8-K

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 14, 2006

FIRSTCITY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	033-19694	76-0243729
(State of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

6400 Imperial Drive

Waco, Texas 76712

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (254) 761-2800

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            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))

Section 1 — Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

On December 14, 2006, FirstCity Financial Corporation (“FirstCity”) and Bank of Scotland, as agent for the lenders, entered into an Amendment No. 5 to Revolving Credit Agreement, dated as of December 14, 2006 (the “Amendment”).  The Amendment amended the existing $96,000,000 revolving credit facility entered into on November 12, 2004, to (i) increase the borrowing base availability from 60% to 70%, and (ii) to increase the margin for LIBOR loans from 2.25% to 2.50% at any time that the loan to value ratio is greater than 1.20 to 2.00.  The foregoing description of the Amendment is qualified in its entirety by reference to the full text of the Amendment attached hereto as Exhibit 10.1 and is incorporated herein by this reference.

Nature of Material Relationship with Bank of Scotland

FirstCity has had a significant relationship with Bank of Scotland and The Governor and The Company of the Bank of Scotland (“BoS-UK”) and their subsidiaries since September 1997. FirstCity and its wholly-owned subsidiaries have entered into loan agreements with Bank of Scotland and its affiliates, BoS (USA) Inc. and BoS-UK, from time to time since 1997.

Since December 2002, the Bank of Scotland has provided a loan facility to FirstCity consisting of (i) a revolving acquisition loan facility providing for a maximum principal balance of loans outstanding at any time of $45,000,000, and (ii) a revolving loan facility in the maximum principal amount of $5,000,000 for corporate purposes. These facilities were secured by all of the assets of FirstCity and certain of its wholly-owned subsidiaries. The outstanding balances under those facilities were converted to loans under the revolving credit agreement between FirstCity and the Bank of Scotland dated November 12, 2004, which is being amended by the Amendment.

On August 26, 2005, FH Partners, L.P., an indirect wholly-owned affiliate of FirstCity, and Bank of Scotland entered into a revolving credit agreement (the “FHP Revolving Credit Agreement”) that provides a $50,000,000 revolving portfolio acquisition facility for FH Partners, L.P., to be secured by all of the assets of FH Partners, L.P. The loan facility is used by FH Partners, L.P. to finance portfolio and asset purchases.  The obligations of FH Partners, L.P. under the FHP Revolving Credit Agreement are guaranteed by FirstCity and the primary wholly-owned subsidiaries of FirstCity.

In December 2002, in connection with an exchange offer to the holders of FirstCity’s New Preferred Stock, BoS-UK provided a non-recourse loan in the amount of $16,000,000 to FirstCity, which was used to pay the cash portion of the exchange offer to the holders of the New Preferred Stock, to pay expenses of the exchange offer and recapitalization, and to reduce FirstCity’s debt to Bank of Scotland and BoS (USA) Inc. (the “Senior Lenders”).  The $16,000,000 loan was secured by a 20% interest in Drive Financial Services LP (“Drive”) (64.51% of FirstCity’s remaining 31% interest in Drive) and other assets of FirstCity Consumer Corporation (“Consumer Corp.”) as were necessary and only to the extent to allow BoS-UK to realize the security interest in the 20% interest in Drive. In connection with the $16,000,000 loan, FirstCity agreed to pay a contingent fee to BoS-UK equal to 20% of all amounts received by FirstCity and Consumer Corp. upon any sale of the 20% interest in Drive or their receipt of any distributions from Drive related to the 20% ownership interest, once such payments exceeded $16,000,000 in the aggregate.  The outstanding principal and accrued interest of $16,003,947 under the $16,000,000 loan was paid by FirstCity in full on November 1, 2004, in connection with the sale of its 31% beneficial interest in Drive.

On November 1, 2004, FirstCity and certain of its subsidiaries completed the sale of a 31% beneficial ownership interest in Drive and its general partner, Drive GP LLC, to IFA Drive GP Holdings LLC (“IFA-GP”), IFA Drive LP Holdings LLC (“IFA-LP”) and Drive Management LP (“MG-LP”) for a total purchase price of $108,478,300 in cash, which resulted in distributions and payments to FirstCity and Consumer Corp. in the aggregate amount of $86,800,000 in cash, from various sources. As is noted above, the proceeds of the sale were used in part to pay indebtedness owed to the Senior Lenders and BoS-UK.

2

BoS (USA) Inc. owns a warrant to purchase 425,000 shares of FirstCity’s voting Common Stock at $2.3125 per share, which is subject to adjustment in the number of shares in the event of certain changes in the Common Stock, grants of options or issuance of convertible securities by FirstCity or certain corporate changes or reorganizations.  The warrant will expire on August 31, 2010, if it is not exercised prior to that date.

