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) May 14, 1998
Mercury Finance Company
(Exact name of registrant as specified in charter)
Delaware 1-10176 36-3627010
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Field Drive, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 295-8600
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
On May 14, 1998, the Registrant entered into an Agreement with certain of
its senior lenders and with the subordinated debt holder (the "Agreement") with
respect to the principal terms of a financial restructuring of the Registrant,
a copy of which agreement is attached as Exhibit 99.1 to this Form 8-K and is
incorporated herein by reference. In connection with the Agreement, the
Registrant and its lenders also entered into a Third Amendment to Forbearance
Agreement (the "Third Amended Forbearance Agreement") on May 14, 1998, a copy
of which is attached as Exhibit 99.2 to this Form 8-K and is incorporated
herein by reference.
On May 15, 1998, the Registrant issued a press release announcing the
Agreement, the Third Amended Forbearance Agreement, and financial results for
the quarter ended March 31, 1998, a copy of which is attached as Exhibit 99.3 to
this Form 8-K and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description of Document
99.1 Agreement dated as of May 14, 1998, by and among
Mercury Finance Company ("Mercury") and each of the
institutional holders of claims, notes and/or
commercial paper issued by Mercury listed on the
signature pages thereto.
99.2 Third Amendment to Forbearance Agreement dated as of
May 14, 1998, between Mercury and the person(s) listed
on the signature pages thereto.
99.3 Press release dated May 15, 1998 issued by the
Registrant.
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 hereunto duly authorized.
Mercury Finance Company
Date: May 15, 1998 By: /s/ William A. Brandt, Jr.
Its: President and Chief Executive
Officer
Exhibit 99.1
Execution Copy
AGREEMENT
This Agreement (the "Agreement"), dated as of May 14, 1998, by and
among Mercury Finance Company, a Delaware corporation, ("Mercury") and each of
the undersigned institutional holders (each, a "Consenting Holder") of claims,
notes and/or commercial paper (each, a "Claim") issued by Mercury under one of
the credit agreement, note agreements or other agreements, instruments or other
documents listed on Schedule 1 (the "Existing Agreements").
WITNESSETH:
WHEREAS, Mercury and each of the Consenting Holders is a party to a
Forbearance Agreement, dated as of July 11, 1997, as amended by the First
Amendment thereto, dated as of November 6, 1997, by the Second Amendment
thereto, dated as of March 2, 1998, and by the Third Amendment thereto, dated as
of May 14, 1998 (collectively, the "Forbearance Agreement") pursuant to which
each of the Consenting Holders has agreed to forebear, on the terms and
conditions therein set forth, from the exercise of any rights or remedies it may
have under the Existing Agreements;
WHEREAS, while the Forbearance Agreement has been in effect, Mercury
and an Ad Hoc Steering Committee of Mercury Creditors (including certain of the
Consenting Holders) (the "Steering Committee") have engaged in good faith
negotiations with the objective of reaching an agreement with regard to
restructuring the indebtedness outstanding under the Existing Agreements;
WHEREAS, Mercury and the Consenting Holders now desire to implement a
financial restructuring of Mercury on the terms set forth on Appendix I hereto
(the "Financial Restructuring");
WHEREAS, in order to implement the Financial Restructuring, Mercury
has agreed, on the terms and conditions of this Agreement, to prepare and file a
disclosure statement (the "Disclosure Statement") and plan of reorganization
(the "Pre-Structured Plan") in a case filed (the "Chapter 11 Proceedings") under
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code")
implementing the terms of the Financial Restructuring and to use its best
efforts to have such Disclosure Statement approved and such Pre-Structured Plan
confirmed by the Bankruptcy Court for such U.S. judicial District as may be
agreed between counsel to the Steering Committee and counsel to Mercury (so long
as venue in such District is proper)(the "Bankruptcy Court"), in each case as
expeditiously as possible under the Bankruptcy Code and the Federal Rules of
Bankruptcy Procedure (the "Rules");
WHEREAS, in order to expedite the implementation of the Financial
Restructuring, each of the Consenting Holders is prepared to commit, on the
terms and subject to the conditions of this Agreement, to vote to accept the
Pre-Structured Plan.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Mercury and each Consenting Holder hereby agree as follows:
1. Forbearance. So long as no "Agreement Termination Event" or
"Mercury Termination Event" (each as defined in Section 4 of this Agreement)
shall have occurred and be continuing, each of the Consenting Holders hereby
agrees to forebear from the exercise of any rights or remedies it may have under
the Existing Agreements, applicable law or otherwise with respect to any default
arising under the Existing Agreements during the period commencing on the date
hereof and ending on the date on which the Chapter 11 Proceedings are commenced
(the "Commencement Date"), provided, that, during such period Mercury shall have
continued to comply with its obligations under the terms and conditions of the
Forbearance Agreement.
2. Voting; Restriction on Transfer. Each of the Consenting Holders
represents that, as of the date hereof, it is the beneficial owner of, and/or
the investment adviser or manager for the beneficial owners of (with the power
to vote and dispose of such Claims on behalf of such beneficial owners) Claims
set forth on the schedule attached to its signature page (for each such
Consenting Holder, the "Relevant Claims"). Each of the Consenting Holders agrees
that, subject to the conditions that (i) the Disclosure Statement shall have
been approved by the Bankruptcy Court; (ii) the Disclosure Statement as so
approved contains information in respect of Mercury's business and operations
that is not materially inconsistent with the information heretofore provided by
Mercury to the Consenting Holders; and (iii) the material terms of the Pre-
Structured Plan contained in the approved Disclosure Statement are the terms set
forth in the Financial Restructuring, it shall timely vote its Relevant Claims
(and, so long as no Agreement Termination Event or Mercury Termination Event
shall have occurred, not revoke or withdraw such vote) to accept the Pre-
Structured Plan.
Each of the Consenting Holders hereby agrees that, so long as this
Agreement has not been terminated, it shall not sell, transfer or assign any of
the Relevant Claims or any option thereon or any right or interest (voting or
otherwise) therein, unless the transferee thereof agrees in writing to be bound
by all the terms of this Agreement by executing a counterpart signature page of
this Agreement and the transferor provides Mercury with a copy thereof, in which
event Mercury shall be deemed to have acknowledged that its obligations to the
Consenting Holders hereunder shall be deemed to constitute obligations in favor
of such transferee, and Mercury shall confirm that acknowledgment in writing.
