Attached files
UNITED
STATES
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): October 13,
2009
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OWENS
MORTGAGE INVESTMENT FUND,
a
California Limited Partnership
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(Exact
name of registrant as specified in its charter)
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California
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000-17248
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68-0023931
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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2221
Olympic Boulevard
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Walnut
Creek, California
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94595
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (925) 935-3840
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Not
Applicable
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(Former
name or former address, if changed since last
report.)
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____________________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________________
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
TABLE OF
CONTENTS
Item 1.01 Entry into a
Material Definitive Agreement
Item 2.04 Triggering Events
That Accelerate or Increase a Direct Financial Obligation or an Obligation under
an Off-Balance Sheet Arrangement.
Item 8.01 Other
Events
Item 9.01 Financial
Statements and Exhibits
Signatures
Exhibit 10 – Modification to
Credit Agreement (Owens Mortgage Investment Fund)
Exhibit 10.1 – Modification
to Credit Agreement (Owens Financial Group)
Exhibit 20 – Prospectus
Supplement No. 2 dated October 19, 2009
Section
1 – Registrant’s Business and Operations
Item
1.01 Entry into a Material Definitive Agreement.
Modification to Credit
Agreement of Owens Mortgage Investment Fund
Owens
Mortgage Investment Fund, a California Limited Partnership (“the Partnership”)
has a line of credit agreement with a group of banks (“the Lenders”), which
provides interim financing on mortgage loans invested in by the Partnership. All
assets of the Partnership are pledged as security for the line of credit. The
line of credit is guaranteed by Owens Financial Group, Inc., the General Partner
of the Partnership. The line of credit matured by its terms on July 31, 2009. On
August 4, 2009, the Partnership received a letter from the Agent for the Lenders
(“the Agent”) that stated that the Partnership’s obligations under the credit
agreement had matured and all principal and accrued interest thereunder was due
and owing. The letter also stated that the Partnership would not be permitted to
receive any further advances under the line of credit. While the letter did not
demand any actions by the Partnership regarding the outstanding line of credit
balance, the letter reserved all of the Lenders’ contractual and legal rights
against the Partnership. As previously reported in a Current Report on Form 8-K
filed August 10, 2009, the General Partner sought to negotiate for the
Partnership a short-term extension of the maturity of the line of
credit.
On
October 13, 2009, a Modification to Credit Agreement (the “Modification”) was
executed by the Partnership and the Lenders. The Modification
provides for the extension of the line of credit’s maturity date to March 31,
2010, during which period the Lenders are not required to advance any additional
amounts. Additionally, the Modification requires the Partnership, by October 30,
2009, to:
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·
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Deliver
to the Agent deeds of trust on real property owned by the Partnership
and/or assignments of promissory notes and related assignments of deeds of
trusts (collectively, “Assignments”) for current performing note
receivables. The total value of the real estate encumbered by the deeds of
trust and the value of the notes receivable for which Assignments are
provided must be at least 200% of the principal balance of the line of
credit (which balance is currently $39,446,000). Such security
will be removed at the rate of 200% of any principal payments on the line
of credit.
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Provide
the Agent with title insurance for the deeds of trust delivered to the
Agent.
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The
Modification also makes other significant modifications to the credit agreement,
including the following:
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The
unpaid principal amount on the line of credit will bear interest prior to
maturity at a rate per annum equal to 1.50% in excess of the prime rate in
effect from time to time but in no event will interest accrue at less than
7.50% per annum.
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·
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The
Partnership’s “Profitability” financial covenant is deleted and replaced
with a “Maximum Outstanding Principal to Asset Value Ratio” financial
covenant requiring the Partnership not to permit the outstanding principal
balance on the line of credit to exceed 65% of the sum of (a) the value of
the Partnership’s real estate and (b) the principal balance due on the
Partnership’s non-delinquent notes
receivable.
