SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 17, 1994
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MORTGAGE AND REALTY TRUST
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(Exact name of registrant as specified in its charter)
Maryland 1-6613 23-1862664
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
8380 Old York Road
Suite 300
Elkins Park, Pennsylvania 19027-1590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 215/881-1525
N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On November 17, 1994, Mortgage and Realty Trust, a Maryland real estate
investment trust (the "Registrant"), issued a press release announcing that the
Registrant had reached an agreement in principle with a substantial number of
holders of the Registrant's Senior Secured Uncertificated Notes due 1995 on the
terms of a restructuring of the Secured Notes. The announcement was made in
the context of the Registrant's intention to effect a restructuring through a
"prepackaged" Chapter 11 bankruptcy, subject to a number of conditions,
including, without limitation, the receipt of indications of support for the
restructuring from additional holders of Secured Notes. A copy of the press
release and the term sheet to the restructuring of the Secured Notes are
attached as exhibits hereto and are incorporated by reference in its entirety
herein.
EXHIBITS
The following exhibit is filed as part of this report:
Exhibit Exhibit Sequential
Number Description Page Number
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20.1 Press Release 4
20.2 Term Sheet 5
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
MORTGAGE AND REALTY TRUST,
a Maryland real estate investment trust
By: /s/ Victor H. Schlesinger
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Victor H. Schlesinger
Chairman
Date: November 28, 1994
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ELKINS PARK, PA - November 17, 1994 . . . Mortgage and Realty Trust
(NYSE:MRT) announced today that it had reached an agreement in principle with a
substantial number of holders of MRT's Senior Secured Uncertificated Notes due
1995 on the terms of a restructuring of the Secured Notes.
Pursuant to the agreement in principle, holders of the Secured Notes in
the aggregate principal amount of $290 million plus accrued interest of $41.7
million through December 31, 1994 will receive under a prepackaged plan of
reorganization under Chapter 11 of the United States Bankruptcy Code, as
amended, $110 million of new senior secured notes due 2002, approximately $50
million in cash and 97% of the restructured equity of MRT (or substantially all
the restructured equity if holders of MRT's outstanding common shares do not
vote to accept the prepackaged plan). If holders of MRT's outstanding common
shares vote to accept the prepackaged plan, such holders will retain 3% of the
equity of the restructured MRT. The agreement in principle anticipates that
the new senior secured notes will mature in 2002 and bear interest at the rate
of 11-1/8% per annum. It is also anticipated that holders of unsecured claims
will receive cash in the allowed amount of their claims. It is contemplated
that MRT will prepare a "shelf" registration statement for the new securities
issued pursuant to the prepackaged plan.
MRT's agreement to pursue the restructuring proposal is subject to a
number of conditions and MRT intends to effect the restructuring through a
"prepackaged" Chapter 11 bankruptcy. At this time there can be no assurance
that MRT will receive such support for the restructuring or that the other
conditions to consummation of the proposed restructuring will be satisfied.
Other details of the agreement, including the additional conditions to
commencement and consummation of the restructuring, were not announced pending
the filing of proxy solicitation materials with the SEC and distribution of a
disclosure statement for the solicitation of votes for the prepackaged plan to
holders of MRT's outstanding securities. No consents will be accepted other
than pursuant to such disclosure statement and proxy statement. The advisors
to MRT and the various holders of Secured Notes are negotiating additional
terms of the new debt securities to be received by the Secured Note holders
under the prepackaged plan, as well as the formal documentation necessary to
the restructuring. Details of the agreement in principle will be disclosed in
that formal documentation.
MRT is a self-administered real estate investment trust with a portfolio
of over $309 million of commercial, industrial and other real estate assets.
MRT has offices in Elkins Park, Pennsylvania and Burbank, California.
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TERM SHEET - FOR DISCUSSION PURPOSES ONLY
The following outline is a summary of certain terms and conditions for a
restructuring of the Senior Secured Uncertificated Notes due 1995 (the "Senior
Notes") of Mortgage and Realty Trust ("MRT") and a prepackaged plan of
reorganization for MRT (the "Plan"). It has been prepared solely to facilitate
discussion of a possible transaction and does not create or reflect any
agreement, commitment or obligation on the part of any person and may only be
used for the purpose of negotiating and facilitating settlement discussions.
This Term Sheet shall be inadmissable in any proceeding relating to the
settlement of claims or contestable matters.
PROPOSED TREATMENTS
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A. Senior Notes:
On the Effective Date of the Plan, each holder of MRT's Senior Notes issued
under the Indenture dated July 15, 1992 between MRT and Wilmington Trust
Company (the "Old Senior Notes Indenture") will receive its pro rata share
of the following:
(1) the amount of cash held by MRT in excess of its short-term obligations
following confirmation of the Plan (the "Short-Term Obligations");
provided, however, that such amount shall not be less than $50
million. The holders of the Senior Notes agree that the amount of the
Short-Term Obligations, which shall not exceed $10 million, shall be
determined by the holders of the Senior Notes, after consultation with
and input from the management of MRT regarding its Short-Term
Obligations, and it is the intent of the holders of the Senior Notes
to allow MRT to retain a sufficient amount of cash to enable MRT to
satisfy its Short-Term Obligations following confirmation of the Plan
and avoid any liquidity shortfalls.