3. Mercury Agreements. Mercury hereby agrees (i) promptly to prepare
a draft Disclosure Statement and Pre-Structured Plan implementing the Financial
Restructuring; (ii) subject to prior written confirmation from counsel to the
Steering Committee that the Steering Committee does not believe that (a) the
information contained in such Disclosure Statement in respect of Mercury's
business and operations is materially inconsistent with the information provided
to the Steering Committee or its representatives prior to the date hereof or (b)
the terms of such Pre-Structured Plan are inconsistent with the terms of the
Financial Restructuring, (1) thereafter, to commence the Chapter 11 Proceedings
on or prior to July 15, 1998 and (2) to use its best efforts to obtain an order
of the Bankruptcy Court approving the Disclosure Statement and thereafter to
take all reasonable steps necessary and desirable to obtain an order of the
Bankruptcy Court confirming the Pre-Structured Plan, in each case, as
expeditiously as possible under the Bankruptcy Code and Rules.
4. Termination of Agreement. Except as set forth in Section 15
hereof, this Agreement shall terminate automatically upon the occurrence of any
"Mercury Termination Event" or any "Agreement Termination Event" (as hereinafter
defined), unless the occurrence of such Agreement Termination Event is waived in
writing by Consenting Holders representing 75% of the Relevant Claims; provided,
that no such waiver shall extend the time for performance of any of Mercury's
obligations under Section 3 hereof to a date after August 30, 1998 without the
consent of all of the Consenting Holders. If any Agreement Termination Event
occurs (and has not been waived) or any Mercury Termination Event occurs at the
time when permission of the Bankruptcy Court shall be required for a Consenting
Holder to change or withdraw (or cause to be changed or withdrawn) its votes to
accept the Pre-Structured Plan, Mercury shall not, subject to its fiduciary
duties as a debtor in possession, oppose any attempt by such Consenting Holder
to change or withdraw (or cause to be changed or withdrawn) such votes at such
time. Upon the occurrence of an Agreement Termination Event or a Mercury
Termination Event, each of the Consenting Holders shall have all rights and
remedies available to it under the Existing Agreements, applicable law or
otherwise with respect to any default under the Existing Agreement that may have
occurred at any time prior to such Event and which default is still continuing.
An "Agreement Termination Event" shall mean any of the following:
(a) Mercury fails to prepare and deliver to the Steering
Committee a Pre-Structured Plan and Disclosure Statement that meet the
standards of Section 3 of this Agreement by July 10, 1998;
(b) The Chapter 11 Proceedings to implement the Financial
Restructuring through confirmation of the Pre-Structured Plan shall
not have been commenced by July 15, 1998;
(c) The Disclosure Statement incorporating the Financial
Restructuring through the Pre-Structured Plan shall not have been
approved by the Bankruptcy Court by September 15, 1998;
(d) The Pre-Structured Plan or any plan of reorganization or
liquidation proposed by Mercury shall contain terms inconsistent with
the terms and provisions set forth in the Financial Restructuring or
shall have been changed or amended in any respect which makes it
inconsistent with the terms and provisions set forth in the Financial
Restructuring;
(e) The Pre-Structured Plan shall not have been confirmed by the
Bankruptcy Court and substantially consummated in accordance with its
terms by November 15, 1998;
(f) Prior to the Commencement Date, Mercury does not meet its
obligations under the Forbearance Agreement;
(g) There shall have occurred any material adverse change in the
business, assets, operations, or condition (financial or otherwise) of
Mercury and its subsidiaries, taken as a whole; or
(h) Mercury breaches any other material provision of this
Agreement, including, but not limited to, ceasing to use its best
efforts to obtain approval of the Disclosure Statement and/or
confirmation of the Pre-Structured Plan.
In addition, Mercury shall have the right to terminate this Agreement,
by the giving of written notice thereof to each of the Consenting Holders, upon
the receipt by Mercury of binding commitments for new debt and/or equity
financing from one or more creditworthy entities in amounts sufficient to repay
all amounts outstanding under the Existing Agreements in full and in cash (a
"Mercury Termination Event"). Upon the occurrence of any Agreement Termination
Event, unless such Agreement Termination Event is waived in accordance with the
terms hereof, or upon the occurrence of a Mercury Termination Event, this
Agreement shall terminate and no party hereto shall have any continuing
liability or obligation to any other party hereunder, except as otherwise
provided in Section 14; provided, that, no such termination shall relieve any
party from liability for its breach or non-performance of its obligations
hereunder prior to the date of such termination.
5. Good Faith Negotiation of Financial Restructuring Documents.
Mercury and each Consenting Holder which is a member of the Steering Committee
hereby further covenants and agrees to negotiate the definitive documents
relating to the Financial Restructuring, including, without limitation, the form
of the New Senior Secured Notes (as defined in the Financial Restructuring), the
indenture therefor and the documents relating to the collateral for such notes
(including with respect to all such documents, without limitation, normal and
customary default provisions), in good faith and Mercury agrees to attach such
definitive documents as exhibits to the Disclosure Statement. In addition,
Mercury agrees that, to the extent that there is any dispute between Mercury and
the Steering Committee with respect to the final form of the New Senior Secured
Notes, the indenture therefor or any of the other documents relating to the
collateral therefor (including, without limitation, any dispute concerning the
covenants to be included in the indenture and collateral documents and/or the
structuring of separate tranches for such notes), Mercury shall accept the
position of the Steering Committee with respect to such dispute so long as the
Steering Committee's position is not inconsistent with the economic terms set
forth in the Financial Restructuring.
6. Representations and Warranties. Mercury, on the one hand, and
each of the Consenting Holders on the other, represents and warrants to each
other that the following statements are true, correct and complete as of the
date hereof:
(a) Corporate Power and Authority. It has all requisite
corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated by, and perform its respective
obligations under this Agreement;
(b) Authorization. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly
authorized by all necessary corporate action on its part;
(c) No Conflicts. The execution, delivery and performance by it
of this Agreement do not and shall not (i) violate any provision of
law, rule or regulation applicable to it or any of its subsidiaries or
its Certificate of Incorporation or bylaws or those of any of its
subsidiaries or (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under
any material contractual obligation to which it or any of its
subsidiaries is a party or under its certificate of incorporation or
by-laws;
(d) Governmental Consents. The execution, delivery and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or
other action to, with or by, any Federal, state or other governmental
authority or regulatory body, except such filings as may be necessary
and/or required for disclosure by the Securities and Exchange
Commission and in connection with the commencement of the Chapter 11
Proceedings, the approval of the Disclosure Statement and confirmation
of the Pre-Structured Plan; and
(e) Binding Obligation. This Agreement is the legally valid and
binding obligation of it, enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
7. Further Acquisition of Securities. This Agreement shall in no way
be construed to preclude the Consenting Holders from acquiring additional
Claims. However, any such additional Claims so acquired shall automatically be
deemed to be Relevant Claims and to be subject to the terms of this Agreement.