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All
proceeds (less reasonable costs) to the Partnership from liquidating any
real estate or other investment asset, and all principal payments received
by the Partnership on notes receivable other than the currently due
installment (other than at maturity), shall be paid to Lenders for
application to the outstanding principal balances on the line of
credit.
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·
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The
Partnership will not be allowed to redeem or repurchase any interest in
the Partnership or make any distribution of assets to its partners,
whether cash, property or securities, except that the Partnership may make
distributions to its partners up to a 3.0% annual return on their
investment in any one year, provided that no event of default under the
credit agreement is pending or would be caused by the
distribution.
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The
unavailability of further advances on the line of credit, increased interest
rate and other terms and conditions of the Modification reduce the amount of
cash available to the Partnership, for purposes such as Partnership investments,
distributions to limited partners and other expenditures. In order to cause
these restrictions on the Partnership to expire, the Partnership intends to
retire the entire outstanding balance on the line of credit as soon as
practicable and no later than its extended maturity date of
March 31, 2010. The Partnership anticipates that it will
have sufficient funds to retire the line of credit, using sales proceeds from
three owned properties currently in contract to be sold and additional
anticipated loan payoffs. However, there can be no assurance that
such property sale transactions will be completed promptly, or that such loan
payoffs will be received. On October 15, 2009, subsequent to the Modification
being executed, the Partnership paid the line of credit down by approximately
$8,176,000 with the proceeds of a loan payoff. The balance on the line of credit
is now approximately $31,270,000.
The
Partnership has supplemented its Prospectus with respect to its offering of
Units of Limited Partnership Interests, as set forth in Prospectus Supplement
No. 2 dated October 19, 2009, in order to reflect the execution of the
Modification. Prospectus Supplement No. 2 was sent to the Partnership’s
limited partners on October 19, 2009, and is included with this report as
Exhibit 20.
Modification to Credit
Agreement of Owens Financial Group, Inc.
Owens
Financial Group, Inc. (the “General Partner”) has a line of credit agreement
with the same group of banks that are the Lenders under the Partnership’s credit
agreement. In order to obtain a waiver of financial covenant
violations under the General Partner’s credit agreement, the General Partner
agreed to have its line of credit frozen as of March 27,
2009. Additionally, the General Partner’s line of credit matured by
its terms on July 31, 2009 and, on August 4, 2009, the General Partner received
a letter from the Agent for the Lenders that stated that all principal and
accrued interest thereunder was due and owing and reserved all of the banks’
contractual and legal rights against the General Partner. The
principal balance of the General Partner’s line of credit is currently
$13,978,000.
On
October 13, 2009, a Modification to Credit Agreement (the “GP Modification”) was
executed by the General Partner and the Lenders. The GP Modification provides
for the extension of the maturity date of the General Partner’s line of credit
to July 30, 2010, during which period the Lenders are not required to advance
any additional amounts. Additionally, the GP Modification requires
the General Partner, by October 30, 2009, to deliver deeds of trust on
parcels of real property owned by the General Partner and assignments of
promissory notes and related assignments of deeds of trust for notes receivable
in favor of the General Partner to be selected by the Agent in its absolute
discretion, and to provide title insurance for the deeds of trust delivered to
the Agent.
The GP
Modification also makes other significant modifications to the credit agreement,
including the following:
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·
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The
unpaid principal amount on the line of credit will bear interest prior to
maturity at a rate per annum equal to 1.50% in excess of the prime rate in
effect from time to time but in no event will interest accrue at less than
7.50% per annum.
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The
General Partner’s financial covenants regarding “Minimum Tangible Net
Worth” and “Total Funded Debt to Tangible Net Worth Ratio” were modified,
and the “Profitability” financial covenant was deleted and replaced with a
“Cash Flow Coverage” covenant.
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The
General Partner will not be allowed to purchase or redeem any shares of
its stock, declare or pay any dividends thereon, make any distributions to
stockholders or set aside any funds for any such purpose and not prepay,
purchase or redeem any subordinated debt prior to
maturity.
