On October 25, 2000 Allstate Financial Corporation issued the following press
release:
ALLSTATE FINANCIAL CORPORATION TO ACQUIRE HARBOURTON FINANCIAL CORP., COURT
APPROVES RECAPITALIZATION PLAN
McLean, VA, October 25, 2000 - Allstate Financial Corporation ("Allstate," or
the "Company") (OTC: ASFN) today reported that its board of directors has
approved the acquisition of Harbourton Financial Corporation ("Harbourton,") a
company which is majority owned by Value Partners, Ltd., Allstate's largest
shareholder. Harbourton provides financing to homebuilders, including
acquisition, development and construction lending as well as mezzanine equity
investments. As of August 31, 2000, Harbourton had assets (unaudited) of $10.6
million, shareholders' equity of $9.1 million and a loan portfolio of $37
million (including serviced participations). Harbourton reported pre-tax income
of $785,307 for the eight months ended August 31,2000. Under the merger plan,
Allstate will issue approximately 7.5 million shares of common stock plus
approximately $1.9 million in cash to Harbourton's shareholders. Allstate
indicated the merged companies would pursue principally the existing business
plan developed by Harbourton to provide residential real estate financing and
mezzanine investments. The transaction is expected to be accounted for as a
combination of a pooling of interests and a purchase.
J. Kenneth McLendon, currently President and founder of Harbourton, will become
President of Allstate after the merger. Mr. McLendon has 29 years of experience
in real estate lending and mortgage banking, serving as President of
Congressional Mortgage and McLean Partners Inc. David W. Campbell, who is
currently Chairman of the board of Allstate, will also continue in that role in
the combined company. Mr. Campbell has 28 years of experience in commercial
banking and mortgage lending. He previously served as President and CEO of
Ameribanc Savings, a $1.2 billion banking institution. Mr. McLendon stated he
was "extremely pleased that the two companies were in a position to complete the
merger, providing a stronger combined balance sheet." Mr. Campbell stated "the
significant net profits of Harbourton and Allstate's net operating tax loss
carryforwards were a natural fit, which will enhance shareholder value in the
future."
The Company also noted that it has reincorporated as a Delaware corporation, and
that the Delaware Court of Chancery for New Castle County has approved its
recapitalization plan (the "Plan"). Under the Plan, over 90% of the Company's
10% Convertible Subordinated Notes due September 2003, plus interest thereon at
12.5% per annum, will be converted into common stock of Allstate at $.95 per
share. The conversion is expected to be completed on October 26, 2000, after
which the Company anticipates realizing the benefits of a stronger equity base
and lower interest costs, while preserving the use of its net operating loss
carryforwards. Mr. Campbell noted that "the acquisition of Harbourton and the
conversion of the notes will immediately be accretive to earnings per share and
will significantly increase Allstate's net tangible equity per share."
Separately, Allstate announced that Charles G. Johnson had resigned his
positions of President, CEO, and member of the board of directors. David W.
Campbell, Chairman of the board of directors, was elected to the additional
positions of Interim President and CEO. Timothy G. Ewing, Managing Partner of
Ewing & Partners, the general partner of Value Partners, Ltd., was elected a
director to fill the vacancy caused by Mr. Johnson's resignation.
After the completion of the Plan and the merger Value Partners, Ltd. is expected
to own approximately 85% of Allstate's total shares outstanding. Mr. Ewing
stated "the Harbourton merger represents the first acquisition of earning assets
which will allow Allstate to take full advantage of the recapitalized balance
sheet and benefit from the utilization of its net operating tax loss
carryforward."
This press release may contain various "forward-looking statements," within the
meaning of Section 27A of the Securities Exchange Act of 1934, as amended, that
represent Allstate's expectations or beliefs concerning future events. Such
forward-looking statements are about matters that are inherently subject to
risks and uncertainties. Factors that could cause actual results or performance
to differ from the expectations expressed or implied in such forward-looking
statements include the implementation of the Plan, the closing of the Harbourton
merger, changes in the timing and amount of earning assets which may be
originated by the Company or by Harbourton, changes in revenue and expense
trends (including trends affecting charge-offs) of Allstate or Harbourton,
changes in Allstate's or Harbourton's markets and changes in the economy
(particularly in the markets served by Allstate or Harbourton). Such factors are
discussed in detail in Allstate's filings with the Securities and Exchange
Commission.
