and outstanding
ADDITIONAL PAID-IN CAPITAL $280,276 $409,018
ACCUMULATED DEFICIT (5,000) (40,574)
----------------- -----------------
$276,276 $369,444
================= =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
JUNE 8, 1998 TO DECEMBER 31, 1999
Cumulative
June 8, 1998 to January 1, 1999 to June 8,1998 to
December 31, 1998 December 31, 1999 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
EXPENSES $5,000 $35,574 $40,574
NET EARNINGS (LOSSES) $(5,000) $(35,574) $(40,574)
NET EARNINGS (LOSSES) PER SHARE:
EARNINGS PER COMMON SHARE $(5.00) $(35.74) $(40.57)
WEIGHTED AVERAGE SHARES 1,000 1,000 1,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
JUNE 8, 1998 TO DECEMBER 31, 1999
Additional Total
Common Stock Paid in Accumulated Stockholder's
------------
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C>
Balance as of June 8, 1998
(inception) - $ - $ - $ - $ -
Capital Contributions 1,000 1,000 280,276 $ - 281,276
Net Earnings for the Period June
8, 1998 to December 31, 1998 - - - (5,000) -
----------- --------- ---------- -------------- -----------
Balance as of December 31, 1998 1,000 1,000 280,276 (5,000) 276,276
Capital Contributions - - 128,742 - 128,742
Net Earnings for the Period
January 1, 1999 to December 31, - - - (35,574) (35,574)
----------- --------- ---------- -------------- -----------
1999
Balance as of December 31, 1999 1,000 $ 1,000 $ 409,018 $(40,574) $ 369,444
=========== ========= ========== ============== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
JUNE 8, 1998 TO DECEMBER 31, 1999
Cumulative
June 8, 1998 to January 1, 1999 to June 8,1998 to
December 31, 1998 December 31, 1999 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,000) $ (35,574) $ (40,574)
----------------- -------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (5,000) (35,574) (40,594)
----------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES 0 0 0
NET CASH USED IN INVESTING ACTIVITIES 0 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 281,276 128,742 410,018
Loan to parent (249,000) (335,000) (584,000)
Receipts from loan to parent 584,000 584,000
Debt issuance costs (26,276) (154,046) (180,322)
----------------- ------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,000 223,696 229,696
------------------ ------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS 1,000 188,122 189,122
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD - 1,000 -
------------------ ------------- --------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,000 $ 189,122 $ 189,122
================= ============= ==============
</TABLE>
<PAGE>
IBF VI -- SECURED LENDING CORPORATION
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. INITIATION OF BUSINESS
On June 8, 1998, IBF VI -- Secured Lending Corporation ("IBF VI") was formed
to engage in the business of purchasing, holding and disposing of debt and
equity securities and instruments and other real estate related assets. There
have been no operations from inception through December 31, 1999.
IBF VI is a wholly-owned subsidiary of InterBank Funding Corporation.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Development stage - IBF VI is a development stage enterprise and
will continue as a development stage enterprise until such time as
it has significant revenues from operations.
b. Debt issuance costs - Debt issuance costs will be charged against
additional paid-in capital upon successful completion of IBF VI's
proposed public offering. In the event the offering is not
completed, such costs will be charged to expense.
c. Pervasiveness of estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
d. Fiscal year - IBF VI has adopted a fiscal year ending December 31.
3. RELATED PARTY INTERESTS
IBF VI is wholly-owned by InterBank Funding Corporation, affiliates of which,
IBF Management Corp. ("IMC") and InterBank Consultants, Inc. ("IB
Consultants") will receive fees for certain administrative and support
services rendered to IBF VI. The annual management fee will pay for certain
costs of operating IBF VI for which IMC is responsible. A portion of the
management fee will be paid to IB Consultants.
The overhead costs incurred by IBF VI are absorbed by IMC. A charge was made
for the year ended December 31, 1999 in the financial statements for the
amount that management believes is appropriate for such costs, including
payroll, rent, equipment leases and other expenses. The amount of such charge
is recorded as a credit to paid in capital.
4. PROPOSED PUBLIC OFFERING
IBF VI anticipates offering $50,000,000 of Current Interest Subordinated Bonds
and Accretion Subordinated Bonds (collectively, the "bonds") of IBF VI --
Secured Lending Corporation. The bonds may be subordinated to future senior
indebtedness of IBF VI. Any amount of the bonds is redeemable at the option of
IBF VI after June 30, 2001. Bonds may be redeemed at the request of the
registered holders of the bonds ("Holders") under limited circumstances. The
redemption value of each bond is equal to 100% of its principal amount plus
accrued interest.
