-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S1ebaBQbia6uX3JesBgVX0Tj5K3IMNFYueL5KOf7BsmNCyjLEdPVfePVXNU1FY1A ON7dGgnL1XDXtqfO5lDfdg== 0001025953-06-000085.txt : 20060324 0001025953-06-000085.hdr.sgml : 20060324 20060324154948 ACCESSION NUMBER: 0001025953-06-000085 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060324 ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060324 DATE AS OF CHANGE: 20060324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVASTAR FINANCIAL INC CENTRAL INDEX KEY: 0001025953 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 742830661 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13533 FILM NUMBER: 06709282 BUSINESS ADDRESS: STREET 1: 8140 WARD PARKWAY STREET 2: STE 300 CITY: KANSAS CITY STATE: MO ZIP: 64114 BUSINESS PHONE: 8162377000 MAIL ADDRESS: STREET 1: 8140 WARD PARKWAY STREET 2: STE 300 CITY: KANSAS CITY STATE: MO ZIP: 64114 8-K 1 form8k.htm PRESS RELEASE

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

 

March 24, 2006

Date of Report (Date of earliest event reported)

 

NOVASTAR FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

001-13533

 

74-2830661

(State or other jurisdiction of incorporation or organization)

 

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

8140 Ward Parkway, Suite 300, Kansas City, MO 64114

(Address of principal executive offices)

(Zip Code)

 

(816) 237-7000

(Registrant’s telephone number, including area code)

 

Not Applicable

(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 obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 

 

INFORMATION TO BE INCLUDED IN THE REPORT

 

Item 7.01 – Regulation FD Disclosure

 

On March 24, 2006, NovaStar Financial, Inc. (“the Company”) announced the signing of a definitive agreement to buy approximately $940 million of nonconforming mortgage loans, pending due-diligence. The Company also announced that it intends to permanently finance these mortgage assets by including them in an asset backed securitization during the second quarter of 2006. This securitization is expected to be structured as a financing transaction for both financial reporting (GAAP) and federal income tax purposes.

 

In addition to the securitization of the recently purchased mortgage loans, NovaStar announced that it intended to structure its first securitization in 2006, a $1.35 billion transaction, as an on-balance sheet financing transaction for both GAAP and tax purposes. The press release announcing the purchase of this bulk loan pool is included as Exhibit 99 and is incorporated herein by reference.

 

References to the registrant’s website do not incorporate by reference the information on the registrant’s website into this Current Report and the registrant disclaims any such incorporation by reference.

 

Item 9.01 – Financial Statements and Exhibits

 

(c)

Exhibits

 

 

99

NovaStar Financial Agrees to Purchase $940 million Bulk Loan Pool.

 

 

 


 

 

SIGNATURE

 

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 thereunto duly authorized.

 

 

NOVASTAR FINANCIAL, INC.

                                                                                                                                

DATE: March 24, 2006

/s/ Gregory S. Metz

 

Gregory S. Metz

 

Chief Financial Officer

 

 

 


 

 

Exhibit Index

 

Exhibit

Number

99

NovaStar Financial Agrees to Purchase $940 million Bulk Loan Pool.

 

 

 

 

 

 

 EX-99 2 ex99.htm EXHIBIT 99

NovaStar Financial Agrees to Purchase $940 million Bulk Loan Pool

Company Also Announces Flexibility in Securitization Structures

 

KANSAS CITY, MO., March 24, 2006 – NovaStar Financial, Inc. (NYSE: NFI), a residential mortgage lender and portfolio investor, today announced the signing of a definitive agreement to buy approximately $940 million of nonconforming mortgage loans, pending due-diligence. The company intends to permanently finance these mortgage assets by including them in an asset backed securitization during the second quarter of 2006. This securitization is expected to be structured as a financing transaction for both financial reporting (GAAP) and federal income tax purposes. Until that time, NovaStar will temporarily finance these assets through a previously negotiated warehouse line of credit with the seller.

 

In addition to the securitization of the recently purchased mortgage loans, NovaStar announced that it intended to structure its first securitization in 2006, a $1.35 billion transaction, as an on-balance sheet financing transaction for both GAAP and tax purposes.

