SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to Section
14(d)(4)
of the Securities Exchange Act of 1934
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SENIOR INCOME FUND L.P.
(Name of Subject Company)
SENIOR INCOME FUND L.P.
(Name of Person Filing Statement)
Units of Limited Partnership Interests
(Title of Class of Securities)
820930 10 5
(CUSIP Number of Class of Securities)
------------------------------------------
Moshe Braver
SENIOR INCOME FUND INC.
3 World Financial Center, 29th Floor
New York, New York 10285
(212) 526-3237
(Name, Address, and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person filing Statement)
Copies to:
Patrick J. Foye, Esq.
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
919 Third Avenue
New York, New York 10022
(212) 735-2274
Item 1. Security and Subject Company
The subject company is Senior Income Fund L.P., a Delaware
limited partnership (the "Partnership"). The general partner of the
Partnership is Senior Income Fund Inc., a Delaware corporation (the
"General Partner"). The address of the principal executive offices of each
of the Partnership and the General Partner is 3 World Financial Center,
29th Floor, New York, New York 10285. The title of the class of equity
securities to which this statement relates is the outstanding units of
limited partnership interests ("Units").
Item 2. Tender Offer of the Bidder
This statement relates to the unsolicited tender offer being
made by LAVRA, Inc., a Delaware corporation and its parent, ARV Assisted
Living, Inc. (together, the "Bidders"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated November 8, 1996, (the "Schedule
14D-1"), to purchase from holders of Units ("Unitholders") up to 2,027,550
Units representing 42% of the outstanding Units of the Partnership, upon the
terms and subject to the conditions set forth in the Offer to Purchase
dated November 8, 1996 (the "Offer to Purchase") and the related Letter of
Transmittal (the "Letter of Transmittal" and together with the Offer to
Purchase, the "ARV Offer"). Neither the Bidders nor any of their affiliates
are affiliated with the Partnership or its General Partner and the ARV
Offer was not solicited by the Partnership. The Schedule 14D-1 states
that the principal place of business of the Bidders is located at 245
Fischer Avenue, Suite D-1, Costa Mesa, California 92626.
Item 3. Identity and Background
(a) The name and business address of the Partnership, which is
the person filing this statement, are set forth in Item 1 above.
(b)(1) The Partnership does not have any directors or executive
officers. Pursuant to the Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), the sole
general partner responsible for the management of the Partnership's
business is the General Partner. Except as described below, there are no
material contracts, agreements, arrangements and understandings or any
actual or potential conflicts of interest between the General Partner or
its affiliates and the Partnership, its executive officers, directors or
affiliates.
Pursuant to the Partnership Agreement, the General Partner and
their affiliates have received or will receive certain types of
compensation, fees, or other distributions in connection with the
operations of the Partnership. The arrangements for payment of compensation
and fees were not determined in arms-length negotiations with the
Partnership.
Net Cash Flow from Operations (as defined in the Partnership
Agreement) with respect to each fiscal year is distributed 99% to the
Unitholders and 1% to the General Partner until such time as each
Unitholder has received an amount equal to his or her Preferred Return (as
defined in the Partnership Agreement). The Partnership's share of any
remaining Net Cash Flow from Operations is distributed 95% to the
Unitholders and 5% to the General Partner. Since 1993, the General Partner
has received less than $15,000 per year in distributions.
Net Proceeds from Interim Capital Transactions (as defined in
the Partnership Agreement) are distributed 99% to the Unitholders and 1%
to the General Partner until each Unitholder has received an amount equal
to his unpaid Preferred Return and Unrecovered Capital (as defined
therein). The Partnership's share of any remaining Net Proceeds from
Interim Capital Transactions are distributed 95% to the Unitholders and 5%
to the General Partner.
Net Proceeds upon Dissolution (as defined in the Partnership
Agreement) will be distributed in accordance with the partners' adjusted
Capital Accounts (as defined in the Partnership Agreement). The
Partnership's share of any remaining Net Proceeds upon Dissolution will be
distributed 95% to the Unitholders and 5% to the General Partner.