The minimum principal amount of bonds that may be purchased is $5,000 for all
investors, except for individual retirement accounts and Keogh Plans, for
which the minimum purchase is $2,000.
<PAGE>
<TABLE>
<CAPTION>
Appendix II - Interim Financial Statements
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
BALANCE SHEET
June 30, December 31,
2000 1999
----------- ------------
(unaudited)
ASSETS
------
<S> <C> <C>
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>
<PAGE>
<TABLE>
<CAPTION>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
Cumulative
Six months ended June 8, 1998 to
June 30, 2000 June 30, 2000
----------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUE $ -- $ --
EXPENSES
General and administrative expenses 18,238 58,812
------------ ------------
Total expenses $ 18,238 $ 58,812
-------------- ------------
NET LOSS $ (18,238) $ (58,812)
============ ============
Weighted average shares of common stock
outstanding 1,000
Net loss per share $ (18.24)
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
(Unaudited)
Additional Total
Common Stock Paid in Accumulated Stockholders'
------------------
Shares Amount Capital Deficit Equity
-------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1999 1,000 $ 1,000 $ 409,018 $ (40,574) 369,444
Capital contributions -- -- 135,516 -- 135,516
-------- --------
Net loss -- -- -- (18,238) (18,238)
-------- -------- --------- ------------ ---------
Balance as of June 30, 2000 1,000 $ 1,000 $ 544,534 $ (58,812) 486,722
======== ====== ======== ============ =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
Cumulative
Six months ended June 8, 1998 to
June 30, 2000 June 30, 2000
------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,238) $ (58,812)
Adjustments to reconcile net loss to net cash used in operating
activities
Debt issuance costs (117,516) (297,838)
------------- -------------
NET CASH USED BY OPERATIONS (135,754) (356,650)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH PROVIDED BY FINANCING ACTIVITIES:
Capital contributions 135,516 545,534
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 135,516 545,534
------------- -------------
NET (DECREASE) INCREASE IN CASH (238) 188,884
CASH, beginning of the period 189,122 --
------------- -------------
CASH, end of the period $ 188,884 $ 188,884
=============== ===============
Supplemental disclosures of cash flow information:
Taxes paid $ -- $ --
=============== ===============
Interest paid $ -- $ --
=============== ===============
</TABLE>
<PAGE>
IBF VI - SECURED LENDING CORPORATION
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Item 1. Financial Statements
Reference is made to the financial statements and footnotes included in the
Company's audited report, dated February 17, 2000 for the period June 8, 1998
(inception) through December 31, 1999.
The financial statement for the periods ended June 30, 2000 are unaudited and
include all adjustments which, in the opinion of management, are necessary to
a fair statement of the results of operations for the periods then ended. All
such adjustments are of a normal recurring nature. The results of the
Company's operations for any interim period are not necessarily indicative of
the results of the Company's operations for a full fiscal year.
Item 2. Capital Contributions
InterBank Funding Corporation incurred $135,516 of expenditures on behalf of
the Company.
<PAGE>
Appendix III - Subscription Agreement
IBF VI -- Secured Lending Corporation
Subscription Agreement
<TABLE>
<CAPTION>
<S> <C> <C>
___
|___| Initial Subscription
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
|___| Additional Investment: Account Number Previously Assigned: |___|___|___|___|___|___|___|___||___||___|
INVESTMENT
___ ___ ___ ___
|___|___|___|___|
I desire to purchase $_________________ aggregate principal amount of IBF VI -- Secured Lending Corporation Current
Interest Subordinated Bonds.
___ ___ ___ ___
|___|___|___|___|
I desire to purchase $_________________ aggregate principal amount of IBF VI -- Secured Lending Corporation Accretion
Subordinated Bonds.
Make Checks Payable to: CSTTC Escrow Agent for IBF VI - Secured Lending Corporation
Subscriber Information: Please clearly print name(s) in which Bonds are to be acquired. All checks and correspondence will go to
the Investor Residence Address unless specified otherwise in the Check Distribution Section.
