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CUSIP
NO. 247918105
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Page 3
of 7 Pages
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1
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NAME
OF REPORTING PERSON
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S.S.
OR I.R.S IDENTIFICATION NO. OF ABOVE PERSON
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JOHN
M. ANGELO
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2
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CHECK
THE APPROPRIATE BOX IF A MEMBER OF A GROUP
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(a)
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o
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(b)
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x
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3
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SEC
USE ONLY
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4
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SOURCES
OF FUNDS*
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Not
Applicable
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5
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CHECK
BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d)
or 2(e)
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o
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6
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CITIZENSHIP
OR PLACE OF ORGANIZATION
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United
States
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7
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SOLE
VOTING POWER
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0
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8
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SHARED
VOTING POWER
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NUMBER
OF
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SHARES
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BENEFICIALLY
OWNED
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9
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SOLE
DISPOSITIVE POWER
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BY
EACH REPORTING
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PERSON
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0
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WITH
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10
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SHARED
DISPOSITIVE POWER
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11
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AGGREGATE
AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
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10,262,700
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12
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CHECK
BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
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o
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13
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PERCENT
OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
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30.5%
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14
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TYPE
OF REPORTING PERSON*
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IN; HC
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*
See
Instructions
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CUSIP
NO. 247918105
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Page 4
of 7 Pages
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1
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NAME
OF REPORTING PERSON
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S.S.
OR I.R.S IDENTIFICATION NO. OF ABOVE PERSON
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MICHAEL
L. GORDON
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2
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CHECK
THE APPROPRIATE BOX IF A MEMBER OF A GROUP
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(a)
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o
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(b)
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x
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3
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SEC
USE ONLY
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4
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SOURCES
OF FUNDS*
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Not
Applicable
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5
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CHECK
BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d)
or 2(e)
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o
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6
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CITIZENSHIP
OR PLACE OF ORGANIZATION
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United
States
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7
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SOLE
VOTING POWER
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0
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8
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SHARED
VOTING POWER
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NUMBER
OF
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SHARES
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BENEFICIALLY
OWNED
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9
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SOLE
DISPOSITIVE POWER
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BY
EACH REPORTING
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PERSON
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0
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WITH
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10
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SHARED
DISPOSITIVE POWER
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11
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AGGREGATE
AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
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10,262,700
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12
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CHECK
BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
*
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o
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13
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PERCENT
OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
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30.5%
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14
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TYPE
OF REPORTING PERSON
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IN; HC
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*
See
Instructions
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CUSIP
NO. 247918105
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Page 5
of 7 Pages
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Introduction
This
Amendment No. 2 to Schedule 13D
amends the Schedule 13D initially filed on August 23, 2007 (as amended,
the
“Schedule 13D”). As reported in the Schedule 13D, Delta Financial
Corporation (the “Company”) (i) entered into a repurchase financing facility
provided by an affiliate of Angelo, Gordon & Co., L.P. (“Angelo Gordon”),
under the Securities Repurchase Agreement, dated August 13, 2007 (the
“Securities Repurchase Agreement”), by and between Renaissance REIT Investment
Corp. and Delta Funding Corporation, as Sellers, the Company, as Guarantor,
and
AG Delta Holdings, LLC, as Buyer and (ii) issued to an affiliate of Angelo
Gordon certain warrants (the “Warrants”) to purchase an aggregate of 10.0
million shares of the Company’s common stock. Except as provided
herein, this Amendment does not modify any of the information previously
reported on the Schedule 13D. Capitalized terms used and not
otherwise defined have the meanings given to them in the Schedule
13D.
Item
4. Purpose of the Transaction.
Item
4 of the Schedule 13D is amended and updated by adding the
following:
The
Reporting Persons are filing this
Amendment No. 2 to Schedule 13D to report a change in their
intentions. On November 15, 2007, AG Special Situation Corp., a
Delaware corporation (“AGSSC”) and an affiliate of Angelo, Gordon & Co.,
L.P., entered into a letter of intent (the “Letter of Intent”) with the Company
to recapitalize the Company, through the issuance by the Company of at
least $50
million in senior secured notes and 40,000,000 shares of common stock
to AGSSC
(the “Proposal”). The description of the Letter of Intent and the
Proposal contained herein is a summary only, and is qualified in its
entirety by
the terms of the Letter of Intent, which is filed as Exhibit H hereto
and is
incorporated herein by reference.
The
Proposal is subject to: (i)
satisfactory completion/update of our due diligence review of the Company,
including legal, regulatory, financial, accounting and tax due diligence;
(ii)
negotiation and execution of definitive agreements; (iii) receipt of
any
required approvals from the Company’s Board of Directors and shareholders; and
(iv) receipt of all governmental and any material third party approvals
necessary to effect the transactions contemplated by the Letter of
Intent.