8. Effectiveness; Amendments; Consenting Holders. This Agreement
shall not become effective and binding on the parties hereto unless and until
counterpart signature pages hereto shall have been executed and delivery by
Mercury and Consenting Holders holding Claims which constitute in the aggregate
at least eighty percent of the principal amount of the indebtedness outstanding
under the Existing Agreements and constituting a majority in number of the
aggregate number of holders of Claims; provided, however, at Mercury's election,
the percentage Claims threshold for effectiveness of this Agreement may be made
any percentage greater than seventy percent; and provided, further, that
delivery of counterpart signature pages from Consenting Holders holding at least
seventy percent of the indebtedness outstanding under the Existing Agreements
shall be deemed to constitute delivery of counterpart signature pages from
holders of a majority in number of the aggregate number of holders of Claims.
Once effective, this Agreement may not be modified (except as provided in
Section 4), amended or supplemented except in writing signed by Mercury and each
of the Consenting Holders.
9. Disclosure of Individual Holdings. Unless required by applicable
law or regulation, Mercury shall not disclose any Consenting Holder's holdings
of Relevant Claims, without the prior written consent of such Consenting Holder;
and if such announcement or disclosure is so required by law or regulation,
Mercury shall afford the Consenting Holders a reasonable opportunity to review
and comment upon any such announcement or disclosure prior to Mercury's making
such announcement or disclosure. The foregoing shall not prohibit Mercury from
disclosing the approximate aggregate holdings of Claims by the Consenting
Holders as a group.
10. Impact of Appointment to Creditors Committee. Mercury shall
cooperate with the Steering Committee in seeking to cause the United States
Trustee for the Chapter 11 Proceedings to appoint the members of the Steering
Committee to be members of the official committee of creditors holding unsecured
claims pursuant to Section 1102 of the Bankruptcy Code. Notwithstanding
anything herein to the contrary, in the event that any Consenting Holder is
appointed to and serves on a committee of creditors in Mercury's Chapter 11
Proceedings, the terms of this Agreement shall not be construed so as to limit
such Consenting Holder's exercise (in its sole discretion) of its fiduciary
duties to any person arising from its service on such committee, and any such
exercise (in the sole discretion of such Consenting Holder) of such fiduciary
duties shall not be deemed to constitute a breach of the terms of this Agreement
(but the fact of such service on such committee shall not otherwise affect the
continuing validity or enforceability of this Agreement). So long as no
Agreement Termination Event or Mercury Termination Event shall have occurred and
this Agreement remains in effect, the foregoing shall not modify or limit the
obligations of the Consenting Holders to vote their Relevant Claims and to take
the other actions set forth in Section 2 hereof.
11. [Intentionally Left Blank]
12. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Illinois,
without regard to any conflicts of law provision which would require the
application of the law of any other jurisdiction. By its execution and delivery
of this Agreement, each of the parties hereto hereby irrevocably and
unconditionally agrees for itself that any legal action, suit or proceeding
against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered
in any such action, suit or proceeding, may be brought in the U.S. District
Court for the Northern District of Illinois. By execution and delivery of this
Agreement, each of the parties hereto hereby irrevocably accepts and submits
itself to the nonexclusive jurisdiction of each such court, generally and
unconditionally, with respect to any such action, suit or proceeding.
Notwithstanding the foregoing consent to Illinois jurisdiction, upon the
commencement of Mercury's Chapter 11 Proceedings, each of the parties hereto
hereby agrees that the Bankruptcy Court shall have exclusive jurisdiction of all
matters arising out of or in connection with this Agreement.
13. Specific Performance. It is understood and agreed by each of the
parties hereto that money damages would not be a sufficient remedy for any
breach of this Agreement by any party (other than a breach by Mercury of Section
14 hereof) and each non-breaching party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy of any such
breach.
14. Fees and Expenses. Mercury shall reimburse each Consenting
Holder which is a member of the Steering Committee for all of its out of pocket
costs and expenses incurred through the earlier to occur of an Agreement
Termination Event or a Mercury Termination Event, in respect of such Steering
Committee member's reasonable travel expenses and in respect of the fees and
expenses of Houlihan Lokey Howard & Zukin, Policano & Manzo, Jones, Day, Reavis
& Pogue and Cleary, Gottlieb, Steen & Hamilton in accordance with Mercury's
respective agreements with such firms (the "Expenses"). To the extent necessary
to continue Mercury's timely payment of the Expenses after the Commencement
Date, Mercury agrees to assume this Agreement pursuant to Section 365(a) of the
Bankruptcy Code or to provide retainers in amounts to be mutually agreed to by
Mercury and each of the professionals retained by the Steering Committee. In
addition, in the event any party brings an action against any other party based
upon a breach by such other party of its obligations hereunder, the prevailing
party shall be entitled to all reasonable expenses incurred, including
reasonable attorneys', accountants' and financial advisers' fees in connection
with such action.
15. Survival. Notwithstanding the sale of the Relevant Claims in
accordance with Section 2 hereof or the termination of the Consenting Holders'
obligations hereunder in accordance with Section 4 hereof, Mercury's obligations
and agreements set forth in Sections 9 and 14 (with respect to Expenses incurred
through the date of such termination) hereof shall survive such termination and
shall continue in full force and effect for the benefit of the Consenting
Holders in accordance with the terms hereof.
16. Headings. The headings of the sections, paragraphs and
subsections of this Agreement are inserted for convenience only and shall not
affect the interpretation hereof.
17. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the parties and their respective successors, assigns,
heirs, executors, administrators and representatives. The agreements,
representations and obligations of the Consenting Holders under this Agreement
are, in all respects, several and not joint.
18. Prior Negotiations. This Agreement and Appendix 1 supersede all
prior negotiations with respect to the subject matter hereof, except the
Forbearance Agreement which shall remain in full force and effect in accordance
with its terms.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement.
20. No Third-Party Beneficiaries. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the parties hereto and no
other person or entity shall be a third-party beneficiary hereof.
