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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 21, 1996
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Oxford Tax Exempt Fund II Limited Partnership
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(Exact Name of Registrant as Specified in Charter)
Maryland 0-14428 52-1394232
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(State or Other (Commission file (I.R.S. Employer
Jurisdiction of Number) Identification
Incorporation) Number)
7200 Wisconsin Avenue, Suite 1100, Bethesda, Maryland 20814
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (301) 654-3100
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_________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
Refunding of OTEF II's Bonds. OTEF II recently completed
refunding transactions for seven of the fifteen tax-exempt
mortgage revenue bonds (the "Existing Mortgage Revenue Bonds") in
its portfolio. These seven bonds have an approximate aggregate
principal amount of $134 million and comprise approximately one-
half of OTEF II's portfolio. Bond refunding transactions for the
remaining Existing Mortgage Revenue Bonds are expected to close
shortly in accordance with certain agreements previously entered
into between OTEF II and the owners of the properties securing
the bonds (the "Operating Partnerships"). The bonds are being
refunded in order to preserve the federally tax-exempt nature of
distributions to the BAC Holders.
Under the refundings, OTEF II exchanged the Existing
Mortgage Revenue Bonds for new senior Series A Bonds and
subordinated Series B Bonds (collectively, the "Refunding Bonds")
with the same aggregate principal amount as the Existing Mortgage
Revenue Bonds. The Refunding Bonds mature 30 years from the
closing of the related refundings. The Refunding Bonds will
accrue interest on their combined principal amounts at fixed,
stepped rates that increase during each year of the term (the
"Combined Rate").
The Series A Bonds initially bear interest at the rate of
4.9% for a period of one year at which time the rate will be
reset. The Series A Bonds require payments of interest only
during the first three years and, beginning in the fourth year of
their terms, are subject to annual sinking fund redemptions that
will result in full amortization of the Series A Bonds over the
remaining term.
The Series B Bonds for each Operating Partnership are
subordinated in right and time of payment to the related Series A
Bonds. The Series B Bonds accrue interest equal to the product
of the Combined Rate multiplied by the total combined principal
balance of the Series A Bonds and the Series B Bonds for each
Operating Partnership, less the interest payable on the related
Series A Bonds; the resulting amount of interest divided by the
principal balance of the Series B Bonds equals the interest
accrual rate on the Series B Bonds. Interest only is payable on
the Series B Bonds to the extent of available cash flow, with the
entire principal balance due at maturity.
Settlement of Litigation. As previously reported, OTEF II
and certain of its affiliates are defendants in putative class
and derivative lawsuits consolidated as In re Oxford Tax Exempt
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Fund Securities Litigation, No. WMN 95-3643 (D.Md.). The
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plaintiffs and the defendants in that consolidated action entered
into a Stipulation of Settlement (the "Settlement"), which was
filed with the court on November 18, 1996. At a hearing held on
November 21, 1996, the court entered an order granting
preliminary approval of the Settlement and approving
certification for settlement purposes only of a class consisting
of all OTEF II BAC Holders as of the record date of November 21,
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1996. OTEF II has mailed to all BAC Holders of record a notice
with respect to the class action lawsuits and the Settlement (the
"Notice"), accompanied by an Information Memorandum, which
outlines the terms of the Settlement and describes a new business
plan for OTEF II (the "Liquidity and Growth Plan"). The terms of
the Settlement are subject to final court approval. The
Liquidity and Growth Plan will be implemented only if the
Settlement is so approved.
If the Liquidity and Growth Plan is implemented, the
Managing General Partner will seek to provide liquidity and a
public trading market for the OTEF II BACs by listing them for
trading on the American Stock Exchange. In addition, if the
Liquidity and Growth Plan is implemented, OTEF II currently
intends to increase tax-exempt distributions on the OTEF II BACs
to at least $12.38 for the first quarter following implementation
of the Liquidity and Growth Plan. OTEF II may increase
distributions further in 1997 as a result of completion of the
restructuring.
The Settlement also provides class members who do not wish
to participate in the Liquidity and Growth Plan with the option
to exchange any or all of their OTEF II BACs for a new class of
BACs called "Status Quo BACs." The Status Quo BACs are designed
to replicate, to the extent possible, the interest that the
holders of the Status Quo BACs would have had in the Existing
Mortgage Revenue Bonds, as refunded, if the OTEF partnership
agreement had continued to govern and the Liquidity and Growth
Plan was not implemented. The Status Quo BACs will have such
terms and redemption rights as are more fully described in the
Information Memorandum.
Pursuant to the Settlement, OTEF II and the Operating
Partnerships are required to complete the refundings of the
Existing Mortgage Revenue Bonds and to enter into a cross-pooling
arrangement, effective with the refunding of each Existing
Mortgage Revenue Bond, whereby the applicable Operating
Partnership will make loans to enable each other Operating
Partnership to make all of its debt service payments required
under the terms of its respective Series A Bonds. In addition,
the Operating Partnerships have agreed to enter into a pledge
arrangement, effective upon refunding, requiring each Operating
Partnership to deposit any net cash flow remaining after
discharge of its cross-pooling obligations and its Series B Bond
debt service obligations into an account to be applied by OTEF II
to certain permitted uses, including the obligations of all of
the Operating Partnerships on their Series B Bonds. The cross-
pooling and pledge obligations of the Operating Partnerships are
subject to certain conditions which are more fully described in
the Notice.
As part of the Settlement, OTEF II will be granted the right
to receive 50% of any amounts actually received by certain other
defendants (including any accrued interest) with respect to the
approximately $33 million of deferred fees and loan obligations
currently owed to those defendants by the Operating Partnerships.
Such deferred amounts are payable by the Operating Partnerships
from net cash flow remaining after they discharge all of their
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obligations with respect to their Series A and Series B Bonds as
well as their cross-pooling and pledge obligations described
above, all of which are obligations to which the Operating
Partnerships are subject for the entire term of the Refunding
Bonds. Defendant Oxford Realty Financial Group, Inc. also has
agreed to waive or limit certain fees that would have been
payable to it by OTEF II and the Operating Partnerships under the
1995 OTEF II Restructuring Plan.
In accordance with the Settlement, the plaintiff class and
the defendants have agreed to a court order reforming or
otherwise amending OTEF II's partnership agreement to, among
other things, impose limitations on or clarifications of the
rights and powers of OTEF II and the Managing General Partner.
These amendments are set forth in an exhibit to the Stipulation
of Settlement.
If the Settlement receives final approval, the defendants
will be released from any and all claims arising out of or
relating to adoption of the 1995 OTEF Restructuring Plan and the
Liquidity and Growth Plan and, as to derivative claims, OTEF II
will release the other defendants from such claims. Within five
days of the effective date of the court's final order approving
the Settlement, the parties will file a stipulation dismissing
all related actions pending in Maryland state court.
OTEF II has incurred and will incur substantial legal fees
and expenses as a result of the Settlement. These legal fees
include the fees of plaintiffs' counsel. Under the Settlement,
OTEF II has agreed not to object to a request by plaintiffs'
counsel for fees and expenses of up to $2.5 million. Any such
fee request must be approved by the court.
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SIGNATURES
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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 hereunto duly authorized.
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
By: Oxford Tax Exempt Fund II Corporation,
Managing General Partner
By: /s/ Francis P. Lavin
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Francis P. Lavin,
President
Date: December 6, 1996