Section 2 — Financial Information

Item 2.03 Creation of a Direct Financial Obligation of the Registrant.

The information described in Item 1.01 herein is hereby incorporated by reference.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

 (d) Exhibits

10.1 Amendment No. 5 to Revolving Credit Agreement, dated as of December 14, 2006, among FirstCity Financial Corporation as Borrower and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent.

3

SIGNATURES

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.

		FIRSTCITY FINANCIAL CORPORATION
Date: December 19, 2006	By:	/s/ J. Bryan Baker
		J. Bryan Baker
		Senior Vice President and Chief Financial Officer

4

EXHIBIT INDEX

10.1 Amendment No. 5 to Revolving Credit Agreement, dated as of December 14, 2006, among FirstCity Financial Corporation as Borrower and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent.

5

EX-10.1

EXHIBIT 10.1

AMENDMENT NO. 5 TO REVOLVING CREDIT AGREEMENT

AMENDMENT (this “Amendment”), dated as December 14, 2006, among FIRST CITY FINANCIAL CORPORATION, a Delaware corporation (the “Borrower”), the financial institutions which are parties to the Agreement hereinafter referred to (each a “Lender” and collectively, the “Lenders”), and BANK OF SCOTLAND, as agent for the Lenders under such Agreement (in such capacity, the “Agent”), to the Revolving Credit Agreement, dated as of November 12, 2004, among the Borrower, the Lenders and the Agent (the “Agreement”).

W I T N E S S E T H:

WHEREAS, the Borrower has requested that certain amendments set forth herein be made to the Agreement;

WHEREAS, subject to the terms and conditions contained below, the Agent and the Lenders are willing to so amend the Agreement;

NOW, THEREFORE, it is agreed:

1.  Definitions.  All terms used herein which are defined in the Agreement (including, to the extent any such terms are to be added or amended by this Amendment, as if such terms were already added or amended by this Amendment, unless the context shall otherwise indicate) shall have the same meanings when used herein unless otherwise defined herein.  All references to Sections in this Amendment shall be deemed references to Sections in the Agreement unless otherwise specified.

2.  Effect of Amendment.  As used in the Agreement (including all Exhibits thereto), the Notes and the other Loan Documents and all other instruments and documents executed in connection with any of the foregoing, on and subsequent to the Amendment Closing Date (as hereinafter defined), any reference to the Agreement shall mean the Agreement as amended hereby.

3.  Amendments.  As of the Amendment Effective Date, the Agreement is hereby amended as follows:

(a)           Annex I. Annex I to the Agreement is amended as follows:

(i)            by restating in its entirety the definition of “Applicable Margin” therein to read as follows:

“Applicable Margin” shall mean, for each period from and including each Payment Date to but excluding the following Payment Date, the applicable percentages set forth below opposite the applicable LTV Ratio; provided, if any change to Total Outstandings occurring during such period would otherwise result in a higher Applicable Margin, such higher Applicable Margin shall be in effect from the date of such change to but excluding the following Payment Date:

1

LTV Ratio	Applicable Margin for Alternate Base Rate Loans	Applicable Margin for Eurocurrency Loans
Greater than 1.20 to 2.00	0.50%	2.50%
Greater than 1.00 to 2.00 but less than or equal to 1.20 to 2.00	0.25%	2.25%
Less than or equal to 1.00 to 2.00	0.00%	2.00%

(ii)           by restating in its entirety the definition of “Borrowing Base Availability” therein to read as follows:

“Borrowing Base Availability” shall mean, as of any computation date, an amount equal to 70% of the Borrowing Base in effect on such date.”

4.  Representations.  In order to induce the Agent and the Lenders to execute this Amendment, the Borrower hereby represents, warrants and covenants to the Agent and the Lenders as of the date hereof and (if different) as of the Amendment Closing Date (which representations, warranties and covenants shall survive the execution, delivery and effectiveness of this Amendment) as follows:

(a)  No Default or Event of Default exists.

(b) Each representation and warranty made by Borrower, each Primary Obligor, each Portfolio Entity, each Related Entity and each other Loan Party in the Loan Documents is true and correct.

5.  Effectiveness.    This Amendment shall become effective as of December 14, 2006 (the “Amendment Effective Date”) when each of the following conditions have been fulfilled to the satisfaction of the Agent (or waived by the Agent).  The first date on which all of the following conditions have been so fulfilled (or so waived) is herein referred to as the “Amendment Closing Date.”  If the Amendment Closing Date shall not have occurred by the close of business (New York time) on October 31, 2006 (or such later time or date as the Agent consents to in writing), the provisions of this Amendment shall (except as may otherwise be specified in this Amendment) be deemed rescinded, null and void.