Under
the terms of the Proposal, the
Company would issue 10% senior secured notes (the “Notes”) in an aggregate
principal amount equal to (i) $100,000,000 minus (ii) the principal amount
outstanding under the Securities Repurchase Agreement on the closing
date. The amount currently outstanding under the Securities
Repurchase Agreement is approximately $50,000,000. The Company also
would issue 40,000,000 shares of newly issued common stock (the “New Common
Stock”). The aggregate purchase price for the Notes and the New
Common Stock would equal the aggregate principal amount of the
Notes.
In
addition, under the terms of the
Proposal, the Warrants would be amended by changing the Exercise Price
(as
defined in the Warrants) to a price equal to $1.00, effective at the
closing.
The
terms of the Letter of Intent do
not create any binding obligation on the part of any party, except for
certain
confidentiality, exclusivity and reimbursement of expenses provisions
as set
forth in the Letter of Intent. Pending the execution of definitive
agreements, the Company agreed for an initial 30 day exclusivity period
not to
enter into any “Competing Transaction” (as defined in the Letter of Intent),
subject to the Company’s right to terminate the Letter of Intent if it receives
a “Superior Proposal” (as defined in the Letter of Intent), as described in
further detail in the Letter of Intent.
The
Company also agreed to
reimburse the reasonable legal and out-of-pocket costs and expenses,
including
all due diligence costs and expenses (including the fees and disbursements
of
counsel, its accountants, its financial advisors and other advisors and
consultants), incurred by AGSSC or its agents (the “AG Expenses”), to be paid
and reimbursed by the Company to AGSSC concurrently at the closing of
the
transactions contemplated by the Proposal; provided, that if (x) the
Company and
AGSSC do not enter into definitive documentation by December 15, 2007,
and in
the six (6) months thereafter the Company enters into a Competing Transaction,
(y) the Company breaches the exclusivity terms of the Letter of Intent,
or
terminates the Letter of Intent in accordance with the exclusivity terms
thereof, or (z) subsequent to entering into definitive documentation
the Company
terminates the
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CUSIP
NO. 247918105
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Page 6
of 7 Pages
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transaction
and accepts a Competing Transaction, then promptly thereafter the Company
is
required to pay and reimburse to AGSSC all the AG Expenses.
Under
the terms of the Proposal, AGSSC
and its affiliates would acquire a majority of the common stock of the
Company
and have the right to appoint a majority of the directors of the
Board.
The
Reporting Persons may make, or
cause to be made, further acquisitions of common stock (or securities
convertible into common stock) of the Company from time to time and may
dispose
of, or cause to be disposed of, any or all of such common stock held
by the
Reporting Persons at any time. The Reporting Persons intend to evaluate
on an
ongoing basis the investment in the Company and their options with respect
to
such investment.
Except
to the extent the foregoing may
be deemed a plan or proposal, none of the Reporting Persons has any plans
or
proposals which relate to, or could result in, any of the matters referred
to in
paragraphs (a) through (j), inclusive, of the instructions to Item 4
of Schedule
13D. The Reporting Persons may, at any time and from time to time,
review or reconsider their position and/or change their purpose and/or
formulate
plans or proposals with respect thereto.
Item
6. Contracts, Arrangements, Understanding or
Relationships with Respect to Securities of the
Issuer.
Except
as disclosed in a prior Schedule
13D or as otherwise described above, to the best knowledge of the Reporting
Persons there are no contracts, arrangements, understandings or relationships
(legal or otherwise) among the Reporting Persons or between such persons
and any
other person with respect to any securities of the Company, including
but not
limited to the transfer or voting of any securities of the Company, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees
of
profits, divisions of profits or loss, or the giving or withholding of
proxies.
Item
7. Material to be Filed as Exhibits.
The
following documents are being filed
as exhibits to this statement and are incorporated herein by
reference:
Exhibit
A
– Joint Filing Agreement, dated as of June 13, 2007, by and among Angelo,
Gordon
& Co., L.P., John M. Angelo and Michael L. Gordon (incorporated by reference
to Exhibit A to Schedule 13D initially filed on August 23, 2007 by the
Reporting
Persons).
Exhibit
H- Letter of Intent dated November 15, 2007 between AG Special Situation
Corp.
and Delta Financial Corporation.
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CUSIP
NO. 247918105
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Page 7
of 7 Pages
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SIGNATURES
After
reasonable inquiry and to the best of our knowledge and belief, the undersigned
certify that the information set forth in this statement is true, complete
and
correct.
Dated:
November 15, 2007
ANGELO,
GORDON &
CO., L.P.
By:
/s/
Michael L.
Gordon
Name:
Michael L.
Gordon
Title:
Chief
Operating Officer
JOHN
M.
ANGELO
/s/
John M.
Angelo
MICHAEL
L.
GORDON
/s/
Michael L.
