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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)
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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
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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 December 23, 1996 (the "Schedule 14D-1"), to
purchase from holders of Units ("Unitholders") any and all of
the outstanding Units of the Partnership, upon the terms and
subject to the conditions set forth in the Offer to Purchase
dated December 23, 1996 (the "Offer to Purchase") and the
related Letter of Transmittal (the "Letter of Transmittal" and
together with the Offer to Purchase, the "Latest Offer").
Neither the Bidders nor any of their affiliates are affiliated
with the Partnership or its General Partner and the Latest
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.
Pursuant to the Partnership Agreement, Net Cash Flow
from Operations 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, other than its allocable share, approximately
$29,000, of the special distribution made on December 9, 1996.
Pursuant to the Partnership Agreement, Net Proceeds
from Interim Capital Transactions 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.
Pursuant to the Partnership Agreement, Net Proceeds
upon Dissolution 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 Latest Offer
the General Partner reviewed and considered the Latest Offer
and explored various possible alternative courses of action
which might be available to the Partnership in response to the
Latest Offer. THE PARTNERSHIP, IN LIGHT OF ALL RELEVANT
CIRCUMSTANCES, DETERMINED THAT THE LATEST OFFER IS INADEQUATE,
NOT IN THE BEST INTERESTS OF EITHER THE PARTNERSHIP OR
UNITHOLDERS AND RECOMMENDS THAT UNITHOLDERS REJECT IT.
THE PARTNERSHIP BELIEVES THAT A PROPERLY CONDUCTED COMPETITIVE
SALE OF ALL ITS ASSETS WILL MAXIMIZE THE VALUE OF THE UNITS
AND ENABLE UNITHOLDERS TO REALIZE A LIQUIDATING CASH
DISTRIBUTION IN AN AMOUNT IN EXCESS OF THE LATEST OFFER.
(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) On November 8, 1996, the Bidders commenced the
first of their offers for 42% of the Partnership's
outstanding Units at a purchase price of $5.00 per Unit.
On November 25, 1996, their offer was amended to increase
the purchase price to $6.50 per Unit for 51% of the
outstanding Units and to extend the offer from December 9
until December 13, 1996. Shortly thereafter, however,
the Bidder's offer was reduced to $5.90 per Unit as a
result of a $0.60 per Unit special cash distribution made
to Unitholders by the Partnership on December 9. We
considered the ARV Offer in accordance with our fiduciary
duties and, in light of the facts then existing,
recommended that you reject the offer because the price
did not adequately reflect the inherent value of your
Units. HOLDERS OF 92% OF THE PARTNERSHIP'S UNITS
APPARENTLY DETERMINED THAT SUCH OFFER WAS INADEQUATE,
REJECTED IT AND DID NOT TENDER THEIR UNITS.
(ii) THE PARTNERSHIP BELIEVES THAT A PROPERLY
CONDUCTED COMPETITIVE SALE OF ALL ITS ASSETS WILL
MAXIMIZE THE VALUE OF THE UNITS AND ENABLE UNITHOLDERS TO
REALIZE A LIQUIDATING CASH DISTRIBUTION IN AN AMOUNT IN
EXCESS OF THE LATEST OFFER.
(iii) As previously disclosed, the General Partner
is currently in the process of competitively marketing
the Partnership's properties for sale. In this respect,
the Partnership has retained the services of a licensed
real estate broker experienced in the congregate care
industry, CB Commercial Real Estate Group, Inc. ("CB
Group"), to ensure the receipt of the highest obtainable
offer. CB Group has entered into confidentiality
agreements with interested parties pursuant to which it
has delivered to them important information regarding the
Partnership's properties. In addition, potential
purchasers have toured the facilities. AS PREVIOUSLY
ANNOUNCED, THE PARTNERSHIP HAS ALREADY RECEIVED A WRITTEN
OFFER TO PURCHASE ALL OF THE PARTNERSHIP'S PROPERTIES AT
A PURCHASE PRICE WHICH, IF REALIZED, WOULD RESULT IN A
PER UNIT LIQUIDATING CASH DISTRIBUTION BEING MADE TO ALL
UNITHOLDERS IN EXCESS OF THE LATEST OFFER.