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All
proceeds (less reasonable costs) to the General Partner from liquidating
any real estate or other investment asset, and all principal payments
received by the General Partner on notes receivable other than the
currently due installment (other than at maturity), shall be paid to
Lenders for application to the outstanding principal balances on the line
of credit.
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The
General Partner will not be allowed to incur or permit to exist any new
indebtedness.
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The
Partnership depends on the General Partner for the conduct of all Partnership
business including, but not limited to, the origination of and accounting for
all mortgage loans and the management of all Partnership assets including
mortgage loans and real estate. As a result of the unavailability of
further advances on the line of credit and other terms and conditions of the GP
Modification, the General Partner will continue to experience restricted
liquidity and primarily will fund its operating cash requirements from its
collection of management and servicing fees from the Partnership. Should the
General Partner’s liquidity problem continue or worsen, the General Partner
might be required to reduce the number of its employees or make other
operational changes that could negatively impact the
Partnership. Additionally, the General Partner guarantees the
Partnership’s bank line of credit, and under its terms, if the General Partner
were to become insolvent or bankrupt, that would constitute an event of default
under the Partnership’s credit agreement. In order to protect the
Partnership from these impacts, the Partnership may have to elect a new General
Partner that may or may not have comparable experience in managing assets such
as those held by the Partnership.
The
Partnership has supplemented its Prospectus with respect to its offering of
Units of Limited Partnership Interests, as set forth in Prospectus Supplement
No. 2 dated October 19, 2009, in order to reflect the execution of the GP
Modification. Prospectus Supplement No. 2 was sent to the Partnership’s
limited partners on October 19, 2009, and is included with this report as
Exhibit 20.
Section
2 – Financial Information
Item
2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation
or an Obligation under an Off-Balance Sheet Arrangement.
See
discussion in Item 1.01 above regarding Modification to Credit Agreement of
Owens Mortgage Investment Fund and Modification to Credit Agreement of Owens
Financial Group, Inc.
Section
8 – Other Events
Item
8.01 Other Events.
Effective
October 13, 2009, the General Partner adopted amendments to the Partnership’s
Sixth Amended and Restated Limited Partnership Agreement, dated March 13,
2001. The General Partner adopted the Partnership’s Seventh Amended
and Restated Limited Partnership Agreement, dated October 13, 2009, in
order to reflect the amendments, in accordance with the General Partner’s
receipt of the approval of the amendments by limited partners holding a majority
of the Partnership’s outstanding Units. The limited partners’
approval of the amendments was sought in a Consent Solicitation Statement sent
to the Partnership’s limited partners on or about
July 1, 2009.
The
principal effect of the adoption of the amendments is to place an annual
aggregate limit of 10% of the Partnership’s capital on distributions authorized
by the General Partner and withdrawals by limited partners.
The
Partnership has supplemented its Prospectus with respect to its offering of
Units of Limited Partnership Interests, as set forth in Prospectus Supplement
No. 2 dated October 19, 2009, in order to reflect the adoption of these
amendments and the resulting modification of the Partnership’s
Units. Prospectus Supplement No. 2 was sent to the Partnership’s
limited partners on October 19, 2009, and is included with this report as
Exhibit 20.
Section
9 – Financial Statements and Exhibits
Item
9.01 Financial Statements and Exhibits
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(c)
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Exhibits
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Exhibit 10 – Modification to
Credit Agreement (Owens Mortgage Investment Fund)
Exhibit 10.1 – Modification
to Credit Agreement (Owens Financial Group)
Exhibit 20 – Prospectus
Supplement No. 2 dated October 19, 2009
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.
OWENS MORTGAGE INVESTMENT
FUND,
a California Limited
Partnership
By: Owens Financial Group,
Inc., General Partner
Dated:
October 19,
2009 By:
/s/ William C.
Owens
William C. Owens,
President