Gordon
EXHIBIT H
AG
SPECIAL SITUATION CORP.
245
PARK AVENUE
New
York, New York 10167
November
15, 2007
Board
of
Directors
Delta
Financial Corporation
1000
Woodbury Road
Woodbury,
New York 11797
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Re:
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Recapitalization
of Delta Financial
Corporation
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Ladies
and Gentlemen:
AG
Special Situation Corp. (“AGSSC”) is pleased to submit this proposal to
recapitalize Delta Financial Corporation (“Delta” or the “Company”) by AGSSC or
its affiliates, through $100 million of financing, consisting of at
least $50
million (as discussed below) in new senior secured notes and the aggregate
principal amount of the existing financing that is currently outstanding
under
the Securities Repurchase Agreement dated August 13, 2007 between AG
Delta
Holdings, LLC and the Company and certain of its affiliates (the "Securities
Repurchase Agreement"), and the issuance by Delta of 40,000,000 shares
of common
stock in connection with such new senior secured notes (the “Transaction”), upon
the terms and subject to the conditions described in this letter and
the term
sheet attached hereto as
Exhibit A
(the “Term Sheet”).
1.
Terms
of the Transaction
. The Term Sheet attached as
Exhibit A
provides the terms and conditions of the Transaction. The parties will
negotiate in good faith with respect to any tax and ERISA structuring
issues
with respect to the Transaction.
2.
Assumptions
and Conditions
. The final transaction documents would be subject
to: (i) satisfactory completion/update of our due diligence review
of Delta,
including legal, regulatory, financial, accounting and tax due diligence;
(ii)
negotiation and execution of definitive agreements; (iii) receipt of
any
required approvals from Delta’s Board of Directors and shareholders; and (iv)
receipt of all governmental and any material third party approvals
necessary to
effect the Transaction (as further discussed in
Exhibit A
).
3.
Due
Diligence
. As a result of our status as one of the largest equity
investors in the Company, we believe that, with appropriate cooperation
from the
Company and its advisors, we will be able to complete our remaining
due
diligence as described above on an expedited basis.
4.
Timing
. We
are confident that we could both complete our due diligence process
and
negotiate definitive binding documentation within 30 days after the
execution of
this letter, and close the transaction promptly thereafter. We are
prepared to close immediately following the expiration of any Hart-Scott-Rodino
waiting period and receipt of all governmental approvals (as further
discussed
in
Exhibit A
), subject to approval by the shareholders (if required by
law and/or applicable stock exchange rules) and assuming no other Company
consents are necessary.
5.
Confidentiality
. The
Company and AGSSC reaffirm that the Confidentiality Agreement dated
July 31,
2007 remains in effect. However, the Company acknowledges that, as a
result of this letter, Angelo, Gordon & Co., L.P. may amend its Schedule 13D
as a result of this proposal and file this letter as an exhibit to
such Schedule
13D, and the Company hereby consents to such amendment and
filing,
provided that AGSSC agrees to provide a draft of such amendment to
the Company
for review and comment.
6.
Exclusivity
. Our
willingness to move forward as we have outlined in this letter is conditioned
on
the Company’s agreement (evidenced by its countersignature of this letter) that,
from the date of the Company’s execution of this letter through the period (the
“Exclusivity Period”) ending on the earlier of (a) the execution of a definitive
agreement with respect to the Transaction and (b) the expiration of
30 days from
such date (such expiration date to be extended at our request for one
additional
30 day period and subject to the Company’s consent, not to be unreasonably
withheld), the Company and its subsidiaries will not, directly or indirectly,
through any officer, director, employee, agent, shareholder, partner,
affiliate
or otherwise, enter into any agreement, agreement in principle, letter
of intent
or other commitment (whether or not legally binding) relating to any
merger or
other business combination with, recapitalization of, or acquisition
or purchase
of 15% or more of the fair market value of the assets of, or any equity
interests in (including securities convertible or exchangeable into
equity
interests), the Company or its subsidiaries or relating to any other
similar
transaction, including any such transaction effected through derivatives
(a
“Competing Transaction”). For the avoidance of doubt, the term
“Competing Transaction” for purposes of this Section 6 shall not be deemed to
include (i) securitizations or whole loan sales in the ordinary course
of
business of the Company or (ii) any non-disclosure agreements or preliminary
negotiations with, or preliminary proposals from or to, third
parties. The Company shall notify AGSSC promptly if any proposal
regarding a Competing Transaction (or any inquiry or contact with any
person or
entity with respect thereto) is made, and shall advise AGSSC of the
contents
thereof (and, if in written form, provide AGSSC with copies
thereof).