(a)  Signed Copies.  The Borrower, the Lenders and the Agent shall have executed a copy hereof and delivered the same to the Agent at 565 Fifth Avenue, New York, New York 10017 (Attention:  Joseph Fratus) or such other place directed by the Agent.

(b)  Guarantor’s Consent.  Each Guarantor shall have executed a confirming consent, substantially in the form attached hereto as Annex A or otherwise satisfactory to the Agent (a

2

“Confirming Consent”), and delivered the same to the Agent at 565 Fifth Avenue, New York, New York 10017 (Attention:  Joseph Fratus) or such other place directed by the Agent.

(c)    No Defaults.  No Default or Event of Default shall exist.

(d)  Accuracy of Representations.  Each representation and warranty made by the Borrower, each Primary Obligor, each Portfolio Entity, each Related Entity and each other Loan Party in the Agreement and the other Loan Documents shall be true and correct in all material respects as of the Amendment Closing Date with the same effect as though made at and as of such date (except for those that specifically speak as of a prior date).

6.  Limited Nature of Amendments.  The amendments set forth herein are limited precisely as written and shall not be deemed to (a) be a consent by the Agent or the Lenders to any waiver of, or modification of, any other term or condition of the Agreement, or any of the documents referred to in any of the foregoing or (b) prejudice any right or rights which any of the Lenders or the Agent may now have or may have in the future under or in connection with the Agreement, or any of the documents referred to in any of the foregoing.  Except as expressly amended hereby, the terms and provisions of the Agreement shall remain in full force and effect.

7.  Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

8.  Jurisdiction, Waiver of Jury Trial.  THE BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AMENDMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS THE AGENT OR ANY LENDER MAY ELECT, and, by execution and delivery hereof, the Borrower accepts and consents for itself and in respect to its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts, unless waived in writing by the Agent and the Majority Lenders.  EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER, ANY AFFILIATE OF THE BORROWER, THE AGENT OR ANY LENDER.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDER ENTERING INTO THIS AMENDMENT.

9.  Headings.  The descriptive headings of the various provisions of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

10.  Writings Only.  BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT NO TERM OR PROVISION OF THE AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE CHANGED, WAIVED, SUPPLEMENTED OR OTHERWISE MODIFIED VERBALLY, BUT ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE RELEVANT PARTIES, AS FURTHER PROVIDED IN SECTION 12.2 OF THE CREDIT AGREEMENT.

3

11.  Counterparts.  This Amendment may be executed in any number of counterparts, and by the different parties on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which together shall constitute one and the same agreement. Telecopied signatures hereto and to the Confirming Consent shall be of the same force and effect as an original of a manually signed copy.

[Signature page follows.]

4

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers.

BANK OF SCOTLAND,
Individually and as Agent
By
	Name:
	Title:
FIRSTCITY FINANCIAL CORPORATION
By
	Name:
	Title:

5

Annex A

CONFIRMING CONSENT

Reference is hereby made to the foregoing Amendment (the “Amendment”) to the Revolving Credit Agreement dated as of December 14, 2006 among the Borrower, the Lenders and the Agent; said agreement, as amended and modified by the Amendment and from time to time hereafter further amended or otherwise modified, the “Amended Agreement”).

Each Guarantor hereby consents to the terms and provisions of the Amendment and confirms and acknowledges that:

(a)  its obligations under the Loan Documents to which it is a party remain in full force and effect and the terms “Obligations” and “Secured Obligations” used in such Loan Documents include all Obligations of the Borrower under the Amended Agreement; and

(b)  its consent and acknowledgement hereunder is not required under the terms of such Loan Documents and any failure to obtain its consent or acknowledgment to any subsequent amendment to the Agreement or the Amended Agreement or any of the other Loan Documents will not affect the validity of its obligations under the aforesaid Loan Documents or any other Loan Document, and this consent and acknowledgement is being delivered for purposes of form only.

Capitalized terms used herein and not otherwise defined have the same meanings as in the Amended Agreement.  This Consent is dated as of the Amendment Closing Date (as defined in the Amendment).

FIRSTCITY COMMERCIAL CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FC CAPITAL CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY CONSUMER LENDING CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

6

FIRSTCITY EUROPE CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY HOLDINGS CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY HOLDINGS CORPORATION OF MINNESOTA
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY INTERNATIONAL CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY MEXICO, INC.
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY SERVICING CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
BOSQUE ASSET CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President
BOSQUE LEASING, L.P.
By:
	Name: James C. Holmes
	Title: Executive Vice President

7

BOSQUE LEASING GP CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President

8