21. Consideration. It is hereby acknowledged by the parties hereto
that no consideration shall be due or paid to the Consenting Holders for their
agreement to vote to accept the Pre-Structured Plan in accordance with the terms
and conditions of this Agreement other than Mercury's agreement to commence the
Chapter 11 Proceedings, to use its best efforts to obtain approval of the
Disclosure Statement and to take all steps necessary and desirable to confirm
the Pre-Structured Plan in accordance with the terms and conditions of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of the
date first above written.
MERCURY FINANCE COMPANY
By:
Name:
Title:
100 Field Drive, Suite 340
Lake Forest, Illinios 60045
Telephone: (847) 564-3720
Facsimile: (847)
CONSENTING HOLDER [Fill in name of entity below]:
By:____________________________
Name:
Title:
Address:
Telephone:
Facsimile:
APPENDIX I
TERM SHEET
MERCURY FINANCE COMPANY
RESTRUCTURING TERM SHEET
This is Appendix I to the Agreement, dated May 14, 1998, by and among Mercury
Finance Company (the "Company") and each of the Consenting Holders (the
"Agreement"). Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
I.TREATMENT OF CLAIMS UNDER THE PRE-STRUCTURED PLAN
The Pre-structured Plan will classify and provide treatment for claims against
and interests in the Company as generally described below. Claims in each
such class will be satisfied in full by the delivery of the consideration
described below on the Effective Date of the Plan. None of the Company's
subsidiaries shall be included in the Chapter 11 Proceedings.
Priority and
Administrative Claims: All allowed administrative claims and priority
claims will be paid in full in cash.
Trade Debt: Trade debt shall remain unimpaired and be paid
in the ordinary course by the Company.
Senior Debt: Each holder of the Company's commercial paper, short-
term loans or senior term notes against the
Company excluding the subordinated notes (a
"Senior Lender") and any other allowed
unsubordinated unsecured claims other than
Indemnity Claims (the "Other Claims") will receive:
(a) Its pro rata share of new senior secured notes
to be issued by the Reorganized Company (the
"New Senior Secured Notes"). The New Senior
Secured Notes will be issued pursuant to
section 1145 of the Bankruptcy Code, secured by
the assets of the Reorganized Company and will
have the following terms.
Aggregate 75.0% of the face amount of the
Principal Senior Lenders Claims after
Amount: giving effect to the payment of
Excess Cash.
Maturity: Third Anniversary of the
Effective Date.
Interest 9.0% per annum (the "Rate")
Rate: payable quarterly. Interest on
the New Senior Secured Notes
shall begin to accrue at the
aforementioned interest rate 91
days following the Bankruptcy
Filing.
The Company is not aware of any material Other
Claims. To the extent that Other Claims turn
out to be material in the judgement of the
Steering Committee, the Steering Committee may
elect to leave the Other Claims unimpaired.
(b) Its pro rata share of 100% of the equity in the
Reorganized Company (the "New Common Stock")
(subject to dilution post-Effective Date by
options issued under the Management Incentive
Plan).
(c) Its pro rata share of Excess Cash as of the
Effective Date. Excess Cash shall be defined
as all cash at the Company in excess of $20
million on the Effective Date, after the
payment of all obligations required to be paid
in cash on the Effective Date under the Pre-
structured Plan.
(d) Its pro rata share of 100% of any cash received
by the Company from the exercise of the Debt
Purchase Option (as defined herein).
(e) The acceptance of the Pre-structured Plan by
the Class of Senior Debt shall constitute the
agreement by each member of the Class to
allocate (i) warrants for 15% of the New Common
Stock (the "New Warrants") to the Class of
Securities Class Actions and Existing Equity,
and (ii) $22.5 million in New Junior
Subordinated Notes to the Class of Subordinated
Notes, respectively.
Consumer/Non-Class
Litigation Claims: Consumer Litigation Claims to the extent
allowed against the Company shall remain
unimpaired and be paid in the ordinary course
by the Reorganized Company.
Subordinated Notes: Subject to acceptance of the Pre-structured
Plan by the Class of Subordinated Notes, the
Senior Lenders shall allocate to the Class of
Subordinated Noteholders $22.5 million in New
Junior Subordinated Notes. The New Junior
Subordinated Notes will be issued pursuant to
section 1145 of the Bankruptcy Code and be
subordinated unsecured obligations of the
Reorganized Company. The New Junior
Subordinated Notes will mature five years from
the Effective Date with interest payable
quarterly in cash at 9 percent per annum.
Indemnity Claims: (A) Allowed indemnity claims of eligible current
and former employees, officers and directors
against the Company shall be paid from the
proceeds of the Directors' and Officers'
Liability Policy Number NDA 1494742-96 (the
"Reliance Policy") which rights and claims
against the Reliance Policy or its proceeds
shall remain unimpaired.
(B) In addition to the foregoing, and in further
satisfaction of such indemnity claims, pursuant
to the terms of the Third Amendment to the
Forbearance Agreement, prior to the Bankruptcy
Filing, a cash escrow in the amount of $13
million shall be established by the Senior
Lenders (the "Settlement Contribution and
Indemnity Fund" or "SC&IF") for the benefit of
holders of allowed indemnity claims of current
and former officers, directors and employees
other than John N. Brincat (the
"Beneficiaries").
(C) In addition to the SC&IF, the Senior Lenders
shall waive and release any direct claim
they may have against the Beneficiaries.
(D) Except for the treatment contemplated in this
section on Indemnity Claims, all indemnity
claims against the Company of current and
former officers, directors, and employees shall
be fully discharged and released.
(E) Subject to the direction of the current board
of directors of the Company, the SC&IF shall be
controlled by the Beneficiaries.
(F) The Company and its creditors, including the
Senior Lenders, shall waive and release any and
all claims to the Reliance Policy and its
proceeds. To the extent the Company recovers
any proceeds from the Reliance Policy, such
proceeds shall be paid to the Beneficiaries.
(G) The escrow into which the SC&IF is deposited
shall provide that the Settlement Contribution
and Indemnity Fund shall revert to the Senior
Lenders in the event the Pre-structured Plan is
not confirmed by November 15, 1998. The
Reliance Policy proceeds shall not be subject
to such reversion.
(H) The Senior Lenders agree to use their
reasonable best efforts in cooperation with the
Company's efforts to settle the class
litigation pending against the Company and the
Beneficiaries for an amount up to the aggregate
of the Settlement Contribution and Indemnity
Fund and the proceeds from the Reliance Policy.
