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ESSEX FINANCIAL PARTNERS, L.P., ANNOUNCES PRELIMINARY RESTRUCTURING AGREEMENT AND CONDITIONAL APPROVAL OF SAVINGS BANK MERGER

 VIRGINIA BEACH, Va., Feb. 1 /PRNewswire/ -- Essex Financial Partners, L.P. (AMEX: ESX) (hereinafter the Partnership), announced today that the Partnership and certain of its subsidiaries have entered into a Preliminary Agreement with PaineWebber Capital Inc. (PWC) and certain of its affiliates intended to result in a substantial restructuring of certain of the Essex companies. The Partnership also announced the conditional approval by the Office of Thrift Supervision (OTS) of the merger of its three savings bank subsidiaries.
 The Restructuring
 The purpose of the restructuring is to help stabilize the Partnership's capital structure and streamline its organizational structure. The agreement provides that PWC will:
 (i) commence on or before Feb. 5, 1993, a cash tender offer to purchase for an amount equal to their principal balance all of the outstanding $23.4 million of debt securities (Essex 11's) issued in January and February 1991 by the Partnership's indirect non-bank mortgage subsidiary, Essex Mortgage Corporation (EMC);
 (ii) invest $3 million in the Partnership's new seven-year note.
 Essex 11's Tender Offer. The Partnership has previously disclosed that as a consequence of liquidity problems related to the Essex 11's, EMC failed to make approximately $2.5 million in scheduled note interest and redemption payments on Dec. 31, 1992. EMC is also required to make an additional sinking fund payment of approximately $2.7 million in February 1993.
 EMC's deteriorating liquidity and its concern regarding its ability to fund its December 1992 and February 1993 obligations made it necessary for EMC to seek new sources of financing. In connection with the Preliminary Agreement, PWC has advised the Partnership that it intends to commence on or before Feb. 5, 1993, a $23.4 million cash tender offer to purchase all of the Essex 11's.
 The terms of the tender offer, as related to the Partnership by PWC, include the purchase of the Essex 11's for their outstanding principal balance, without payment to noteholders of accrued interest from and after July 1, 1992, or any other amounts; the delivery of noteholder releases in favor of the Partnership, EMC, PWC, and their current affiliates; and the adoption of certain amendments to the Indenture of Trust that governs the Essex 11's (the Indenture). The amendments to the Indenture may be effected, so long as the consent of a majority in principal amount of the noteholders is received, even if the tender offer is not consummated. The proposed amendments include limiting the circumstances in which a default on the Essex 11's is deemed to occur and restricting the ability of the Indenture trustee and the noteholders to accelerate the Essex 11's indebtedness and pursue their remedies under the Indenture with respect to defaults thereunder (including existing defaults).
 The Partnership has been advised by PWC that the completion of the tender offer will be contingent on several conditions, including (a) the acceptance of the tender offer by the holders of at least 95 percent of the outstanding principal amount of the Essex 11's, by Feb. 26, 1993 (unless PWC elects to extend this deadline to a date not later than June 30, 1993), (b) the satisfactory disposition by the OTS of certain matters raised by this transaction and the restructuring, (c) the adoption of amendments to the Indenture, (d) the negotiation and delivery of certain agreements between PWC and the Partnership regarding the 10-year note described below, (e) standard conditions relating to the non-occurrence of significant adverse events, and (f) the satisfactory resolution of the other restructuring issues further described below.
 The completion of the PWC tender offer, as well as of the other restructuring transactions described in the Preliminary Agreement, are also subject to several other conditions, including (i) the negotiation of final documentation for the restructuring transactions that is acceptable to the parties, including the delivery of mutually acceptable releases, (ii) the consummation of the merger of the three savings bank subsidiaries of the Partnership that, as described below, was conditionally approved by the OTS on Jan. 29, 1993, and (iii) the receipt by the Partnership and certain of its subsidiaries of acceptable investment banking and legal advice regarding the transaction. Several further conditions to the completion of the restructuring transactions are described below.
 Assuming the successful completion of the tender offer, the Preliminary Agreement contemplates that EMC will transfer the purchased mortgage servicing rights (PMSRs) that serve as the collateral for the Essex 11's for their fair market value as determined by an independent third party appraiser. The Partnership will deliver to PWC, in respect of its guaranty obligations on the Essex 11's, a 10-year promissory note (the 10-year note) reflecting the remaining balance due under the Essex 11's acquired by PWC, which is expected to be approximately $11 million. The final value of the 10-year note will depend on the level of acceptance of the tender offer, the appraised value of the PMSRs and the amount of cash EMC may transfer to PWC. The Partnership has also agreed that the amount of the 10-year note will be increased by approximately $2 million to reflect expenses incurred by or for the Partnership and its affiliates and by or for PWC and its affiliates. The 10-year note will accrue interest at the applicable federal rate, but interest will not be paid on a current basis and will be due only upon maturity or a mandatory prepayment. The 10-year note will be payable in full at the end of the term.
