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Contact: Investor Relations Department
Aames Financial Corporation
(323) 210-5311
FOR IMMEDIATE RELEASE
AAMES FINANCIAL CORPORATION
RECEIVES $34.7 MILLION IN FIRST PHASE OF THE $50.0 MILLION EQUITY INVESTMENT BY
CAPITAL Z; SUCCESSFULLY RENEGOTIATES AMENDMENTS TO FINANCIAL COVENANTS IN
WAREHOUSE LINES; ARRANGING $75.0 MILLION RESIDUAL SALE FACILITY WITH CAPITAL
Z AFFILIATE.
LOS ANGELES, CALIFORNIA, JUNE 7, 2000 - AAMES FINANCIAL CORPORATION
(NYSE: AAM), a leader in subprime home equity lending, today reported that it
received $34.7 million in the first of a two phase $50.0 million equity
investment by the Company's lead stockholder, Specialty Finance Partners, an
affiliate of Capital Z Financial Services Fund II, L.P. ("Capital Z").
In the first phase of the $50.0 million investment, completed today,
the Company received $34.7 million in exchange for (i) 40.8 million shares of
Series C Convertible Preferred Stock (a purchase price of $0.85 per share, which
reflects the average closing market price for the five trading days prior to the
closing of the first phase) and (ii) warrants to purchase 5.0 million shares of
Series C Convertible Preferred Stock at $0.85 per share.
Prior to closing the first phase of the $50.0 million equity
investment, the Company successfully renegotiated and amended the financial
covenants in its revolving warehouse and repurchase facilities effective as of
March 31, 2000. These amendments enable the Company to meet its financial
covenants as of March 31, April 30, and May 31, 2000 and better enable the
Company to meet its financial covenants going forward. The Company also received
a fairness opinion relating to the equity investment from a nationally
recognized investment banking firm.
A. Jay Meyerson, the Company's Chief Executive Officer, stated, "This
equity infusion is a key driver in Aames' turnaround strategy. Combined with our
lenders' continued support in modifying their financial covenants, this
additional capital firmly positions Aames to execute its business plan of
enhancing the value of its loan production while growing its core origination
channels and reducing costs."
In the second phase of the $50.0 million equity investment,
approximately 18.0 million additional shares of a newly designated class of
convertible preferred stock ("Series D Convertible Preferred Stock") will be
sold to Capital Z for $15.3 million. The second phase will close on the earliest
possible date that the Company is authorized to issue shares of Series D
Convertible Preferred Stock pursuant to Rule 14C of the Securities Exchange Act
of 1934. The Company expects the second phase of the $50.0 million equity
investment to be completed on or about July 12, 2000.
Prior to the close of the second phase, the Company will amend its
Certificate of Incorporation to designate shares of the Company's preferred
stock as Series D Convertible Preferred Stock. The Series D Convertible
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Preferred Stock will be identical to Series C Convertible Preferred Stock,
except that it will have a stated value equal to $0.85 per share. As is the case
with the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock will have no rights to vote for the election of directors of the
Company. At the close of the second phase, Capital Z will exchange the 40.8
million shares of Series C Convertible Preferred Stock and the warrants to
purchase 5.0 million of Series C Convertible Preferred Stock issued today for an
equal number of shares and warrants of Series D Convertible Preferred Stock.
Additionally, the Company announced it will conduct a rights offering,
which it expects to commence as soon as practicable after the filing of the
necessary amendments to the Company's Certificate of Incorporation and receipt
of the appropriate regulatory approvals. The rights offering is intended to give
the holders of the Company's Common Stock and Series C Convertible Preferred
Stock, other than Capital Z and its affiliates, the opportunity to maintain
their current percentage ownership in the Company. Such holders will have the
right to purchase Series D Convertible Preferred Stock at $0.85 per share. (The
same price as paid by Capital Z.)
"Aames' stockholders have patiently supported the Company, and the
Board of Directors determined that all stockholders should have the same
opportunity to participate in this round of equity financing on the same terms
as Capital Z," Meyerson said.
The Company is also arranging a residual sale facility with an
affiliate of Capital Z that will allow the Company to sell, on an on-going
basis, up to $75.0 million of residual assets created by the Company in
securitization transactions during the next 24 months.
Aames Financial Corporation is a leading home equity lender, and at
March 31, 2000 operated 101 retail Aames Home Loan offices and 7 wholesale loan
centers nationwide.
From time to time the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance and results of the Company's business include the
following: negative cash flow and continued access to outside sources of cash to
fund operations; dependence on funding sources; third party rights to terminate
mortgage servicing; high delinquencies and losses in our securitization trusts;
prepayment risk; changes in interest rates; basis risk; prolonged interruptions
or reductions in the secondary market for mortgage loans; timing of loan sales;
dependence on broker network; competition; concentration of operations in
California and Florida; economic conditions; contingent risks on loans we sell;
government regulation; changes in federal income tax laws; our ability to pay
dividends and the concentrated ownership of our controlling stockholder. For a
more complete discussion of these risks and uncertainties, see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors" in the Company's Annual Report on Form 10-K and
10-K/A for the fiscal year ended June 30, 1999 and "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations - Risk
Factors" in Form 10-Q for the quarter ended March 31, 2000, and subsequent
Company Filings with the United States Securities and Exchange Commission.