If so settled, the Senior Lenders agree to
permit the settlement to be incorporated into
the plan, provided such process does not delay
confirmation of the Pre-structured Plan beyond
the ninetieth day after the Bankruptcy Filing.
(I) The Beneficiaries will continue to be
indemnified and held harmless by the Company
from any claims and counterclaims that may
arise out of claims asserted by the Company
related to the subject matter of the Securities
Class Actions.
(J) All derivative and direct claims by or on
behalf of the Company against the Beneficiaries
shall be released under the Pre-structured Plan.
(K) Except as set forth in (I), the funding of
the Settlement Contribution and Indemnity Fund
and the assignment of the Company's interest, if
any, in the Reliance Policy shall constitute full
satisfaction of the Company's obligation to
indemnify the present and former officers,directors
and employees of the Company and its subsidiaries
and affiliates in respect of an costs or expenses
or damages incurred now or hereafter in connection
with any event or cause of action arising prior to
confirmation of the Pre-structured Plan (whether
by contract, under the Company's by-laws, certificate
of incorporation, applicable state law or otherwise)
and, in consideration of such payent and assignment,
the Pre-structured Plan shall provide that each of
the officers directors and employees (present and
former) shall be deemed to have waived any right to
any additional amounts in respect thereof.
Securities Fraud The Senior Lenders shall allocate and
Claims and Equity distribute to the holders of allowed Class of
Interests: Securities Fraud Claims and Equity Interests
warrants entitling the holders thereof to
purchase in the aggregate 15% of the New Common
Stock. The warrants shall be in three series
and have the terms outlined below.
<TABLE>
<CAPTION>
Amount of Exercise Price (% recovery
Equity Term on Total Debt<F1>)
<S> <C> <C> <C>
Series A 5.0% 3 years 100%
Series B 5.0% 4 years 110%
Series C 5.0% 5 years 120%
</TABLE>
Senior Debt Under the Pre-structured Plan, the
Purchase Option holders of each share of Existing
Equity shall be granted the right to
purchase its pro rata amount of the
Senior Debt at a price, in cash, equal
to 98.5% of the then outstanding claim
plus all accrued and unpaid interest
thereon, (the "Debt Purchase Option").
The Debt Purchase Option shall be
exercisable by record holders of common
stock as of May 14, 1998 who continue
to hold such stock as of the Senior
Debt Purchase Option exercise date
under the Pre-structured Plan and shall
be non-transferable. Any existing
Equityholders choosing to exercise the
Debt Purchase Option must irrevocably
commit to such purchase in cash on or
before the last date of the Company's
solicitation period (as defined in
section 1125 of the Bankruptcy Code).
If the Pre-structured Plan is
confirmed, the Senior Debt must be
purchased no later than the Effective
Date of the Pre-structured Plan.
[FN]
<F1> Total Debt equals all Senior and Subordinated Note claims as of the
Petition Date plus all accrued and unpaid interest on such claims through
the Petition Date. Percentage recovery is calculated after giving effect
to the distribution of the aggregate amount of New Senior Secured Notes
and, if applicable, shares available for issuance upon the exercise of
options granted under the New Management Incentive Plan.
</FN>
II.ADDITIONAL TERMS AND CONDITIONS
CEO Search: The Company shall actively continue its
existing CEO search (the "Search")
through Heidrick & Struggles. In
connection with the Search, three
members of the Steering Committee will
be allowed to interview the candidates
and actively participate in discussions
with the Company concerning the
selection of the new CEO. The new CEO
selected by the Company must be
acceptable to the Steering Committee.
Litigation Claims: All creditors, shareholders and the
Company will retain their respective
rights to pursue their direct claims
(not derivative claims) against third
parties other than current and former
officers, directors and employees of
the Company, including claims against
KPMG Peat Marwick.
Liquidity The Company shall take all reasonable
Provisions: efforts necessary to ensure an active
and fully-valued public market for the
New Common Stock, the New Warrants and
the New Senior Secured Notes of the
Reorganized Company including, but not
limited to, (i) issuing appropriate
releases of information and otherwise
complying with the requirements of
paragraph (c) of Rule 144 under the
Securities Act of 1933, as amended,
(ii) conducting informational meetings
with potential investors and research
analysts, (iii) registering the common
stock of the Reorganized Company under
the Securities and Exchange Act of
1934, as amended, so that the
Reorganized Company will be a public
reporting company and (iv) obtaining
the listing of the New Common Stock,
the New Warrants and the New Senior
Secured Notes on a national securities
exchange or NASDAQ NMS. Any creditor
who would be deemed following the
Effective Date of the Pre-structured
Plan to be an "affiliate" of the
Reorganized Company by reason of its
equity holdings in the Company or
otherwise would be granted demand
registration rights. The New Common
Stock, the New Warrants and the New
Senior Secured Notes shall be issued
pursuant to section 1145 of the
Bankruptcy Code.
Releases: Subject to the reservation of direct
claims against KPMG Peat Marwick, the
Pre-structured Plan also (i) will
include a full discharge and release of
liability, to the fullest extent
provided by law, in favor of the
Company and each of their respective
principals, employees, agents,
officers, directors, and professionals
from all claims and causes of action
arising prior to the Effective Date
(including, without limitation, all
claims relating to the pending class
litigation); and (ii) may include to
the fullest extent permissible a
release for the Company, the Steering
Committee and each of their respective
principals, employees, agents,
officers, directors and professionals
from any and all claims arising from
actions taken or omitted to be taken in
good faith in connection with the
restructuring, the Pre-structured Plan
and the Company's bankruptcy case;
including pre-petition activities
leading to the promulgation and
confirmation of the Pre-structured
Plan.
New Board of The New Board of Directors will consist
Directors: of 7 members; 6 members nominated by
the Steering Committee and the new
Chief Executive Officer.
Management The New Board of Directors will
Incentive Plan: implement a Management Incentive Plan
with a portion of the plan designed to
grant stock options to senior
management based upon performance
hurdles and time vesting.
Exhibit 99.2
THIRD AMENDMENT TO FORBEARANCE AGREEMENT
This Third Amendment to Forbearance Agreement, dated as of May 14, 1998
(this "Amendment"), is between Mercury Finance Company, a Delaware corporation
(the "Company"), and the person(s) listed on the signature pages of this
Amendment (collectively or individually, the "Lender"). Capitalized terms used
in this Amendment and not otherwise defined have the meanings assigned to such
terms in the Forbearance Agreement (referred to below) or the Consent Agreement
(defined herein).