The General Partner is reimbursed for certain out-of-pocket
costs and expenses incurred in connection with the operation of the
Partnership. The General Partner or its affiliates incurred administrative
expenses of approximately $86,000, $61,000 and $54,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. The General Partner or its
affiliates were owed approximately $228,000, $215,000 and $207,000 at
December 31, 1995, 1994 and 1993, respectively.
The General Partner, as general partner of the Partnership, is
entitled to indemnification under certain circumstances from the
Partnership pursuant to the Partnership Agreement.
(b)(2) To the best knowledge of the Partnership, there are no
material contracts, agreements, arrangements and understandings or any
actual or potential conflicts of interest between the Partnership or its
affiliates and the Bidders, their executive officers, directors or
affiliates.
Item 4. The Solicitation or Recommendation
(a) Following the announcement of the ARV Offer the General
Partner reviewed and considered the ARV Offer and explored various possible
alternative courses of action which might be available to the Partnership
in response to the ARV Offer. The Partnership, in light of all relevant
circumstances, determined that the ARV Offer is inadequate, not in the best
interests of either the Partnership or Unitholders and strongly recommends
that Unitholders reject it.
(b) The Partnership reached the conclusion set forth in Item
4(a) after considering a variety of factors, including, but not limited to,
the following:
(i) The Partnership's minimum estimate of current net
asset value is approximately $6.50 per Unit, which is 30%
higher than the ARV Offer. Such estimate takes into
consideration the recent offers for the Partnership's assets
discussed below, the independent appraisal of the Partnership's
properties as of December 31, 1995 and the Partnership's
current assets and liabilities. Such estimate also includes the
recently concluded $3.2 million insurance settlement discussed
below. It should be noted that the estimate of net asset value
is only an estimate of current value and the actual amount
realizable upon a sale of the Partnership's properties may be
different.
(ii) Since the commencement of the ARV Offer, the
Partnership has received unsolicited bona fide offers from
third parties involved in the congregate care industry to
purchase the Partnership's assets at prices that, together with
the insurance proceeds discussed below, would result in cash
distributions being made to all Unitholders totalling
approximately $6.00 per Unit. Such cash distributions represent
a premium of 20% to the ARV Offer and would be made in respect
of all your Units as opposed to as little as 42% of your Units
if all outstanding Units are tendered. Although there can be no
assurance that any asset sale actually will be consummated or
that any particular price can be obtained, the Partnership, in
light of such offers, has accelerated its existing plan to
competitively market the properties as discussed below which
is expected to maximize the value of your Units.
(iii) MacKenzie Patterson, Inc. and certain of its
affiliates ("MacKenzie") have informed the Partnership that
they have commenced a tender offer for 4.9% of the outstanding
Units at a purchase price of $5.50 per Unit. We will
communicate with you separately regarding this offer.
(iv) The Partnership this week concluded previous
negotiations and reached a settlement with its insurance
carrier in respect of certain claims for earthquake damage to
two of its properties located in California, Prell Gardens and
Ocean House, which resulted in a $3.2 million payment being
made to the Partnership. The Partnership had previously advised
to the Bidders that the pendency of such negotiations made the
timing of the ARV Offer not in the best interests of either the
Partnership or Unitholders. As a result of such settlement, the
Partnership will declare a special cash distribution from
operations to all Unitholders of at least $0.50 per Unit before
the end of the year. All Unitholders who sell their Units in
the ARV Offer will either lose their right to receive such
distribution or, pursuant to the terms of the ARV Offer,
receive an amount per Unit from the Bidders reduced by the
amount of such distribution.
