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
Date
of
Report (Date of earliest event reported): August 22, 2008
United
PanAm Financial Corp.
(Exact
name of registrant as specified in its charter)
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California
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94-3211687
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
employer
identification
number)
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Commission
file number: 000-24051
18191
Von Karman Avenue, Suite 300
Irvine,
California 92612
(Address
of principal executive offices and zip code)
Registrant’s
telephone number, including area code: (949) 224-1917
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:
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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CAUTIONARY
NOTICE REGARDING FORWARD LOOKING STATEMENTS
Certain
statements contained in this Current Report on Form 8-K are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, or the Act. Statements which are predictive in nature, which depend
upon or refer to future events or conditions, or which include words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “hopes,”
“assumes,” “may,” “project,” “will” and similar expressions constitute
forward-looking statements. In addition, any statements concerning future
financial performance (including future revenues, earnings or growth rates),
ongoing business strategies or prospects, and possible future actions, which
may
be provided by management are also forward-looking statements as defined in
the
Act. Forward-looking statements are based upon expectations and projections
about future events and are subject to assumptions, risks and uncertainties
about, among other things, United PanAm Financial Corp. (the “Company”) and
economic and market factors. Actual events and results may differ materially
from those expressed or forecasted in the forward-looking statements due to
a
number of factors. The principal factors that could cause our actual performance
and future events and actions to differ materially from such forward-looking
statements include, but are not limited to, changes in the interest rate
environment, risks associated with downsizing the Company, and other factors
or
conditions described under “Part II, Item 1A. Risk Factors” of our last
Quarterly Report on Form 10-Q. The Company’s past performance and past or
present economic conditions are not indicative of its future performance or
of
future economic conditions. Undue reliance should not be placed on
forward-looking statements. In addition, the Company undertakes no obligation
to
update or revise forward-looking statements to reflect changed assumptions,
the
occurrence of anticipated or unanticipated events or changes to projections
over
time unless required by federal securities law.
Item
1.01. Entry into a Material Definitive Agreement.
The
information set forth in Item 8.01 is incorporated by reference herein.
Item
8.01 Other Events
Summary
On
August 22, 2008, United PanAm Financial Corp. (the “Company” or “UPFC”) entered
into an amendment to its $300 million warehouse facility, which the Company
has
historically used to fund its automobile finance operations to purchase
automobile contracts pending securitization. The amendment continues the
revolving nature of the warehouse facility through its previously scheduled
maturity of October 16, 2008 and, after that time, provides that the warehouse
facility becomes a term loan for an additional one-year term, which amortizes
pursuant to a pre-determined schedule, providing that the Company will pay
all
amounts owed under the warehouse facility by October 2009. The August 22, 2008
amendment also lowers the aggregate advance amount available under the warehouse
facility (and the term loan) to $260 million.
By
entering into the August 22, 2008 amendment, the warehouse facility lenders
have
approved the July 25, 2008 appointment of James Vagim as UPFC’s chief executive
officer and have removed the requirement that, within certain specified time
periods, the Company access the securitization markets to reduce amounts owed
under the warehouse facility. The Company had previously disclosed in a Current
Report on Form 8-K filed on July 31, 2008 that Mr. Vagim’s appointment required
the approval of the warehouse lenders.
This
Current Report on Form 8-K describes the parties to the August 22, 2008
amendment, the market conditions that have impacted the Company prior to
entering into the amendment, the Company’s strategy going forward in light of
the changes to the warehouse facility, and discusses the status of approvals
under the Company’s six securitizations regarding the appointment of Mr. Vagim
as UPFC’s chief executive officer.
Parties
to the amendment and general terms of the warehouse facility
The
amendment was entered into by and among (1) the Company; (2) United Auto Credit
Corporation (“UACC”), the Company’s direct, wholly-owned subsidiary; (3) United
Auto Business Operations, LLC (“UABO”), the Company’s direct, wholly-owned
subsidiary; (4) UPFC Funding Corp. (“UFC”), UACC’s direct, wholly-owned
subsidiary; (5) certain participating lenders, including Deutsche Bank AG,
New
York Branch, (5) CenterOne Financial Services, LLC as backup servicer, and
(6)
Deutsche Bank Trust Company Americas as administrative/collateral agent and
as
custodian.