PRELIMINARY STATEMENTS
1. The Company and the Lender are parties (or as to the Lender, is a
successor in interest to a party) to the Forbearance Agreement, dated as of July
11, 1997 (as amended by First Amendment to Forbearance Agreement dated as of
November 6, 1997 Waiver Agreement dated April 30, 1998, and Second Amendment to
Forbearance Agreement dated as of March 2, 1998, collectively, the "Forbearance
Agreement").
2. The Company has requested that the Forbearance Agreement be amended,
inter alia, to extend the automatic Termination Date of the Forbearance Period
from June 3, 1998 to July 15, 1998.
3. The Lender is willing to extend the automatic Termination Date of the
Forbearance Period from June 3, 1998 to July 15, 1998 but only on the terms and
conditions stated herein.
AGREEMENT
In consideration of the premises and mutual agreements contained in this
Amendment and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties to this Amendment agree as
follows:
1. AMENDMENTS TO FORBEARANCE AGREEMENT.
On the date this Amendment becomes effective, after satisfaction by the
Company of each of the conditions set forth in Section 3 hereof:
1.1 ESCROW. Section 1.1 of the Forbearance Agreement hereby is amended by
deleting the definition of "Escrow".
1.2 TERMINATION DATE. Section 1.1 of the Forbearance Agreement hereby is
amended by deleting the reference to "June 3, 1998" in the definition of
"Termination Date" and replacing it with "July 15, 1998".
1.3 SPECIAL ESCROW. Section 1.1 of the Forbearance Agreement hereby is
amended by adding in the appropriate alphabetical order the following defined
terms:
""Special Escrow" means the escrow to be established by the holders of
Funded Debt for the benefit of certain third-parties pursuant to the Special
Escrow Agreement in accordance with Section 3.10 hereof."
""Special Escrow Agreement" means the Special Escrow Agreement to
govern the Special Escrow to be entered into by the Company and the holders of
Funded Debt on terms mutually acceptable to the Company and the Steering
Committee."
1.4 EFFECT OF TERMINATION DATE. Section 2.2 of the Forbearance Agreement
hereby is amended by deleting the reference to "June 3, 1998" and replacing it
with "July 15, 1998".
1.5 PAYMENT OF INTEREST.
(A) Subsection (A) under 3.2 of the Forbearance Agreement is hereby
amended by deleting the reference to "Termination Date" and replacing it with
"July 15, 1998".
(B) Subsection (B) under Section 3.2 of the Forbearance Agreement hereby
is amended by (i) deleting the reference to "June 1, 1998" and replacing it with
"July 14, 1998" and (ii) by deleting the phrase "on the last business day of
each month" and replacing it with "(x) May 29, 1998, (y) the earlier of the Last
Prepetition Date (as defined below) and June 30, 1998 and (z) the earlier of the
Last Prepetition Date and July 14, 1998".
(C) Subsection (D) under Section 3.2 of the Forbearance Agreement hereby
is amended by adding a new sentence at the end of the first sentence as follows:
"On the earlier of (i) the last business day preceding the filing of
the Chapter 11 Proceedings (as defined in the Consent Agreement) (the "Last
Prepetition Date") and (ii) July 14, 1998, the Company will pay to the
Lender all accrued and unpaid interest calculated to and including such
date, excluding any accrued and unpaid interest owing to the Lender as a
result of the application of a Default Rate in excess of 9.00% per annum."
1.6 ACKNOWLEDGMENT; OTHER AGREEMENTS. Section 3.3 of the Forbearance
Agreement hereby is amended by deleting the fourth sentence of such section.
1.7 CASH SWEEP. Section 3.4 of the Forbearance Agreement hereby is
amended by adding the following sentences after the fourth sentence in such
section:
"On the earlier of the Last Prepetition Date and July 6, 1998, the
Company will pay to the Lender its Funded Debt Pro Rata Share of the
aggregate amount of Excess Cash calculated as of the close of business on
the third business day prior to the payment date (but after giving effect
to any interest payments required to be paid under this Agreement on or
before the payment date). On the earlier of the Last Prepetition Date and
July 14, 1998, the Company will pay to the Lender its Funded Debt Pro Rata
Share of the aggregate amount of Excess Cash calculated as of the close of
business on the third business day prior to the payment date (but after
giving effect to any interest payments required to be paid under the this
Agreement on or before the payment date). Notwithstanding any other
provision of this Agreement, all payments made under this Section 3.4 after
May 14, 1998 shall be paid by the lenders to the Special Escrow until such
time as the aggregate payments so made to the Special Escrow equals
$13,000,000."
1.8 ESCROW. Section 3.10 of the Forbearance Agreement hereby is amended
by amending and restating such section in its entirety as follows:
"3.10 Special Escrow: By no later than June 3, 1998, the holders
of Funded Debt shall establish the Special Escrow to serve as the escrow
contemplated in Appendix I to the Consent Agreement for the Settlement
Contribution and Indemnity Fund."
1.9 TOLLING. Section 3.12 of the Forbearance Agreement hereby is amended
by deleting each reference to "July 1, 1998" and replacing them with "August 31,
1998".
1.10 TERMINATION EVENTS.
(A) Subsection (D) of Section 4.1 of the Forbearance Agreement hereby is
amended by amending and restating such section in its entirety as follows:
"(D) the Agreement dated as of May 14, 1998 attached hereto at
Schedule 4.1(D) (the "Consent Agreement") shall have been terminated;"
(B) Subsection (E) of Section 4.1 of the Forbearance Agreement hereby is
amended by amending and restating such section in its entirety as follows:
1.11 FORBEARANCE FEE. A new Section 3.11 shall be added to the
Forbearance Agreement as follows:
"3.11 FORBEARANCE FEE. By no later than June 3, 1998, the Company
shall have paid the Lender a fee in consideration of entering into the
Third Amendment to the Forbearance Agreement in an amount equal to the
product of .0225 multiplied by the aggregate amount of outstanding
principal owing by the Company to the Lender as of May 14, 1998."