(v) The Partnership has accelerated its existing plan
to competitively market all of its assets for sale and
anticipates completing such process early next year. A
competitive process will be open to all interested buyers,
including the Bidders, and facilitate the Partnership obtaining
the highest price for its assets, thereby maximizing the value
of all of the Units. The sale of all the Partnership's
properties would result in a liquidating cash distribution
being made to all Unitholders followed by the dissolution of
the Partnership. Although there can be no assurance that any
sale actually will be consummated or that any particular price
can be obtained, the Partnership expects that proceeds from a
sale of the Partnership's properties together with its
remaining cash would result in total cash distributions being
made to all Unitholders in excess of $6.00 per Unit promptly
following receipt of such proceeds. All Unitholders who sell
their Units in the ARV Offer will lose their right to receive
any distributions, including distributions from any sale of
the Partnership's properties.
(vi) As disclosed in the Bidders' Schedule 14D-1 filed
with the Securities and Exchange Commission, the General
Partner was advised in September 1996 of the Bidders' interest
in acquiring Units for only $4.25 per Unit. On September 30,
the General Partner met with the Bidders' financial advisor and
explained that $4.25 per Unit was grossly inadequate and not
representative of the inherent value of the Units. Since then,
the Bidders have increased their price by approximately 18% per
Unit. The Partnership believes that the current $5.00 offer
price, which the Bidders acknowledge was developed based on the
Partnership's response to the Equity Offer, is also inadequate
and not in the best interests of either the Partnership or
Unitholders and strongly recommends that Unitholders reject it.
The ARV Offer and MacKenzie's higher offer at $5.50 per Unit
provide Unitholders who desire immediate liquidity the
opportunity to receive cash for their Units currently and avoid
the inherent business, real estate, timing and other general
economic risks associated with the Partnership's marketing of
its properties followed by a subsequent distribution of the
sale proceeds to Unitholders.
(vii) The Bidders acknowledge that there is a conflict
between their desire to purchase Units at a low price and your
desire to realize the highest value for your Units. Moreover,
the Bidders concede in the ARV Offer that they will seek to
make themselves the operator of the Partnership's properties
and pay themselves management fees which currently are payable
to a third party operator unaffiliated with the Partnership.
Item 5. Persons Retained, Employed, or to be Compensated
The Partnership has retained D.F. King & Co., Inc. to assist
with communications with Unitholders with respect to, and to provide
other services to the Partnership in connection with, the ARV Offer. The
Partnership will pay D.F. King & Co., Inc. reasonable and customary fees
for its services, reimburse it for reasonable expenses, and provide
customary indemnities. Neither the Partnership nor any person acting on its
behalf has employed, retained, or compensated or intends to employ, retain,
or compensate any other person or class of persons to make solicitations or
recommendations to Unitholders on its behalf concerning the ARV Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) Neither the Partnership nor the General Partner has effected
any transactions in the Units during the past 60 days. Except as described
below, the Partnership is not aware of any other transactions in the Units
during the past 60 days by any of the General Partner's executive officers,
directors, affiliates, or subsidiaries.
(b) Neither the Partnership nor, to the knowledge of the
Partnership, any of the General Partner's executive officers, directors,
affiliates, or subsidiaries owns any Units.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) Since the commencement of the ARV Offer, the Partnership has
received offers from two unaffiliated parties which own and/or operate
congregate care facilities to purchase the Partnership's assets. In
addition, the Partnership has begun the process of competitively marketing
all its assets for sale and anticipates completing such process during the
first quarter of next year. The Partnership expects that such process will
involve, among other things, furnishing non-public information to certain
parties, entering into confidentiality agreements in connection therewith
and responding to due diligence inquiries.
(b) The Partnership has determined that public disclosure with
respect to the parties to, and the possible terms of any proposals made in
connection with, or agreements that may result from any discussions or
negotiations referred to above in this Item 7 might jeopardize the
continuation of such discussions or negotiations and, accordingly,
authorized and directed management not to make any such public disclosure
unless and until an agreement in principle is reached.
There can be no assurance that any of the foregoing will result
in any transaction being recommended to the Partnership or that any
transaction that may be recommended will be authorized or consummated, or
that a transaction other than those described herein will not be proposed,
authorized or consummated. The initiation or continuation of any of the
foregoing may be dependent upon the future actions of the Bidders with
respect to the ARV Offer. The proposal, authorization, announcement or
consummation of any transaction of the type referred to in this Item 7
could adversely effect or result in the withdrawal of the ARV Offer.