Under
the terms of the warehouse facility, the Company’s indirect subsidiary, UFC has
historically obtained advances on a revolving basis by issuing notes to the
participating lenders and pledging for each advance a portfolio of automobile
contracts. UFC purchases the automobile contracts from UACC and UACC services
the automobile contracts, which are held by a custodian. UPFC provides an
absolute and unconditional and irrevocable guaranty of the full and punctual
payment and performance, of certain liabilities, agreements and other
obligations of UACC and and UABO in connection with the warehouse facility.
Although the warehouse lenders have expressed their intention that UACC continue
to service the automobile contracts pledged to the warehouse facility through
UACC’s decentralized branches, the warehouse facility, as amended, provides that
UACC will act as servicer on a month-to-month basis for the automobile contracts
pledged to the warehouse facility. UACC’s servicing rights automatically expire
each month, unless extended by the warehouse lenders in their sole and absolute
good faith discretion.
Market
Conditions Impacting the Company
The
asset-backed securities market, along with credit markets in general, have
been
experiencing unprecedented disruptions,
including
reduced liquidity and reduced investor demand for asset-backed securities.
Since
2004, the
Company
has developed and implemented a securitization program that involved selling
interests in pools of automobile contracts (that were originally pledged under
the warehouse facility) to investors through the public issuance of asset-backed
securities. The Company has historically used the proceeds from such
securitization transactions to periodically reduce amounts owed under the
warehouse facility. However, due to the disruptions in the credit markets,
the
Company’s access to the asset-backed securities market has been reduced and the
Company has not accessed the securitization market with a transaction since
November 2007. In turn, amounts owed under the warehouse facility have not
been
reduced with proceeds from a securitization since that time. As of June 30,
2008, the $300 million warehouse facility was drawn to $237.1 million. Prior
to
being amended, the warehouse facility included a requirement that the Company
access the securitization market and reduce amounts owed under the warehouse
facility within certain specified time periods. The August 22, 2008 amendment
removes this securitization requirement and provides that the warehouse facility
becomes a term loan for another year beginning on October 17, 2008 such that
the
amounts drawn down under the warehouse facility amortize pursuant to a
pre-determined schedule.
Strategy
Going Forward
As
a result of the continued disruptions in the capital markets, including the
uncertainty for use of securitizations as a source of financing, as well as
the
lack of available borrowing capacity under the warehouse facility for an
extended period of time, the Company previously determined to downsize its
operations and reduce its branch footprint in order to lower expenses and meet
required liquidity needs. The Company intends to pursue that same strategy
under
the warehouse facility, as amended. In addition, the Company has significantly
slowed new loan originations in the third quarter of 2008 and will continue
this
practice during the fourth quarter of 2008 to allow the Company’s outstanding
receivables to shrink to a level where the Company’s capital base will be able
to finance future originations at the lower advance structures currently
available in the market. Management is currently pursuing and evaluating
alternative sources of financing and is also considering selling receivables
on
a whole-loan basis. At this time, there is no assurance the Company will be
able
to arrange for other types of interim financing or be able to sell receivables
on a whole-loan basis.
Status
of Securitization Approvals
As
was
previously disclosed in a Form 8-K filed on July 31, 2008, the Company replaced
its chief executive officer as of July 25, 2008. The replacement of UPFC’s chief
executive officer required the approval of the warehouse lenders and the various
insurance providers that insure UPFC’s six outstanding securitizations. As
disclosed above, by entering into the August 22, 2008 amendment to the warehouse
facility, the warehouse lenders have approved the appointment of James Vagim
as
the Company’s chief executive officer.
UPFC
is
continuing its discussions with the various insurance providers to obtain
approval of the appointment of Mr. Vagim as UPFC’s chief executive officer. If
Mr. Vagim is not approved, each insurance provider may elect to enforce the
various rights and remedies that are governed by the different transaction
documents for each securitization. At this time, there is no assurance that
UPFC
will obtain such approvals.
Filing
of the Amended Warehouse Facility Agreement
The
foregoing is a summary of the material terms of the warehouse facility, as
amended, and does not purport to be complete. The complete amended warehouse
facility shall be attached as an exhibit to the Company’s next Quarterly Report
on Form 10-Q and, when filed, such agreement shall be incorporated by reference
herein. The Company will seek confidential treatment for certain terms of the
agreement at the time of filing such Quarterly Report.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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United
PanAm Financial Corp.
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(Registrant)
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Dated:
August 27, 2008
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By:
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/s/
Arash Khazei
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Name:
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Arash
Khazei
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Title:
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Chief
Financial Officer
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United Panam Financial (NASDAQ:UPFC)
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