Apollo Real Estate to Invest in New Series of CRIIMI MAE Shares
Agreement Is Part of a $910 Million Reorganization Plan Under Which CRIIMI MAE
Would Emerge From Chapter 11
ROCKVILLE, Md., Sept. 9 /PRNewswire/ -- CRIIMI MAE Inc. (NYSE: CMM) today entered into a Stock Purchase Agreement ("Agreement") with an affiliate of Apollo Real Estate Advisors IV, L.P. ("Apollo"). Under the Agreement, Apollo will purchase $50 million, (up to $61 million under certain circumstances), of a new series of convertible preferred stock which would be part of the financing of an approximately $910 million plan of reorganization (the "Proposed Plan") whereby the Company would emerge from Chapter 11. The Agreement, which is subject to bankruptcy court approval, received the unanimous approval of CRIIMI MAE's Board of Directors. The Special Reorganization Committee, composed of the outside directors of the Company, recommended Board approval of the Agreement with Apollo.
In addition to the new equity investment, the Agreement and the Proposed Plan call for approximately $435 million of debt financing, some of which would come from existing debtholders, and $425 million of additional amounts, the bulk of which will result from the sale of certain commercial mortgage- backed securities ("CMBS"). Prior to October 5, 1999, which date could be extended under certain conditions, Apollo has the right to commit to purchase these CMBS at specified spreads over relevant treasury rates. The Company would retain related servicing rights so long as Apollo controls the entity which holds these bonds. At the Company's option, up to $11 million of the $425 million of the additional amounts may come from a rights offering in which existing common stockholders would be able to purchase new preferred stock on a pro rata basis.
The new preferred stock to be purchased by Apollo would be convertible into common stock at an initial conversion price of $3.25 per share, subject to an initial adjustment based on the Company's debt costs and thereafter subject to certain anti-dilution adjustments. Eighteen months from the issuance of the preferred stock, the conversion price would be subject to a one-time revision if the average market price during two 60-day reference periods is less than $4.75 per share. If such a revision is necessary, the revised conversion price will become a percentage, (60% to 70% based on an agreed schedule), of the average market price during the reference periods.
Under the Proposed Plan, the existing Series B Preferred Stock would become junior to the new preferred stock for 20 months and pari passu thereafter, with the current Series B dividend subject to upward adjustment as a result of confirmation of the Proposed Plan by the bankruptcy court. The Series C and Series D Preferred Stock would be redeemed in accordance with their terms. Holders of the Company's publicly-traded 91/8 % Senior Notes and other unsecured creditors would be paid in full, a portion in cash and a portion in new debt.
Pursuant to the Agreement, the Board of Directors will be increased to nine members with holders of the new preferred stock electing four of the members.
The Company has agreed that within five business days it will file a motion for expedited approval of certain provisions of the Agreement involving, among other things, a buyer break-up fee and buyer reimbursement and commitment fees. The Agreement is also subject to certain other conditions, including an eighteen-business day due diligence condition.
CRIIMI MAE chairman, William B. Dockser said, "The Agreement is an important step toward emerging from Chapter 11. Apollo's investment with us provides additional capital while the plan to sell CMBS slims down CRIIMI MAE. Taken in its entirety, the Agreement and the Proposed Plan establish a base for growth."
The Company is filing a report on Form 8-K with the Securities and Exchange Commission which will include the Agreement as an exhibit. The above summary of the Agreement is qualified in its entirety by reference to the entire Agreement (including the draft Articles Supplementary and the Proposed Plan).
The Company has filed a motion to extend the period in which it has the exclusive right to file a plan of reorganization, and solicit acceptances thereof, for a period of an additional sixty days. A hearing on such motion will be held in bankruptcy court tomorrow. |