Item 8. Additional Information to be Furnished
On October 22, 1996, the Bidders commenced legal action against
the Partnership in the Court of Chancery of the State of Delaware, New
Castle, to compel production and delivery of a list of beneficial owners of
Units. The action is still pending.
On November 20, 1996, Shearson August Property Partnership, a
California general partnership, which is the record owner of the
Partnership's properties (the "Property Partnership"), and whose two
partners are the Partnership and the successor to August Financial Partners
II ("August"), agreed to acquire the partnership interest of August in the
Property Partnership for $850,000. As a result of such purchase, the
Property Partnership will be dissolved and all of its assets will be
distributed to the Partnership. Accordingly, all sale proceeds received
upon a sale of any property will be paid to the Partnership and no amount
will be owed to August.
Item 9. Material to be Filed as Exhibits
(a)(1) Form of letter from the Senior Income Fund L.P. to Unitholders,
dated November 21, 1996.
(b) Not Applicable.
(c) Not Applicable.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: November 21, 1996
SENIOR INCOME FUND L.P.
By: Senior Income Fund Inc.,
its General Partner
By: /s/ Moshe Braver
Name: Moshe Braver
Title: President
EXHIBIT INDEX
Exhibit Description Page
(a)(1) Form of letter from Senior Income Fund L.P.
to the Unitholders, dated November 21, 1996.
SENIOR INCOME FUND L.P.
November 21, 1996
Dear Unitholder:
We are writing in response to materials you should have recently received
constituting an unsolicited tender offer (the "ARV Offer") being made for
42% of the outstanding units of limited partnership interests ("Units") of
Senior Income Fund L.P. (the "Partnership"). The ARV Offer is being made by
LAVRA, Inc. and ARV Assisted Living, Inc. (together, the "Bidders") at
$5.00 per Unit. Also, last month you should have received both materials
describing another unsolicited partial tender offer for your Units which
was commenced by Equity Resource Bay Fund (the "Equity Offer") and our
recommendation against such offer.
Why, all of a sudden, do so many sophisticated investors want to purchase
your Units? The answer is relatively simple: They want to profit
significantly at your expense by owning your Units.
THE PARTNERSHIP, IN LIGHT OF ALL RELEVANT CIRCUMSTANCES, DETERMINED THAT
THE ARV OFFER IS INADEQUATE, NOT IN THE BEST INTERESTS OF EITHER THE
PARTNERSHIP OR UNITHOLDERS AND STRONGLY RECOMMENDS THAT UNITHOLDERS REJECT
IT.
The Partnership reached this conclusion after considering a variety of
factors, including, but not limited to, the following:
o Net Asset Value is 30% Higher than Offer. The Partnership's
minimum estimate of current net asset value is approximately
$6.50 per Unit, which is 30% higher than the ARV Offer. Such
estimate takes into consideration the recent offers for the
Partnership's assets discussed below, the independent appraisal
of the Partnership's properties as of December 31, 1995 and the
Partnership's current assets and liabilities. Such estimate also
includes the recently concluded $3.2 million insurance
settlement discussed below. It should be noted that the estimate
of net asset value is only an estimate of current value and the
actual amount realizable upon a sale of the Partnership's
properties may be different.
o Receipt of Higher Offers for Assets. Since the commencement of
the ARV Offer, the Partnership has received unsolicited bona
fide offers from third parties involved in the congregate care
industry to purchase the Partnership's assets at prices that,
together with the insurance proceeds discussed below, would
result in cash distributions being made to all Unitholders
totalling approximately $6.00 per Unit. Such cash distributions
represent a premium of 20% to the ARV Offer and would be made in
respect of all your Units as opposed to as little as 42% of your
Units if all outstanding Units are tendered. Although there can
be no assurance that any asset sale actually will be consummated
or that any particular price can be obtained, the Partnership,
in light of such offers, has accelerated its existing plan to
competitively market the properties as discussed below which is
expected to maximize the value of your Units.
