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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): June 1, 1998
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CITYSCAPE FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-27314 11-2994671
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State or Other Jurisdiction Commission (IRS Employer
of Incorporation File Number Identification No.)
565 Taxter Road, Elmsford, New York 10523-5200
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(Address of Principal Executive Offices) Zip Code
Registrant's telephone number, including area code: (914) 592-6677
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Former name or former address,
if changed since last report
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Item 5. Other Events.
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As part of Cityscape Financial Corp.'s (the "Company") ongoing efforts to
restructure its balance sheet, the Company entered into a non-binding letter
of intent (the "Letter of Intent") on June 1, 1998 with representatives of
holders of a majority of the Company's 12-3/4% Senior Notes due 2004 (the
"Senior Notes") to support a proposed restructuring of the Company (the
"Proposed Restructuring"). The Letter of Intent has been approved by the
Company's Board of Directors. In addition, the Company has entered into
negotiations with holders of its 6% Convertible Subordinated Debentures (the
"Convertible Debentures") regarding the Proposed Restructuring. The Company
presently intends to file a Chapter 11 petition and plan of reorganization in
what is commonly known as a "prepackaged" bankruptcy filing within 60 days and
to seek approval of its disclosure statement and confirmation of its plan
shortly thereafter.
The Proposed Restructuring, if approved, will significantly reduce
outstanding indebtedness, eliminate mandatory cash interest payments and restore
net worth. To achieve these objectives, the Proposed Restructuring will (i)
result in a complete write-off of the Company's currently outstanding Common
Stock, (ii) an extreme impairment of the Company's preferred stock, (iii) a
severe impairment of the Company's Convertible Debentures and (iv) a substantial
impairment of the Company's Senior Notes.
In connection with the Company's restructuring efforts, the Company has
determined (i) to defer the June 1, 1998 interest payment on its Senior Notes
and (ii) to continue to defer the May 1, 1998 interest payment on the
Convertible Debentures. The continued deferral of the Convertible Debenture
interest payment constitutes an "Event of Default" pursuant to the Indenture
under which such securities were issued.
Separately, as part of the Proposed Restructuring, the Company has entered
into negotiations regarding debtor in possession financing from Greenwich
Capital Financial Markets, Inc. and The CIT Group/Equipment Financing, Inc. to
increase the Company's existing warehouse lines of credit.
No assurance can be given that the Proposed Restructuring will be approved
or that the Company will be successful in its negotiations with holders of the
Convertible Debentures or to obtain financing as a debtor in possession in
amounts, if at all, necessary to fund the Company's loan production. In
addition, no assurance can be given that, if approved, the Company will be
successful in its restructuring efforts, or that, as a result of such efforts,
the value of the Company's securities will not suffer further material
impairment beyond that contemplated by
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the Proposed Restructuring. The extent of any such impairment will depend on
many factors including the outcome of the Company's discussions with the holders
of its securities as well as other factors set forth in the paragraph discussing
forward-looking statements below.
A copy of the Letter of Intent has been filed with this Form 8-K as Exhibit
99.1 and is hereby incorporated by reference.
This report on Form 8-K contains forward-looking statements which involve
risks and unmcertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors including, but not limited, to, the ability to access loan
warehouse or purchase facilities in amounts, if at all, necessary to fund the
Company's loan production, the successful execution of loan sales in the whole
loan sales market, the ability of the Company to successfully restructure its
balance sheet, the initiative to streamline the Company's operations, the
ability of the Company to retain an adequate number and mix of its employees,
legal proceedings and other matters, adverse economic conditions, competition
and other risks detailed from time to time in the Company's Securities and
Exchange Commission reports. The Company undertakes no obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of anticipated
or unanticipated events.
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Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
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(c) Exhibits
99.1 Letter of Intent, dated as of May 22, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
CITYSCAPE FINANCIAL CORP.
(Registrant)
By: /s/ Tim S. Ledwick
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Name: Tim S. Ledwick
Title: Vice President and Chief
Financial Officer
Dated: June 2, 1998
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INDEX TO EXHIBITS
Exhibits Description Page
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99.1 Letter of Intent, dated as of May 22, 1998
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CITYSCAPE FINANCIAL CORP.
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523
May 22, 1998
CONFIDENTIAL
Mackay Shields Financial Corp.,
as advisor to The Main Stay Funds -----------------------
9 West 57th Street -----------------------
New York, New York 10019 -----------------------
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Attention: Steve Tananbaum Attention:
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Cerberus Partners
450 Park Avenue -----------------------
28th Floor -----------------------
New York, New York 10022 -----------------------
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Attention: Steve Feinberg Attention:
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Re: Cityscape Financial Corp.
Ladies/Gentlemen:
This letter is submitted by Cityscape Financial Corp. ("Cityscape" and,
together with Cityscape Corp., the "Company") with respect to the proposed
financial restructuring of the Company (the "Restructuring") to you in your
capacity as a holder of 12-3/4% Senior Notes due 2004 (the "Senior Notes") of
Cityscape. This letter incorporates by reference the term sheet (the "Term
Sheet") attached as Exhibit "A" hereto.