You hereby certify that: ___ your net worth is at least $65,000 in excess of the proposed investment in the
|___| bonds and you have an annual gross income of at least $65,000, or
___
|___| irrespective of annual gross income, your net worth is at least $225,000, or
___ that you satisfy the suitability standards imposed by the state in which you
|___| reside, if such standards are more stringent than those set forth above.
All computations of your net worth must exclude the value of your principal residence, its furnishings, and personal automobiles.
All other assets should be valued at their fair market value.
Investor 1 (First, Middle I., Last):
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
(1) Investor 2 (First, Middle I. Last):
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Registration For The Investment (How The Investment Should Be Titled):
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Check One Of The Following:
Investor Residence Address 1:
_______________________________________________________________ ___
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___| |___| U.S. Citizen
___
Investor Residence Address 2: |___| Resident Alien
_______________________________________________________________ ___
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___| |___| Foreign Resident; Country
___
City, State ZIP Code |___| U.S. Citizen residing outside the U.S.
_______________________________ _______ ___________________
|___|___|___|___|___|___|___|___| |___|___| ___|___|___|___|___|
Occupation:
_______________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Check Distribution Information (if different):
Financial Institution (Bank, Trust Company, etc.):
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Address:
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
City, State ZIP Code
_______________________________ _______ ___________________
|___|___|___|___|___|___|___|___| |___|___| ___|___|___|___|___|
Account Number:
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Enter the taxpayer identification number. For most individual taxpayers, it is
their Social Security Number. Note: If the purchase is in more than one name,
----
the number should be that of the first person listed. For IRAs, Keoghs, and
qualified plans, enter both the Social Security Number and the Taxpayer
Identification Number for the plan.
Social Security Number Taxpayer Identification Number (If Applicable)
___________ ___________ ___________ _______ _______________________ ___
|___|___|___| |___|___|___| |___|___|___| |___|___| |___|___|___|___|___|___|___|
Form of Ownership (Individual, IRA, Trust, UGMA, Pension Plan, etc.)
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
==================================================================================================================================
Broker/Dealer - Registered Representative Information (To be completed by Registered Representative)
I hereby certify that the investor(s) has read the prospectus and meets the suitability requirements.
Broker/Dealer Firm Name:
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Registered Representative:
___________________________________________________________________________
|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Branch Address: _____________________________________________
Telephone Number: _____________________________________________
Sales Representative Number: _____________________________________________
Sales Representative Signature: _________________________________________
==================================================================================================================================
Interest Distribution: If you are purchasing $15,000 or more of the Current Interest Subordinated Bonds, please indicate how you
want fixed interest paid:
___ ___
|___| Monthly |___| Quarterly
<PAGE>
Subscriber Signature: (the undersigned has the authority to enter into this subscription agreement on behalf of the person(s) or
entity registered above. I (We) certify under penalty of perjury that this is my (our) correct Social Security Number (and/or Tax
Identification Number) and that interest income on this account should be reported on this number. I (We) certify, acknowledge and
agree that all information in this statement is true and correct.
==================================================================================================================================
Authorized Signature of Investor 1 _____________________ Date _________________________
Authorized Signature of Investor 2 _____________________ Date _________________________
==================================================================================================================================
Company's Acceptance (To be completed only by an authorized representative of IBF VI.--Secured Lending Corporation)
The foregoing subscription is accepted this ____________ day of ________________, _____
_______________________________________________________
Authorized Representative of IBF VI
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[Outside back cover]
<S> <C>
==================================== ======================================
Until _____________, 2000, all
dealers that effect transactions in
these securities, whether or not
participating in this offering, may $50,000,000
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.
