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): December 21,
2009
KH
FUNDING COMPANY
(Exact
name of registrant as specified in its charter)
Maryland
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333-106501
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52-1886133
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(State
or other jurisdiction of
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(Commission
file number)
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(IRS
Employer
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incorporation
or organization)
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Identification
No.)
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10801 Lockwood Drive, Suite
370, Silver Spring, Maryland 20901
(Address
of principal executive offices) (Zip Code)
(301)
592-8100
(Registrant’s
telephone number, including area code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligations of the registrant under any of the following
provisions:
o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.04
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Triggering
Events That Accelerate or Increase a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet
Arrangement.
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On December 21, 2009, KH Funding
Company (the “Company”) received notice from Wells Fargo Bank (the “Trustee”),
the trustee under the Company’s Indenture dated August 2, 2004, as amended and
supplemented to date( the “Indenture”), pursuant to which the Trustee declared
an event of default under the Indenture and stated its intention to mail notice
of such event of default to all holders of the Company’s outstanding Series 3
Senior Secured Notes (the “Series 3 Notes”) and Series 4 Subordinated Unsecured
Notes (the “Series 4 Notes” and together with the Series 3 Notes, the “Notes”)
that were sold to various investors. The Indenture is the instrument
that governs the terms and conditions of the Notes. The Trustee
declared an event of default because the Company has failed to timely pay
certain holders of Notes (the “Affected Investors”) who have requested
redemption thereof or whose Notes have matured, and that failure has continued
for at least 30 days. As of the date of this report, the Company is
in default with respect to approximately $3.6 million in Series 3 Notes and
$903,747 in Series 4 Notes. The total amount of all outstanding
Series 3 Notes is $35.4 million, and the total amount of all outstanding Series
4 Notes is approximately $2.5 million.
The Indenture provides that, for so
long as an event of default is continuing, the Trustee and the holders of at
least 25% in principal amount of the outstanding Notes have the right to declare
the unpaid principal of the Notes and any accrued but unpaid interest thereon to
be due and payable immediately by delivering notice of such acceleration to the
Company. However, if the Company has any senior debt outstanding at
the time of such acceleration notice, the acceleration will not become effective
with respect to Series 4 Notes until the earlier of (i) five business days after
receipt by representatives of any senior debt holder of the acceleration notice
or (ii) the date of acceleration of any senior debt by its holder.
At any time while the event of default
is continuing, the Trustee may also pursue any available remedy to collect the
payment of principal or interest on the Notes or to enforce the performance of
any provision of the Notes and the Indenture. Further, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against the Company for the whole amount of principal and interest
remaining unpaid on the Notes plus interest on overdue principal and, to the
extent lawful, unpaid interest, and such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
The Indenture provides that, generally,
the Company must indemnify the Trustee against any and all losses, liabilities
or expenses incurred by it arising out of or in connection with the acceptance
or administration of its duties under the Indenture.
Holders of a majority in principal
amount of the outstanding Notes, by notice to the Trustee, may waive the event
of default and its consequences except for any continuing payment default held
by a non-consenting holder. Upon actual receipt of any such notice of
waiver by the Trustee, the event of default will cease to exist and will be
deemed cured, except with respect to non-consenting holders.
The Trustee has requested that the
Company obtain written waivers from all Affected Investors, and the Company
requested such written waivers on December 23, 2009.
The Company has not received an
acceleration notice from the Trustee or the holders of at least 25% in principal
amount of the outstanding Notes, nor has the Company received notice of any
collection action. The consequences of the acceleration of the Notes
are discussed in the “Risk Factors” section of the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2009 and of the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008 that were filed with the
Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KH
FUNDING COMPANY
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Dated:
December 23, 2009
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By:
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/s/
Robert L. Harris
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Robert
L. Harris
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President
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