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May 22, 1998
Page 2
This letter constitutes a statement of intent of Cityscape and each of
the signatories hereto as follows: (i) to support the Restructuring as
reflected in the Term Sheet to the fullest extent permitted by law, whether in
connection with or outside a bankruptcy proceeding, and in the event a
bankruptcy proceeding with respect to the Company is commenced, to support a
plan of reorganization embodying the Restructuring (a "Plan") and to cooperate
to obtain confirmation and consummation of a Plan, subject to the terms and
conditions set forth therein; and (ii) to proceed diligently and in good faith
to draft, negotiate and execute the definitive documents required to carry out
the Restructuring.
This letter should not, however, be understood to be a binding
contract, but only an expression of intent. A contract among the parties will
exist only upon the completion and execution of definitive documentation
containing all of the terms and conditions of the Restructuring. This letter
creates no legal obligations on the part of any of the parties hereto.
You agree to keep this letter and the Term Sheet confidential, with
disclosure on a need to know, confidential basis only to your legal and
financial advisors, and you acknowledge that this letter and the Term Sheet
shall be considered to be "confidential" (or words of similar import) for
purposes of any confidentiality agreement in effect between you and Cityscape
or any of Cityscape's affiliates or advisors; provided, however, that Cityscape
will make a public announcement regarding the execution of this letter shortly
after such execution.
You represent and acknowledge that you hold, control (including, without
limitation, power to vote on a Plan) or represent by duly authorized proxy the
principal amount of Senior Notes entered below next to your signature.
Please confirm you acceptance and acknowledgment of the foregoing by
(i) signing this letter where indicated below, and (ii) entering the principal
amount of the Senior Notes you hold, control or represent by proxy.
This letter may be executed in counterparts, each of which shall be
deemed to be an original, and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
Very truly yours,
CITYSCAPE FINANCIAL CORP.
By: /s/ STEVEN M. MILLER
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Name: Steven M. Miller
Title: President and CEO
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May 22, 1998
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Accepted and acknowledged:
MACKAY SHIELDS FINANCIAL CORP.,
as advisor to The Main Stay Funds
By: /s/ Steven A. Tananbaum Principal amount: $85,295,000
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Name: Steven A. Tananbaum
Title: Managing Director
CERBERUS PARTNERS AND AFFILIATED ENTITIES
By: Stephen Feinberg Principal amount: $51,750,000
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Name: General Partner
Title:
/s/ Stephen Feinberg
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By: /s/ Jeffrey Altman Principal amount: $19,500,000
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Name:
Title: Sr. Vice President
Franklin Mutual Advisors
Our acceptance of the terms herein is conditioned on the public announcement of
the terms of this letter no later than 5 p.m. EST June 3, 1998.
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By: Principal amount: $
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Name:
Title:
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EXHIBIT "A"
TERM SHEET
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GENERAL RESTRUCTURING TERMS
SUMMARY OF TERMS
<TABLE>
<S> <C>
SENIOR NOTES: An exchange of the existing senior notes for $75 million
principal amount of new 9.25% Senior PIK 10 year Notes
("Senior PIK Notes") and 94% of the Reorganization Equity
on a primary basis (as defined below)
CONVERTIBLE
DEBENTURES: An exchange of the existing convertible debentures for 6%
of the Reorganization Equity on a primary basis and
Reorganization Warrants (as defined below) struck at a
total enterprise value equal to $300 million to purchase
5% of the fully diluted Reorganization Equity(1)
A PREFERRED/
B PREFERRED: Pro rata portion of Reorganization Warrants (as defined
below) struck at a total enterprise value equal to $430
million to purchase 10% of the fully diluted
Reorganization Equity(1)
COMMON STOCK AND
EXISTING WARRANTS
FOR COMMON STOCK: No Distribution
MANAGEMENT: The foregoing distributions are subject to dilution for
distributions of Reorganization Equity and/or Warrants to
management
REORGANIZATION
EQUITY: The new common stock distributed pursuant to a plan of
reorganization on the effective date of such plan
REORGANIZATION
WARRANTS: Warrants to purchase common stock issued pursuant to a
plan of reorganization struck at various enterprise values
to purchase various percentages
</TABLE>
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(1) Distributions to the holders of the existing convertible debentures and
preferred stock set forth herein are premised upon acceptance of the terms
of this proposed restructuring by such classes. In the event that either of
such classes does not accept this proposed restructuring, the Company
reserves the right to modify the distributions which such classes would
receive.
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SENIOR PIK NOTES
SUMMARY OF TERMS
ISSUER: Cityscape Financial Corp.
ISSUE: $75 million in initial aggregate principal amount of Senior
PIK Notes.
INTEREST: 9.25% payable semi-annually at the option of the Issuer
either in cash or additional Senior PIK Notes.
MATURITY: 2008 (10 years)
OPTIONAL
REDEMPTION: The Senior PIK Notes will be redeemable at the option of
the Issuer, in whole or in part, at any time on or after
issuance in cash at 102% of par plus accrued and unpaid
interest.
RANKING: Senior unsecured obligations of the Company
GUARANTEES: Unconditional guarantee on a senior basis by all
subsidiaries existing on consummation of the restructuring
CERTAIN COVENANTS: Typical and reasonable for this instrument