------------------------------- IBF VI -- SECURED LENDING
TABLE OF CONTENTS CORPORATION
------------------------------ [logo]
Current Interest Subordinated
Bonds
Accretion Subordinated
Bonds
No dealer, salesperson or other
person has been authorized to give ---------------------
any information or to make any PROSPECTUS
representations other than those ---------------------
contained in this prospectus and,
if given or made, such information
or representations must not be relied
upon as having been authorized by the
issuer 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 herein is
correct as of any time subsequent to
the date hereof or that there has
been no change in the affairs of the
issuer since such date. July __, 2000
==================================== ======================================
</TABLE>
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Charter of IBF VI - Secured Lending Corporation ("IBV VI") provides
that, to the fullest extent that limitations on the liability of directors and
officers are permitted by the Delaware General Corporation Law (the "DGCL"),
no director or officer of IBF VI shall have any liability to IBF VI or its
stockholders for monetary damages. The DGCL provides that a corporation's
charter may include a provision which restricts or limits the liability of its
directors or officers to the corporation or its stockholders for money damages
except: (1) to the extent that it is provided that the person actually
received an improper benefit or profit in money, property or services, for the
amount of the benefit or profit in money, property or services actually
received, or (2) to the extent that a judgment or other final adjudication
adverse to the person is entered in a proceeding based on a finding in the
proceeding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. IBF VI's Charter and Bylaws provide that IBF VI
shall indemnify and advance expenses to its currently acting and its former
directors to the fullest extent permitted by the DGCL and that IBF VI shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law.
The Charter and Bylaws provide that IBF VI will indemnify its directors
and officers and may indemnify employees or agents of IBF VI to the fullest
extent permitted by law against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with IBF VI. However, nothing in the Charter or Bylaws of IBF VI
protects or indemnifies a director, officer, employee or agent against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. To the extent that a director has been
successful in defense of any proceeding, the DGCL provides that he shall be
indemnified against reasonable expenses incurred in connection therewith.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with this
Registration Statement. IBF VI will pay all expenses of the offering. All of
such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission and NASD.
Securities and Exchange Commission Filing Fee $ 13,900.00
NASD Filing Fee 5,500.00
Printing Fees and Expenses 400,000.00
Legal Fees and Expenses 350,000.00
Accounting Fees and Expenses 50,000.00
Blue Sky Fees and Expenses 25,000.00
Indenture Trustee's and Registrar's Fees 35,000.00
Miscellaneous 100,600.00
--------------------------------------------- ------------------------------
TOTAL $980,000.00
===========
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement,
IBF VI had only one transaction in which it issued its securities. In
connection with the formation of IBF VI, it sold 1,000 shares of its common
stock to InterBank Funding Corporation ("InterBank") to obtain $250,000 of
initial capital. InterBank is the sole stockholder of IBF VI, and two of IBF
VI's officers and directors are the sole owners of InterBank. The transaction
was intended to be exempt from the registration requirements of the Securities
Act of 1933, as amended, by virtue of Section 4(2) thereunder. No underwriters
were involved in connection with the sales of these securities.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
Exhibits.
Exhibit No. SEC Ref. No. Title of Document Location
<S> <C> <C> <C>
1 (1) Underwriting Agreement Amend. 2
Page E-1
2 (1) Selling Group Agreement Amend. 2
Page E-14
3 (3)(i) Certificate of Incorporation, as amended Initial Filing
Page E-17
3(a) (3)(i) Certificate of Amendment to Certificate of Incorporation Amend. 1
Page E-32
3(b) (3)(i) Certificate of Amendment to Certificate of Incorporation Amend. 2
Page E-18
3(c) (3)(i) Certificate of Amendment to Certificate of Incorporation Amend. 3
Page E-1
4 (3)(ii) By-Laws Initial Filing
Page E-21
5 (4) Proceeds Escrow Agreement Amend. 2
Page E-34
6 (4) Indenture, with exhibits Amend. 2
Page E-27
7 (10) Management Agreement Amend. 3
Page E-2
8 (5)(23) Opinion and Consent of Brown & Wood LLP Amend. 4
Page E-1
9 (23) Consent of Radin, Glass & Co., LLP Amend. 4
Page E-3
10 (25) Form T-1, Statement of Eligibility under Initial Filing
the Trust Indenture Act of 1939 Page E-195
</TABLE>
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
persons of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form SB-2 and authorizes this Registration
Statement or Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Washington, D.C., on July 12, 2000.
IBF VI -- SECURED LENDING CORPORATION
By: /s/ Simon A. Hershon
--------------------------------------
Simon A. Hershon, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the following
persons in the capacities and on the dates indicated.
By: /s/ Simon A. Hershon July 12, 2000
---------------------------------------------
Simon A. Hershon, President
and Director
By: /s/ Ehud D. Laska July 12, 2000
---------------------------------------------
Ehud D. Laska, Director
By: /s/ Robert L. Olson July 12, 2000
---------------------------------------------
Robert L. Olson, Chief Financial Officer
EXHIBIT 8
Opinion and Consent of Brown & Wood LLP
