2004-02-09 11:18:21
The FINOVA Group Inc. Repays $5.6 Billion Berkadia Loan
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Remaining Senior Debt Significantly Exceeds Assets No Payments to Shareholders Anticipated SCOTTSDALE, Ariz., Feb. 9 /PRNewswire-FirstCall/ -- The FINOVA Group Inc. (OTC Bulletin Board: FNVG) announced that its principal operating subsidiary, FINOVA Capital Corporation, has fully repaid its $5.6 billion loan from Berkadia LLC, a joint venture between Berkshire Hathaway, Inc. and Leucadia National Corporation. The loan was received in August 2001 in conjunction with FINOVA's emergence from bankruptcy. The Berkadia loan was scheduled to mature in 2006 but was repaid earlier due to accelerated collections from FINOVA's liquidating portfolio. Although the Berkadia loan has been repaid, FINOVA remains obligated to repay the $3.0 billion principal balance outstanding on its 7.5% Senior Secured Notes (the "Senior Notes"). Beginning May 15, 2004, in accordance with the terms of the Indenture governing the Senior Notes, the Company will use any excess cash, as defined in the Indenture, to make semi-annual principal payments on the Senior Notes. The Company, however, does not believe that it has sufficient assets to fully repay this debt, and the Indenture prohibits the Company from engaging in new business. Therefore, FINOVA intends to rely on the liquidation of its remaining assets as its only meaningful source of cash. Shareholders should not expect any payments or distributions from FINOVA. The Indenture contemplated that once principal payments on the Senior Notes had begun, FINOVA's shareholders would receive a distribution equal to 5.263% of each principal repayment. However, the Indenture prohibits FINOVA from making distributions to shareholders if they would "render the Company insolvent, would be a fraudulent conveyance ... or would not be permitted to be made ... under applicable law." Given the Company's significant negative net worth (approximately $784.2 million at September 30, 2003, or $1.4 billion if the Senior Notes are considered at their principal amount due) and its belief that the Senior Notes will not be fully repaid, FINOVA intends to retain an amount equal to the shareholder distribution contemplated by the Indenture until such time, if ever, that it is no longer restricted from making a distribution to its shareholders or until it is required to use the cash to satisfy its debt obligations. FINOVA believes that it will be unable to fully repay its senior debt and that it is unlikely that it will be able to make distributions on its common stock. Consequently, investing in the Senior Notes and Common Stock involves a high level of risk. The Management Agreement between FINOVA and Leucadia National Corporation was not affected by the repayment of the Berkadia loan, and Leucadia will continue to manage the operations of FINOVA pursuant to that agreement, which expires in 2011. To help maintain the stability of its workforce throughout the remainder of the liquidation, FINOVA's Board of Directors approved the establishment of two grantor trusts to secure the company's severance and bonus obligations to all remaining employees. These trusts, which secure existing severance and bonus plans and do not increase the Company's obligations to its employees, were funded in November 2003 with approximately $24 million. The FINOVA Group Inc., through its principal subsidiary, FINOVA Capital Corporation, is a financial services company based in Scottsdale, Arizona.

THIS SEEMS ABOUT DEAD DONT YOU THINK,
MAY BE TIME TO GET OUT AND CUT LOSSES.
WHAT DO YOU THINK??