o Higher Offer at $5.50. MacKenzie Patterson, Inc. and certain of
its affiliates ("MacKenzie") have informed the Partnership that
they have commenced a tender offer for 4.9% of the outstanding
Units at a purchase price of $5.50 per Unit. We will communicate
with you separately regarding this offer.
o Settlement of Insurance Claims. The Partnership this week
concluded previous negotiations and reached a settlement with
its insurance carrier in respect of certain claims for
earthquake damage to two of its properties located in
California, Prell Gardens and Ocean House, which resulted in a
$3.2 million payment being made to the Partnership. The
Partnership had previously advised to the Bidders that the
pendency of such negotiations made the timing of the ARV Offer
not in the best interests of either the Partnership or
Unitholders. As a result of such settlement, the Partnership
will declare a special cash distribution from operations to all
Unitholders of at least $0.50 per Unit before the end of the
year. All Unitholders who sell their Units in the ARV Offer will
either lose their right to receive such distribution or,
pursuant to the terms of the ARV Offer, receive an amount per
Unit from the Bidders reduced by the amount of such
distribution.
o Competitively Marketing the Properties. The Partnership has
accelerated its existing plan to competitively market all of its
assets for sale and anticipates completing such process early
next year. A competitive process will be open to all interested
buyers, including the Bidders, and facilitate the Partnership
obtaining the highest price for its assets, thereby maximizing
the value of all of the Units. The sale of all the Partnership's
properties would result in a liquidating cash distribution being
made to all Unitholders followed by the dissolution of the
Partnership. Although there can be no assurance that any sale
actually will be consummated or that any particular price can be
obtained, the Partnership expects that proceeds from a sale of
the Partnership's properties together with its remaining cash
would result in total cash distributions being made to all
Unitholders in excess of $6.00 per Unit promptly following
receipt of such proceeds. All Unitholders who sell their Units
in the ARV Offer will lose their right to receive any
distributions, including distributions from any sale of the
Partnership's properties.
o General Partner Extracts Higher Offer. As disclosed in the
Bidders' Schedule 14D-1 filed with the Securities and Exchange
Commission, the General Partner was advised in September 1996 of
the Bidders' interest in acquiring Units for only $4.25 per
Unit. On September 30, the General Partner met with the Bidders'
financial advisor and explained that $4.25 per Unit was grossly
inadequate and not representative of the inherent value of the
Units. Since then, the Bidders have increased their price by
approximately 18% per Unit. The Partnership believes that the
current $5.00 offer price, which the Bidders acknowledge was
developed based on the Partnership's response to the Equity
Offer, is also inadequate and not in the best interests of
either the Partnership or Unitholders and strongly recommends
that Unitholders reject it. The ARV Offer and MacKenzie's higher
offer at $5.50 per Unit provide Unitholders who desire immediate
liquidity the opportunity to receive cash for their Units
currently and avoid the inherent business, real estate, timing
and other general economic risks associated with the
Partnership's marketing of its properties followed by a
subsequent distribution of the sale proceeds to Unitholders.
o Bidders' Conflict; Bidders Seek Fees from the Partnership. The
Bidders acknowledge that there is a conflict between their
desire to purchase Units at a low price and your desire to
realize the highest value for your Units. Moreover, the Bidders
concede in the ARV Offer that they will seek to make themselves
the operator of the Partnership's properties and pay themselves
management fees which currently are payable to a third party
operator unaffiliated with the Partnership.
THE PARTNERSHIP STRONGLY RECOMMENDS THAT YOU REJECT THE OFFER AND NOT
TENDER YOUR UNITS.
If you have any questions concerning this letter or the attached Schedule
14D-9 which was filed with the Securities and Exchange Commission, please
contact D.F. King & Co., Inc., which has been engaged by the Partnership to
assist in our response to investors' inquiries, toll free at (800)
758-5378.
Very truly yours,
Moshe Braver
President
Senior Income Fund Inc.
General Partner