(iv) The competitive sale of the Partnership's
properties is open to all interested buyers who execute
confidentiality agreements, including the Bidders, and
should facilitate the Partnership obtaining the highest
price for its assets. The Bidders, after learning of the
Partnership's intentions to market the properties, are
eager to purchase the Units rather than bid for the
Partnership's assets with all other buyers in a
competitive process because they are probably afraid that
a competitive process could lead to a per Unit purchase
price in excess of the Latest Offer. The Partnership
believes that competitively marketing its properties will
maximize the value of the Units, although there can be no
assurance that any sale will be consummated or that any
particular price can be obtained. This belief has been
reinforced by the marketing process underway. All
Unitholders who sell their Units in the Latest Offer will
lose their right to receive the benefit of any
distributions, including distributions from any sale of
the Partnership's properties.
(v) In their offering material, the Bidders concede
that "there is a conflict between the desire of the
[Bidders] to purchase Units at a low price and the desire
of the Unitholders to sell their Units at a high price."
The Bidders also concede that they will seek to make
themselves the operator of the Partnership's properties
and pay themselves management fees which are currently
payable to a third party operator unaffiliated with the
Partnership. If these are the ways in which the Bidders
are trying to maximize their investment, they may not be
looking out for Unitholder's best interests if their
tender offer is successful.
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 Latest 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 Latest 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) As previously disclosed, the General Partner is
currently in the process of competitively marketing the
Partnership's properties for sale. In this respect, the
Partnership has retained the services of a licensed real
estate broker experienced in the congregate care industry, CB
Group, to ensure the receipt of the highest obtainable offer.
CB Group has entered into confidentiality agreements with
interested parties pursuant to which it has delivered to them
important information regarding the Partnership's properties.
In addition, potential purchasers have toured the facilities.
AS PREVIOUSLY ANNOUNCED, THE PARTNERSHIP HAS ALREADY RECEIVED
A WRITTEN OFFER TO PURCHASE ALL OF THE PARTNERSHIP'S
PROPERTIES AT A PURCHASE PRICE WHICH, IF REALIZED, WOULD
RESULT IN A PER UNIT LIQUIDATING CASH DISTRIBUTION BEING MADE
TO ALL UNITHOLDERS IN EXCESS OF THE LATEST OFFER.
(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 Latest 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 Latest Offer.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Acquisition of Interest in Property Partnership. As
previously disclosed, 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.
Cautionary Note Regarding Forward-Looking
Statements. This Schedule 14D-9 and the accompanying letter
to Unitholders contain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, that are not historical facts and which reflect
numerous assumptions and involve a number of risks and
uncertainties. Forward-looking statements contained in the
foregoing include statements relating to the marketing and
sale of the Partnership's properties and the occurrence and
amount of any future distributions made in connection
therewith by the Partnership. Among the factors which can
cause actual results to materially differ from those expressed
by the Partnership include, but are not limited to, changes in
the local and national real estate markets, changes in
interest rates, restrictions in financing, changes in the
condition of the Partnership's properties, unanticipated
expenditures, changes in local or national economic
conditions, changes in environmental laws, changes in building
codes, changes in other laws or regulations, changes in the
competitive environment for congregate care facilities, other
factors affecting the sale of real estate and other factors
discussed from time to time in the Partnership's documents and
reports filed with the Securities and Exchange Commission.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Form of letter from the Senior Income Fund L.P.
to Unitholders, dated January 6, 1997.
(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: January 6, 1997
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 January 6,
1997.
EXHIBIT (a)(1)
January 6, 1997
Dear Unitholder:
We are writing because LAVRA, Inc. and its affiliate ARV
Assisted Living, Inc. (together, the "Bidders") have
commenced yet another unsolicited tender offer (the "Latest
Offer") to purchase your units of limited partnership
interests ("Units") of Senior Income Fund L.P. (the
"Partnership"). The Latest Offer for any and all of the
outstanding Units of the Partnership is being made at the
same $5.90 net purchase price as the unsolicited partial
tender offer commenced in November 1996.
As you will remember, on November 8, 1996, the Bidders
commenced the first of their offers for 42% of the
Partnership's outstanding Units at a purchase price of
$5.00 per Unit. On November 25, 1996, their offer was
amended to increase the purchase price to $6.50 per Unit
for 51% of the outstanding Units and to extend the offer
from December 9 until December 13, 1996. Shortly
thereafter, however, the Bidder's offer was reduced to
$5.90 per Unit as a result of a $0.60 per Unit special cash
distribution made to you by the Partnership on December 9.