 

“We intend to maintain flexibility with respect to our overall business strategy, including our ability to structure securitizations as sales or financings for GAAP and tax purposes. This flexibility allows us to continue providing shareholders with the tax benefits associated with NovaStar’s REIT status, while complying with certain income and asset tests to maintain our tax advantaged structure. In order to satisfy these tests in a variety of interest rate environments, it may be necessary to periodically add additional real estate assets to our GAAP and tax balance sheets through securitizations treated as financings. By structuring the securitization of these mortgage loans as financings, we will add approximately $2.6 billion of REIT qualified assets to our balance sheet. In addition, these transactions will provide greater qualified real estate income for various REIT income tests,” said Greg Metz, NovaStar’s Chief Financial Officer.

 

The company anticipates that structuring these securitizations as financings will reduce GAAP earnings in the first quarter of 2006, since 1) For these transactions, NovaStar will not report a gain on sale as it would if the securitizations were accounted for as sales, which has been the typical method over the last several years, and 2) NovaStar will establish an initial loan loss reserve related to maintaining the loans on its balance sheet. However, for the full year, NovaStar does not believe structuring these transactions as financings will have a material impact on reported GAAP earnings or affect its previous 2006 dividend guidance of at least $5.60 per common share. Furthermore, the company stated that the initial difference in net income will reverse itself over the remaining life of the transaction.

 

Given the structure of the securitization transactions, NovaStar expects that a portion of its 2006 taxable income will be considered excess inclusion income. Tax exempt entities that receive these dividends may be subject to income tax on the portion of NovaStar’s dividends that constitute excess inclusion income as unrelated business taxable income.

 

 


 

 

“It is our understanding that 2006 dividends, which relate to the distribution of 2005 taxable income, will not be impacted by the excess inclusion generated in 2006. As disclosed previously, 2006 dividends will initially be applied to our obligation to disburse 2005 taxable income. It is estimated that $209 million in 2005 taxable income remains to be distributed. We recommend that current and prospective shareholders seek counsel from their individual tax advisor with respect to this matter,” Metz added.

 

In a securitization structured as a financing, no gain is recognized at the time of securitization, the mortgage loans remain on the balance sheet and the asset-backed bonds issued to third parties are recorded as debt. Income recognized using this structure will more closely follow cash flow trends. In addition, the company will be required to establish an initial loan loss reserve at the time of the securitization and maintain that reserve at an appropriate level in future periods.

 

NovaStar has typically qualified for sale accounting treatment when securitizing mortgage assets. In a sale, a gain is recognized at the time of securitization, the mortgage loans are removed from the balance sheet and new mortgage securities (retained interests) are recorded on the balance sheet. Income is accrued through the life of the securities using a level yield method.

 

About NovaStar

 

NovaStar Financial, Inc. (NYSE: NFI) is a specialty finance company that originates, purchases, invests in and services residential nonconforming loans. The company specializes in single-family mortgages, involving borrowers whose loan size, credit details or other circumstances fall outside conventional mortgage agency guidelines. A Real Estate Investment Trust (REIT) founded in 1996, NovaStar efficiently brings together the capital markets, a nationwide network of mortgage brokers and American families financing their homes. NovaStar is headquartered in Kansas City, Missouri, and has lending operations nationwide.

 

For more information, including quarterly portfolio data, please visit our website at www.novastarmortgage.com.

 

Certain matters discussed in this release constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are those that predict or describe future events and that do not relate solely to historical matters. Forward-looking statements are subject to risks and uncertainties and certain factors can cause actual results to differ materially from those anticipated. Some important factors that could cause actual results to differ materially from those anticipated include: our ability to generate sufficient liquidity on favorable terms; the size and frequency of our securitizations; interest rate fluctuations on our assets that differ from our liabilities;

 


 

increases in prepayment or default rates on our mortgage assets; changes in assumptions regarding estimated loan losses and fair value amounts; changes in origination and resale pricing of mortgage loans; our compliance with applicable local, state and federal laws and regulations or opinions of counsel relating thereto and the impact of new local, state or federal legislation or regulations or opinions of counsel relating thereto or court decisions on our operations; the initiation of margin calls under our credit facilities; the ability of our servicing operations to maintain high performance standards and maintain appropriate ratings from rating agencies; our ability to expand origination volume while maintaining an acceptable level of overhead; our ability to adapt to and implement technological changes; the stability of residual property values; the outcome of litigation or regulatory actions pending against us or other legal contingencies; the impact of losses resulting from natural disasters; the impact of general economic conditions; and the risks that are from time to time included in our filings with the SEC, including our Annual Report on Form 10-K, for the year ended December 31, 2005. Other factors not presently identified may also cause actual results to differ. This document speaks only as of its date and we expressly disclaim any duty to update the information herein.

 

Investor Relations Contact

Jeffrey A. Gentle

816.237.7424

 

 

 

 

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