"(E) INTENTIONALLY DELETED;"
2. REPRESENTATIONS AND WARRANTIES.
To induce the Lender to enter into this Amendment, the Company represents
and warrants to the Lender that:
2.1 CORPORATE AUTHORITY; NO CONFLICTS. The execution and delivery by the
Company of this Amendment and the performance of the Company's obligations under
this Amendment (i) are within its corporate powers, (ii) are duly authorized by
its board of directors, (iii) are not in contravention of the terms of its
articles or certificate of incorporation or by-laws or of any indenture,
agreement or undertaking to which it is a party or by which it or any of its
property is bound, (iv) does not, as of the date hereof, require any consent,
registration or approval of any governmental authority, (v) does not contravene
any material contractual or governmental restriction binding upon it and
(vi) will not result in the imposition of any lien, claim or encumbrance upon
any of its property under any existing indenture, mortgage, deed of trust, loan
or credit agreement or other material agreement or instrument to which it is a
party or by which its property may be bound or affected.
2.2 NO TERMINATION EVENT; REPRESENTATIONS AND WARRANTIES. As of the date
hereof, (a) no Termination Event under the Forbearance Agreement, as amended by
this Amendment, has occurred and is continuing or will result from the
amendments set forth in this Amendment other than as set forth in Schedule 2.2
hereof and (b) the representations and warranties of the Company contained in
the Forbearance Agreement, as amended by this Amendment, are true and correct.
3. CONDITIONS TO EFFECTIVENESS.
The obligation of the Lender to make the amendments contemplated by this
Amendment, and the effectiveness thereof, are subject to the following:
3.1 DOCUMENTS. The Lender has received all of the following, each duly
executed and dated as of the date of this Amendment (or such other date as shall
be satisfactory to the Lender) in form and substance satisfactory to the Lender:
(A) fully executed counterparts to this Amendment;
(B) executed amendments on the same terms as this Amendment from other
holders of Funded Debt satisfactory to the Lender;
(C) certified resolutions of the board of directors of the Company
authorizing or ratifying the execution, delivery and performance of
this Amendment; and
(D) the Consent Agreement shall have become effective.
3.2 EFFECTIVE TIME. Subject to the satisfaction of Section 3.1 hereof,
the effective time of this Amendment shall be deemed to be 12:01 a.m. May 14,
1998.
4. MISCELLANEOUS.
4.1 SECTION TITLES. The preliminary statements to this Amendment and the
section titles used in this Amendment are for convenience only and do not affect
the construction of this Amendment.
4.2 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which together constitute one instrument.
4.3 ENTIRE AGREEMENT. This Amendment constitutes the full and entire
understanding of the Company and the Lender with respect to the subject matter
of this Amendment. To the extent that any term of this Amendment is
inconsistent with or contrary to any term of the Forbearance Agreement, this
Amendment shall govern and control.
4.4 SUCCESSORS AND ASSIGNS. This Amendment inures to the benefit of, and
is binding upon the successors and assigns of, each of the Company and the
Lender.
4.5 GOVERNING LAW. This Amendment will be interpreted, and the rights and
liabilities of the Company and the Lender determined, in accordance with the
internal laws of the State of Illinois.
4.6 SEVERABILITY. Wherever possible, each provision of this Amendment
will be interpreted in a manner as to be effective and valid under applicable
law. If any provision of this Amendment is held to be prohibited by or invalid
under applicable law, such provision is ineffective only to the extent of such
prohibition or invalidity and the remaining provisions of this Amendment remain
unaffected and in full force and effect.
4.7 SIGNATURE PAGE REPRESENTATIONS OF COMMERCIAL PAPER HOLDERS. As to
holders of commercial paper, each and every Schedule attached to the signature
pages of this Amendment are true and correct.
4.8 AMENDED AND RESTATED SCHEDULE OF EXISTING AGREEMENTS. Schedule 1 to
the Forbearance Agreement is hereby amended and restated such that any reference
in the Forbearance Agreement to "Schedule 1" shall mean a reference to the
Schedule 1 attached hereto.
* * *
Exhibit 99.3
FOR IMMEDIATE RELEASE
CONTACT
Jim Fitzpatrick
The Dilenschneider Group
312-553-0700
MERCURY FINANCE ANNOUNCES RESTRUCTURING AGREEMENT;
REPORTS FIRST QUARTER RESULTS
CHICAGO, May 15, 1998 - Mercury Finance Company (NYSE: MFN) today announced that
it has entered into an agreement with substantially all of its senior lenders
and with its subordinated debt holder providing for the financial restructuring
and recapitalization of the company. The agreement contemplates that the
restructuring will be implemented under a prestructured plan of reorganization
to be filed in the federal bankruptcy court within the next 60 days.
"By significantly reducing the debt of the company, the contemplated
restructuring will provide Mercury Finance with a sound financial platform from
which to operate its business and return to profitability," said William A.
Brandt, president and chief executive officer of Mercury. "The restructuring is
also intended to relieve the company of the burdens of the securities lawsuits
facing it. The present debt structure and the ongoing securities litigation
have placed severe burdens on the company's ability to operate successfully.
Shareholders also will have an opportunity to participate under the
restructuring by being granted warrants to acquire a limited equity interest in
the reorganized Mercury. The warrants will initially be out of the money."
The following paragraphs contain a summary of certain terms of the
Company's agreement with its lenders. The complete agreement is being filed
today on Form 8-K with the Securities and Exchange Commission.
SUMMARY OF TERMS
The company intends within the next 60 days to file for relief under
chapter 11 of the bankruptcy code for the purpose of confirming and implementing
today's agreement. At the same time, the company will file a plan of
reorganization with the bankruptcy court.
The company conducts its business operations through wholly owned
subsidiaries. None of the company's operating subsidiaries will be included in
the chapter 11 case to be filed by the parent holding company. As a result, all
trade debt and dealer contracts will remain unimpaired and will continue to be
paid in the ordinary course without interruption. The company and its
subsidiaries will continue to be vigorous and active participants in the sub-
prime lending marketplace. The agreement contemplates that the company's
operations at all levels will remain unaffected by the implementation of this
restructuring agreement.
If the plan is approved by the court, the company's creditors and interest
holders will receive the following:
-The company's senior lenders will receive new senior secured notes
equal to 75 percent of the face value of their then current claims.
The senior lenders will also receive all the initial equity in the
reorganized company.
-The holders of the subordinated notes will receive $22.5 million in
new junior unsecured subordinated notes.
-The shareholders and the securities class action claimants, as a
combined group, will receive three series of warrants, each series
exercisable for five percent of the common stock of the restructured
company, with expiration dates of three, four and five years,
respectively, from approval of the plan. The exercise prices will be
set at increasing levels. The first series will contain an exercise
price reflective of a market price for the common stock which results
in the senior lenders having received total value from both common
stock and senior secured notes equal to 100 percent of their claims on
the effective date of the plan. The second and the third series will
contain exercise prices reflective of a market price for the common
stock which translates into a 10 percent and 20 percent premium,
respectively, of the total amount of such claims. Consequently, it is
anticipated that the exercise prices of the warrants will be
significantly in excess of the initial market price of the common
stock of the restructured company.