We considered the ARV Offer in accordance with our
fiduciary duties and, in light of the facts then existing,
recommended that you reject the offer because the price did
not adequately reflect the inherent value of your Units.
HOLDERS OF 92% OF THE PARTNERSHIP'S UNITS APPARENTLY
DETERMINED THAT SUCH OFFER WAS INADEQUATE, REJECTED IT AND
DID NOT TENDER THEIR UNITS.
Remarkably, only ten days after allowing their prior offer
to expire, the Bidders are again seeking to purchase your
Units for the same $5.90. THE PARTNERSHIP, IN LIGHT OF ALL
RELEVANT CIRCUMSTANCES, DETERMINED THAT THE LATEST OFFER IS
INADEQUATE, NOT IN THE BEST INTERESTS OF EITHER THE
PARTNERSHIP OR UNITHOLDERS AND RECOMMENDS THAT UNITHOLDERS
REJECT IT.
THE PARTNERSHIP BELIEVES THAT A PROPERLY CONDUCTED
COMPETITIVE SALE OF ALL ITS ASSETS WILL MAXIMIZE THE VALUE
OF YOUR UNITS AND ENABLE UNITHOLDERS TO REALIZE A
LIQUIDATING CASH DISTRIBUTION IN AN AMOUNT IN EXCESS OF THE
LATEST OFFER.
ASSETS FOR SALE. As we have previously informed you, we are
currently in the process of competitively marketing the
Partnership's properties for sale. In this respect, the
Partnership has retained the services of a licensed real
estate broker experienced in the congregate care industry,
CB Commercial Real Estate Group, Inc. ("CB Group"), to
ensure the receipt of the highest obtainable offer. CB
Group has entered into confidentiality agreements with
interested parties pursuant to which it has delivered to
them important information regarding the Partnership's
properties. In addition, potential purchasers have toured
the facilities. AS PREVIOUSLY ANNOUNCED, THE PARTNERSHIP
HAS ALREADY RECEIVED A WRITTEN OFFER TO PURCHASE ALL OF THE
PARTNERSHIP'S PROPERTIES AT A PURCHASE PRICE WHICH, IF
REALIZED, WOULD RESULT IN A PER UNIT LIQUIDATING CASH
DISTRIBUTION BEING MADE TO ALL UNITHOLDERS IN EXCESS OF THE
LATEST OFFER.
COMPETITIVE PROCESS. The competitive sale of the
Partnership's properties is open to all interested buyers
who execute confidentiality agreements, including the
Bidders, and should facilitate the Partnership obtaining
the highest price for its assets. Ask yourself why the
Bidders, after learning of our intentions to market the
properties, are so eager to purchase your Units rather than
bid for the Partnership's assets with all other buyers in a
competitive process. The answer is simple -- they are
probably afraid that a competitive process could lead to a
per Unit purchase price in excess of the Latest Offer. The
Partnership believes that competitively marketing its
properties will maximize the value of your Units, although
there can be no assurance that any sale will be consummated
or that any particular price can be obtained. This belief
has been reinforced by the marketing process underway. All
Unitholders who sell their Units in the Latest Offer will
lose their right to receive the benefit of any
distributions, including distributions from any sale of the
Partnership's properties.
CONFLICT OF INTEREST. In their offering material, the
Bidders concede that "there is a conflict between the
desire of the [Bidders] to purchase Units at a low price
and the desire of the Unitholders to sell their Units at a
high price." The Bidders also concede that they will seek
to make themselves the operator of the Partnership's
properties and pay themselves management fees which are
currently payable to a third party operator unaffiliated
with the Partnership. If these are the ways in which the
Bidders are trying to maximize their investment, consider
whether they will be looking out for anyone's best
interests other than their own if their tender offer is
successful.
Attached is the Partnership's response to the Latest Offer
which has been filed with the Securities and Exchange
Commission (the "Schedule 14D-9"). We will, of course,
continue to keep you informed of significant events
concerning the Partnership. In the event you have any
questions concerning this letter or the Schedule 14D-9,
please contact D.F. King & Co., Inc., which has been
retained by the Partnership to assist in our response to
investor's inquiries, toll free at (800) 758-5378.
Very truly yours,
Moshe Braver
President
Senior Income Fund Inc.
General Partner
