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): January 7,
2010
KH
FUNDING COMPANY
(Exact
name of registrant as specified in its charter)
Maryland
|
333-106501
|
52-1886133
|
(State
or other jurisdiction of
|
(Commission
file number)
|
(IRS
Employer
|
incorporation
or organization)
|
Identification
No.)
|
10801 Lockwood Drive, Suite
370, Silver Spring, Maryland 20901
(Address
of principal executive offices) (Zip Code)
(301)
592-8100
(Registrant’s
telephone number, including area code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
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))
|
|
INFORMATION
TO BE INCLUDED IN THE REPORT
|
Item
2.02
|
Results
of Operations and Financial
Condition.
|
The information required by this Item
is contained in Item 8.01 of this report and incorporated herein by
reference.
Item
8.01
|
Other
Events.
|
As previously reported, KH Funding
Company (the “Company”) received notice on December 21, 2009 from Wells Fargo
Bank (the “Trustee”), the trustee under the Company’s Indenture dated August 2,
2004, as amended and supplemented to date( the “Indenture”), that the Trustee
intended to provide written notice (the “Trustee Notice”) to all holders
(“Holders”) of the Company’s outstanding Series 3 Senior Secured Notes (the
“Series 3 Notes”) and Series 4 Subordinated Unsecured Notes (together with the
Series 3 Notes, the “Notes”) that an Event of Default (as defined in the
Indenture) existed under the Indenture because of the Company’s failure to
timely make principal and interest payments under approximately $4.53 million in
Notes. This amount represents approximately 11.04% of all Notes
currently outstanding ($39.86 million).
The Trustee also noted, however, that
the Trustee Notice would not be required if the Company were able to obtain
written waivers of the Event of Default from 100% of the Holders with respect to
whom the Company is in default (the “Affected
Holders”). The Company requested such waivers on December 23,
2009.
As of January 7, 2010, the aggregate
amount of Notes with respect to which the Company either was current in its
payment obligations or had obtained waivers of the Event of Default was
approximately $38.68 million, or 97.14% of all outstanding Notes, and the
aggregate amount of Notes with respect to which the Company was in default was
$1.18 million, or 2.86% of all outstanding Notes. Because of the
continuing default, the Trustee notified the Company that it had mailed the
Trustee Notice to all Holders on January 7, 2010.
The Trustee has asked the Company to
cease making any payments, from any source, to any Holder until either the Event
of Default is cured or the Company obtains waivers from 100% of the Affected
Holders. The Company intends to continue its efforts to obtain
written waivers from the remaining Affected Holders, as well as to otherwise
pursue a cure of the Event of Default, so that it can re-commence payments
under its Notes.
The consequences and risks associated
with an uncured Event of Default due to non-payment of principal or interest are
summarized in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, as updated by the Company’s Quarterly Reports on Form 10-Q
for the quarters ended March 31, 2009, June 30, 2009 and September 30,
2009.
In an effort to remedy the Event of
Default, the Company continues to pursue its previously disclosed efforts to
aggressively market and sell Other Real Estate Owned held for sale (“OREO”),
which had a carrying value of approximately $5.81 million as of September 30,
2009, as well as certain other assets. The Company believes that it
should be able to sell enough of its OREO over the next 30 to 60 days to satisfy
its obligations to Affected Holders. There can be no assurance,
however, that the Company’s efforts will be successful or, even if successful,
that the Company will not require additional funds to pay future redemption
requests or maturities as they come due.
2
Portions of this Item 8.01, including,
without limitation, the discussion in the preceding paragraph regarding the
Company’s
strategy for curing the Event of Default, contain “forward-looking statements”
as defined in the Private Securities Litigation Reform Act of
1995. These statements may be identified by the use of
forward-looking words or phrases such as “should”, “expects”, “anticipates”,
“plans”, “believes”, “intends”, “estimates”, and variations of such words and
similar expressions. These statements are not guarantees of future performance
and involve numerous risks and uncertainties that are difficult to
predict. Therefore, actual results may differ materially from what is
indicated in forward-looking statements due to a variety of
factors. These risks and uncertainties are described in detail in the
periodic reports that the Company files with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on such
forward looking statements, which speak only as of the date of this
report. Except as required by law, the Company assumes no obligation
to update any forward looking statements even if experience or future changes
make it clear that projected results expressed or implied in such statements
will not be realized.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KH FUNDING COMPANY | |||
Dated: January
8, 2010
|
By:
|
/s/ Robert L. Harris | |
Robert L. Harris | |||
President | |||
3