 New Investment in Essex Savings Bank. In conjunction with the transactions related to the restructuring of the Essex 11's, PWC has also agreed to advance an additional $3 million to the Partnership in exchange for a seven-year promissory note (the seven-year note). The Partnership is obligated to use the proceeds of the seven-year note to acquire a new issue of preferred stock from Essex Bancorp (Bancorp), which will in turn use the proceeds to acquire a new issue of preferred stock from the post-merger savings bank (the Savings Bank). The seven-year note also will accrue interest at the applicable federal rate, but interest will not be paid on a current basis and will be due only upon maturity or a mandatory prepayment. The seven-year note will be subject to mandatory prepayment terms, and will involve the imposition of certain restrictions on the operating expenses and other uses of cash by Partnership and Bancorp. Neither the seven-year note nor the 10-year note will permit the Partnership to make distributions to the Partnership's unitholders while the notes remain outstanding.
 This transaction, as well as the other transactions described in the Preliminary Agreement, is conditioned upon the parties receiving a written opinion from the OTS that the proceeds received by the Savings Bank for its preferred stock will be treated as tangible core capital for purposes of measuring the Savings Bank's regulatory capital.
 Essex Mortgage Term Debt. The Preliminary Agreement also provides for PWC to attempt to locate a purchaser for the loans that collateralize the $2.5 million credit facility advanced by an affiliate of PWC to EMC in June 1992. The repayment of that credit facility is presently guaranteed by the Partnership and Bancorp, and the Preliminary Agreement provides for an affiliate of PWC to extend the term of the credit facility until Jan. 1, 1994. Upon the sale of the collateral, any shortfall between the sales price of the collateral and the unpaid balance of the credit facility is to be added to the balance of the 10-year note.
 Regulatory Approvals
 In contemplation of certain aspects of the transactions that are part of the restructuring, on Jan. 29, 1993, the OTS conditionally approved the merger of the Partnership's three savings bank subsidiaries. The OTS also conditionally approved the installation as the Partnership's general partner of Thrift Management Services, Inc., a corporation of which Gene D. Ross, the CEO of Bancorp and the Partnership's savings bank subsidiaries, will be the sole shareholder. Neither action can be completed until several conditions imposed by the OTS, including the $3 million capital infusion to the Savings Bank that is described above, are satisfied.
 In its prior public disclosure, the Partnership has emphasized the importance of the consummation of the merger to the savings banks. Management believes that the completion of the merger will enable the savings banks to enjoy substantial reductions in operating costs, among other benefits. In its Jan. 4 press release, the Partnership disclosed the risk, due to the undercapitalization of the Partnership's North Carolina savings bank subsidiary, that the North Carolina bank could become subject to seizure by the OTS. Management expects that taking into account the effect of the merger of the Partnership's existing savings banks, and the new infusion of capital to the Savings Bank described above, the post-merger Savings Bank will comply with all presently applicable regulatory capital requirements and will not be subject to the risk of seizure at the present time.
 Although management is hopeful that the merger and the transactions contemplated by the Preliminary Agreement will be completed in a timely manner, the transactions are subject to the numerous conditions described above, and there can be no assurance that the conditions to the closing will be fulfilled. The proposed transactions are also dependent, to a large extent, on the continued forbearance of the indenture trustee for the Essex 11's and the cooperation of the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation in the proposed transfer of the PMSRs.
 If the merger and the transactions contemplated by the Preliminary Agreement are completed, management is optimistic that it will be able to move forward to restore the partnership to profitability.
 -0- 2/1/93
 /CONTACT: Essex Financial Partners, L.P., Investor Relations, 804-431-5612/
 (ESEX)


CO: Essex Financial Partners, L.P. ST: Virginia IN: FIN SU: RCN

TW -- DC006 -- 1264 02/01/93 10:24 EST
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Date:Feb 1, 1993
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