-All shareholders as of May 14, 1998 shall have the right to purchase
their pro rata amount of the senior lenders' debt at a price, in cash,
equal to 98.5 percent of the senior lenders claims, subject to
specific provisions detailed in the restructuring agreement.
All parties will retain their rights to pursue direct claims against third
parties other than the company and certain of its officers and directors.
The company will continue in its search for a permanent CEO.
The new board of directors will be nominated by the steering committee of
the senior lenders.
TIMING
The company presently intends to file its chapter 11 petition and
prestructured plan of reorganization within 60 days and to seek approval of its
disclosure statement and confirmation of its plan shortly thereafter.
In connection with the restructuring agreement, the company and its lenders
agreed to extend the existing forbearance agreement to July 15, 1998. Under the
extended forbearance agreement, the company will continue to keep interest
payments current and will make periodic payments to reduce the principal of the
outstanding debt as cash flow permits. In addition, the company will pay a
forbearance fee of approximately $16 million to those senior lenders who have
executed the amended forbearance agreement. In return, the lenders have agreed
not to take action against the company while the forbearance agreement is in
effect, subject to the terms thereof.
THE ABOVE DESCRIPTION CONSTITUTES ONLY A SUMMARY OF CERTAIN PROVISIONS
CONTAINED IN THE AGREEMENT WITH THE COMPANY'S LENDERS AND IS NOT COMPLETE.
READERS ARE URGED TO REVIEW THE FULL TEXT OF THE AGREEMENT, WHICH IS BEING FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER FORM 8-K.
FIRST QUARTER FINANCIAL RESULTS
Mercury today reported a net loss of $1.5 million or $0.01 per share for
the first quarter of 1998, ended March 31.
The first quarter 1998 loss compares to a loss of $33.2 million and $0.19
per share in the 1997 first quarter, which included a charge of $29.5 million or
$0.17 per share from the loss on the sale of the Lyndon Insurance subsidiaries.
Results from operations improved to a profit of $812,000 in the first
quarter of 1998 from a loss of $676,000 in 1997. Operating results in 1997
included operating profits from the Lyndon Insurance Group, which was sold on
June 3, 1997.
According to company sources, the reason for the improvement in results for
the first quarter of 1998 is the result of a significantly lower provision for
finance credit losses, which more than offset the decline in finance charge
income. The 1998 provision for finance credit losses benefited from a decrease
in the size of the portfolio as well as an improvement in its relative
delinquency.
Management believes that the change in the relative delinquency of the
portfolio is an indication of an overall improvement in its credit quality.
Under the company's methodology of providing for finance credit losses, a change
in the expected future performance of the portfolio is recognized on a current
basis. Accordingly, the significant first quarter reduction in the finance
credit loss provision is expected to be a nonrecurring event. Future quarterly
credit loss provisions are expected to be significantly higher.
Finance charge income declined due to a decrease in the size of the
portfolio. This decline is expected to continue through at least the second
quarter of 1998 due to a lower level of new volume.
The company continues to make periodic principal payments to its senior
lenders under the terms of the amended forbearance agreement currently in
effect. During the first quarter of 1998, the company paid principal of
approximately $100 million, reducing debt from $851.7 million at December 31,
1997, to $752.7 million at March 31, 1998.
"SAFE HARBOR" STATEMENT UNDER THE SECURITIES LITIGATION REFORM ACT OF
1995: This news release contains certain forward-looking statements
pertaining to the outcome of the company's agreement with certain lenders,
the expected terms of securities of the restructured company, expected
operating results, loss provisions, and other matters. These statements are
subject to uncertainties and other factors. Should one of more of these
uncertainties or other factors materialize, or should underlying assumptions
prove incorrect, actual events or results may vary materially from those
anticipated. Such uncertainties and other factors include the outcome of
negotiations with the company's lenders with respect to the plan of
reorganization and other documents related thereto, approval by the
Bankruptcy Court, objections of third parties, as well as the company's
ability to acquire finance receivables on terms it deems acceptable, changes
in the quality of finance receivables, trends in the automobile and finance
industries, and general economic conditions. The company undertakes no
obligation to update any such factor or to publicly announce the results of any
revisions to any forward-looking statements contained herein to reflect future
events or developments.
MERCURY FINANCE COMPANY
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands)
<CAPTION>
For the 3 months ended March 31,
1998 1997
(unaudited) (unaudited)
<S> <C> <C>
Finance charges, fees and other interest 51,141 66,780
Interest expense (18,597) (20,716)
Net interest income 32,544 46,064
Provision for finance credit losses (12,959) (30,462)
Net interest income after provision for finance
credit losses 19,585 15,602
Other operating income 3,926 26,723
Other operating expenses (22,699) (43,001)
Operating income (loss) 812 (676)
Non-operating income 1,965
Loss on sale of Lyndon (29,528)
Non-operating expenses (4,255) (5,129)
Income (loss) before income taxes (1,478) (35,333)
Applicable income taxes (benefit) 0 (2,165)
Net income (loss) (1,478) (33,168)
Net income (loss) per share ($0.01) ($0.19)
Average shares outstanding 172,498 172,465
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
3/31/98 3/31/97 12/31/97
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and investments 65,296 247,211 53,896
Finance receivables 860,585 1,126,119 971,377
Less: allowance for credit losses (88,191) (111,584) (102,204)
Less: nonrefundable dealer reserves (43,667) (80,677) (52,731)
Finance receivables, net 728,727 933,858 816,442
Other assets 78,386 314,566 109,066
Total Assets 872,409 1,495,635 979,404
LIABILITIES AND SHAREHOLDERS' EQUITY
Senior debt, commercial paper and notes 368,980 503,619 416,731
Senior debt, term notes 363,265 488,625 412,514
Subordinated debt 22,500 22,500 22,500
Total debt 752,745 1,014,744 851,745
Accounts payable and other liabilities 38,442 357,783 44,959
Total Liabilities 791,187 1,372,527 896,704
Shareholders' Equity 81,222 123,108 82,700
Total Liabilities and Shareholders' 872,409 1,495,635 979,404
Equity
</TABLE>
