Aames Financial Corporation Announces Sale of $50.0 Million of Preferred Stock to Major Stockholder.Business Editors LOS ANGELES--(BUSINESS WIRE) May 19, 2000- New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. Approves Request of Aames Financial Corporation for an Exception to the NYSE NYSE See: New York Stock Exchange Stockholder Approval Policy Based on NYSE Financial Distress Financial distress Events preceding and including bankruptcy, such as violation of loan contracts. Exception Rights Offering to Holders of Common Stock and Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. is Planned Aames Financial Corporation (NYSE:AAM n. 1. A Dutch and German measure of liquids, varying in different cities, being at Amsterdam about 41 wine gallons, at Antwerp 36½, at Hamburg 38¼. ), a leader in subprime home equity lending, today announced that the New York Stock Exchange (the "Exchange") has agreed to permit the Company to rely on the Exchange's Financial Distress Exception (the "Financial Distress Exception") to the Exchange's Stockholder Approval Policy (the "Stockholder Approval Policy") and issue $50.0 million of Series C Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". to Specialty Finance Partners, the Company's largest stockholder and an affiliate of Capital Z Financial Services Fund II, L.P. ("Capital Z"), without seeking stockholder approval. Description of Transaction The investment by Capital Z consists of (i) an equity investment in the Company by Capital Z in the amount of $50.0 million in exchange for shares of Series C Preferred Stock (the "Shares") at the lower of $0.90 per share or the average market trading price Trading price The price at which a security is currently selling. for the five days prior to the closing transaction (the "Price") and (ii) warrants to purchase another five million shares of Series C Preferred Stock at the Price per share. The equity portion of the transaction will be completed in two steps. The first 40.0 million shares would be sold on or after May 30, 2000 (the "Initial Closing"). The remaining shares would be sold on the earliest possible date that the Company is authorized to issue additional shares of Series C Preferred Stock pursuant to Rule 14C of the Securities Exchange Act of 1934 (the "Subsequent Closing"). In addition to normal closing conditions, the investment is subject to several other conditions including a fairness opinion Fairness Opinion A report put together by qualified analysts or advisors providing to key decision makers an evaluation of and facts about a merger or acquisition. Notes: A fairness opinion serves as a document used for guidance in a merger, takeover, or acquisition. to be delivered by a nationally recognized investment banking firm, the receipt by the Company of waivers from certain of the Company's financing providers, and a material adverse change provision in the stock purchase agreement. The Company is also in negotiations with an affiliate of Capital Z pursuant to which the Company will enter into a forward residual purchase facility that would purchase up to $75.0 million of assets created by the Company in securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. transactions during the next 24 months. Rights Offering Existing stockholders will have the right to purchase a proportional amount of shares of Series C Preferred Stock at the Price pursuant to a rights offering that will commence as soon as practicable after the Initial Closing (and subject to the appropriate regulatory approvals) to all holders of the Company's Common Stock and all holders of the Company's Series C Preferred Stock, other than Capital Z and its affiliates. Exception to Stockholder Approval Requirement The issuance of the shares of Series C Convertible Preferred Stock to Capital Z would normally require approval of the Company's stockholders according to the Stockholder Approval Policy of the Exchange. However, the Financial Distress Exception is available if the delay necessary to seek stockholder approval would seriously jeopardize the financial viability of the Company and if the Company's Audit Committee expressly approves the Company's reliance on the Financial Distress Exception. The Audit Committee of the Board of Directors has determined that the delay necessary in securing such stockholder approval would seriously jeopardize the financial viability of the Company. The determination was based primarily on adverse market conditions, lack of available liquidity to fund the Company's loan production, the lack of other available alternative sources of liquidity and covenants in certain of the Company's warehouse and repurchase lines and indentures relating to the Company's public debt that require the Company to maintain certain levels of liquidity. Upon making such a determination, the Audit Committee expressly approved the Company's omission to seek the stockholder approval that would otherwise have been required under the Stockholder Approval Policy and the Exchange accepted the Company's application for reliance on the Financial Distress Exception. In reliance on the Financial Distress Exception, the Company is mailing to all stockholders on or about May 19, 2000 a letter notifying them of its intention to issue the shares on, or after, May 30, 2000 to Capital Z without seeking their approval. Aames Financial Corporation is a leading home equity lender, and at March 31, 1999 operated 101 retail Aames Home Loan offices and seven wholesale branches 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 The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. 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 Mortgage servicing The collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default , involved with a mortgage loan. ; high delinquencies and losses in our securitization trusts; prepayment risk Prepayment Risk The uncertainty related to unscheduled prepayment in excess of scheduled principal repayment. Notes: This risk is generally associated with mortgage securities. ; 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; Year 2000 compliance; 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 Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations - Risk Factors" in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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 Form 10-Q See 10-Q. for the quarter ended December 31, 1999, and subsequent Company Filings with the United States Securities and Exchange Commission. |
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