(2) $110 million aggregate principal amount of 11-1/8% senior secured
notes due 2002 (the "New Senior Notes"); and
(3) 97% (or 99.5% if the holders of old equity interest do not vote to
accept the Plan in accordance with section 1126(d) of the Bankruptcy
Code) of the common stock of MRT issued on the Effective Date of the
Plan (the "Common Stock", and collectively with the New Senior Notes,
the "New Securities").
B. Imperial Bank Claim:
The Imperial Bank loan will be restructured in accordance with the New
Imperial Bank Loan Documents (subject to review and approval by the holders
of the Senior Notes).
C. Unsecured Claims
Holders of unsecured claims will receive cash in the allowed amount of
their claims (subject to review of the estimated amount of such claims).
D. Existing Equity Interests
If holders of equity interests vote to accept the Plan in accordance with
section 1126(d) of the Bankruptcy Code, then each holder shall receive its
pro rata share of 3% of the New Common Stock on the Effective Date. If
holders of equity interests do not vote to accept the Plan in accordance
with section 1126(d) of the Bankruptcy Code, they shall receive nothing on
account of their equity interests. In either event, all existing equity
interests will be canceled on the Effective Date of the Plan.
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PROCEDURES AND STRUCTURE
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The Term Sheet shall be effectuated through a "prepackaged" chapter 11 case.
MRT shall maintain its REIT status.
CONDITIONS PRECEDENT TO THE RESTRUCTURING:
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(a) Board of Directors of MRT shall recommend that the existing equity accept
the Plan and support the Plan; (b) completion of satisfactory documentation
consistent with the terms hereof; and (c) MRT shall have made all necessary
regulatory filings and shall have obtained necessary regulatory approvals.
TERMS OF THE NEW SENIOR NOTES
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Issuer: MRT
Trustee: A commercial bank or trust company.
Principal Amount: $110 million
Interest Rate: 11-1/8% per annum, payable quarterly on March 31,
June 30, September 30 and December 31, in arrears.
Maturity: Seven years from the Effective Date of the Plan.
Amortization: Any unpaid principal and any accrued but unpaid
interest shall be paid in full on the seventh
anniversary of the Effective Date of the Plan.
Ranking: The New Senior Notes will rank senior to all other
indebtedness of MRT existing now or hereafter.
Security: Subject to existing and permitted future liens granted
in connection with asset refinancings, the New Senior
Notes Indenture (the "Senior Notes Indenture") will
provide for a first priority lien on all existing and
future assets of MRT to secure the New Senior Notes.
Where a first priority lien is not available, MRT shall
grant a lien of the next highest priority available,
if any.
Mandatory Redemption: MRT will be required to redeem the New Senior Notes
upon maturity; provided, however, that upon the receipt
of proceeds from the sale of MRT assets, which proceeds
shall include mortgage repayments (the "Asset Sale
Proceeds"), 90% of the Asset Sale Proceeds shall be
used to redeem the then outstanding New Senior Notes on
a pro rata basis at par until the aggregate amount
outstanding of the New Senior Notes has been reduced to
$75 million, whereupon 75% of the Asset Sale Proceeds
shall be used to redeem the then outstanding New Senior
Notes on a pro rata basis at par until 100% of the New
Senior Notes have been redeemed.
Optional Redemption: The New Senior Notes will be redeemable at par plus
accrued and unpaid interest at any time.
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Covenants: The New Senior Notes Indenture will contain customary
affirmative, negative and financial covenants, for this
type of security (as agreed to by the holders of Senior
Notes), including, without limitation, the following:
(a) limitations on existing advances and investments,
(b) limitations on new investments, (c) restrictions
on future financing transactions and (d) limitations on
capital expenditures.
Events of Default: The New Senior Notes Indenture will provide for
customary events of default.
TERMS OF THE COMMON STOCK
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Dividends: Dividends will be payable on the shares of Common Stock
out of funds legally available therefor and to the
extent permitted by law.
Voting Rights: One vote for each share of Common Stock on all matters
required or permitted to be voted on by shareholders
of MRT.
REGISTRATION RIGHTS
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In connection with the Plan, MRT shall prepare a "shelf" registration statement
for the New Securities issued pursuant to the Plan. MRT shall file and have
declared effective the "shelf" registration statement within 90 days from the
issuance of the New Securities, and MRT shall keep the "shelf" registration
statement effective for a period of three years after the Effective Date of the
Plan, with customary liquidated damages to be payable to "affiliates" that hold
the New Common Stock and the Senior Notes in the event MRT fails to timely
perform.
CORPORATE GOVERNANCE
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Board of Trustees: A new Board of Trustees shall be appointed consisting
of seven members. One member shall be the Chief
Executive Officer, four members shall be designated by
the Holders of Senior Notes listed below, one member
shall be designated by Prudential, and one member
shall be designated by the other Holders of Senior
Notes listed below.
Holders of Senior Notes: The Prudential Insurance Company of America
Fidelity Management & Research Company
Angelo, Gordon & Co.
Mutual Series Fund, Inc.
Strome-Susskind & Co.
Emerald Partners
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