Notwithstanding
the foregoing, if the
Board of Directors of the Company (following the recommendation of
its Special
Committee, if deemed appropriate by the Company, upon advice of outside
independent legal counsel) determines in good faith after consultation
with its
outside independent legal counsel and independent financial advisors
that a
Competing Transaction is a Superior Proposal (as defined below), the
Board of
Directors may terminate this letter, subject to the payment to AGSSC
of all “AG
Expenses” as defined in the Term Sheet;
provided
, that prior to
terminating this letter (i) five business days shall have elapsed following
delivery by the Company to AGSSC of written notice advising AGSSC that
the Board
of Directors of the Company has received a Superior Proposal (or any
revision
thereto) and intends to terminate this letter, specifying the material
terms and
conditions of the Superior Proposal (or such revision) and identifying
the
person making the Superior Proposal (or such revision) and (ii) the
Company has
given AGSSC the opportunity to propose to the Company revisions to
the terms of
the Transaction, and the Company and its representatives shall have,
if
requested by AGSSC, negotiated in good faith with AGSSC and its representatives
regarding any revisions to the terms of the Transaction.
“Superior
Proposal” means a bona fide
written proposal for a Competing Transaction made by a third party
(x) on terms
that the Special Committee of the Board of Directors determines in
its good
faith judgment (based on the financial analysis and other advice of
independent
financial advisors and on the advice of independent legal advisors)
to be more
favorable to the stockholders of the Company than the Transaction (after
giving
effect to any proposed revisions to the terms of the Transaction pursuant
to
clause (ii) of the above proviso or otherwise), (y) which offer or
proposal is
reasonably likely to be consummated (taking into account, among other
things,
all legal, financial, regulatory and other aspects of the offer or
the proposal,
including any conditions and the identity of the offeror) and (z) for
which
financing, to the extent required, is then fully committed or which,
in the good
faith judgment of the Special Committee (based on the advice of independent
financial advisors), is reasonably capable of being timely financed
by such
third party.
7.
Warrants
. Upon
the closing of the Transaction, the warrants dated August 14, 2007
issued by the
Company to certain affiliates of AGSSC (the “Warrants”) shall be amended by
changing the Exercise Price (as defined in the Warrants) to a price
equal to
$1.00. Each of Delta and AGSSC promptly shall execute, and cause its
affiliates to execute, such other documents, agreements and instruments
as may
be reasonably necessary to effect such amendment to the Warrants.
8.
Non-binding
Nature of Proposal; Miscellaneous
. This letter and the Term Sheet
attached as Exhibit A is an expression of our interest in Delta and
does not
constitute an offer or agreement to provide financing or acquire all
or part of
Delta, or any securities issued by Delta, it being understood that
the terms of
any such financing or acquisition would be set forth in definitive
documentation
in form and substance satisfactory to the parties, and executed and
delivered by
them. This letter shall not give rise to any binding obligation on
the part of any party except as set forth in Sections 5, 6, 7, the
provision
titled “Third Party Costs” in the Term Sheet and this Section 8. This
letter constitutes the entire agreement among Delta, us and/or any
of our
respective affiliates, and supersedes all prior communications, agreements
and
understandings, written or oral, with respect to the proposed transaction
and
the matters referenced in this letter. This letter is not assignable
by either party to any other person or entity without the written consent
of the
other party, except that AGSSC may assign this letter to an affiliate
with the
written consent of Delta, which shall not be unreasonably
withheld. The terms and provisions of this letter cannot be amended,
waived or otherwise modified except in writing signed by AGSSC and
Delta. This letter may be signed in counterparts, all of which shall
constitute the same agreement, shall be governed by the domestic substantive
laws of New York, and shall bind and inure to the benefit of the parties
and
their respective successors and assigns.
The
Company acknowledges and agrees that except as otherwise expressly
indicated,
none of the terms set forth herein, or the fact that AGSSC has provided
this
proposal to the Company, shall in any way limit, waive, modify or affect
the
terms and conditions of the Securities Repurchase Agreement or any
documents
related thereto, or AG Delta Holdings LLC’s rights thereunder, all of which
rights and remedies that AG Delta Holdings LLC may have now or in the
future
under the Securities Repurchase Agreement, any related documents and/or
otherwise under applicable law are expressly reserved.
9.
Termination
. This
letter shall automatically terminate at 9:00 p.m., Eastern Time on
November 15,
2007 unless you have signed and returned a copy of this letter to AGSSC
prior to
such time.
Please
indicate your acceptance of the matters set forth herein by signing
in the place
provided below and returning the executed letter to David Roberts at
AG Special
Situation Corp., 245 Park Avenue, New York, New York 10167 or via facsimile
transmission to (212) 599-2920 prior to 9:00 PM New York City time
on November
15, 2007.
Very
truly
yours,
AG
Special Situation
Corp.
By:
/s/
David Roberts
Name:
David Roberts
Title:
Vice President
Agreed
and
Accepted:
Delta
Financial
Corporation
By:
/s/
Hugh Miller
Name:
Hugh Miller
Title:
President
