Attached files
| file | filename |
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| EX-16.1 - KH FUNDING CO | ex16-1.htm |
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): December 2,
2010
KH
FUNDING COMPANY
(Exact
name of registrant as specified in its charter)
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Maryland
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333-106501
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52-1886133
|
|
(State
or other jurisdiction of
|
(Commission
file number)
|
(IRS
Employer
|
|
incorporation
or organization)
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Identification
No.)
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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))
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INFORMATION
TO BE INCLUDED IN THE REPORT
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Item
1.03
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Bankruptcy
or Receivership.
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On December 3, 2010, KH Funding Company
(the “Company”) filed a voluntary petition in the United States Bankruptcy Court
for the District of Maryland (the “Bankruptcy Court”) for relief under the
provisions of Chapter 11 of Title 11 of the United States Code (the “Bankruptcy
Code”). The bankruptcy case number is 10-37371 TC.
Historically, the Company has generated
liquidity and capital resources primarily through its lending operations and the
sale of investment debt securities. The Company’s outstanding debt
securities include its Series 3 Senior Secured Investment Debt Securities (the
“Series 3 Notes”) and its Series 4 Subordinated Unsecured Investment Debt
Securities (the “Series 4 Notes” and together with the Series 3 Notes, the
“Notes”), which were issued and sold under an Indenture, dated as of August 2,
2004 (the “Indenture”), between the Company and Wells Fargo, National
Association (“Wells Fargo”), as trustee (“Wells Fargo”). Pursuant to
a Fourth Supplemental Indenture thereto, dated July 29, 2010, Wells Fargo
resigned as trustee for the Series 4 Notes and was replaced by Law Debenture
Trust Company of New York. Wells Fargo remains the trustee for the
Series 3 Notes.
As previously reported, the Company
experienced significant delays between 2006 and 2008 in obtaining an effective
registration statement for the offer and sale of its Notes. The
resulting inability to raise capital and the severe recession that has gripped
the United States since 2008 and its impact on the lending and real estate
markets have had a significant and adverse impact on the Company and its ability
to continue as a going concern.
On December 21, 2009, Wells Fargo
declared an event of default under the Indenture because the Company failed to
timely make payments due under some of the Notes. On February 5,
2010, Wells Fargo accelerated all of the Company’s outstanding
Notes. Since that time, the Company and the trustees under the
Indenture have been actively working to find a solution to the Company’s
financial situation that would allow the Company to restructure and/or pay its
obligations under the Indenture, but those efforts have not been
successful. Accordingly, at this time, the Company believes that its
best course of action is to seek protection under the Bankruptcy
Code.
The Company continues to operate its
business as a debtor-in-possession under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the Bankruptcy
Code. As of the date of this report, a trustee, receiver, fiscal
agent or similar officer has not been appointed.
As a result of the Company’s bankruptcy
filing, the ability of the Company’s creditors to seek remedies to enforce their
rights, including under the Indenture and the Notes, has been stayed, and
creditors’ rights of enforcement are subject to the applicable provisions of the
Bankruptcy Code.
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Item
4.01
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Changes
in Registrant’s Certifying
Accountant.
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On December 2, 2010, Stegman &
Company resigned as the Company’s independent registered accounting
firm. Given the pending bankruptcy case discussed in Item 1.03 of
this report, the Company’s Board of Directors does not intend to appoint a new
independent registered accounting firm.
The report of Stegman & Company on
the consolidated financial statements of the Company for the fiscal years ended
December 31, 2008 and 2007 (the last fiscal years for which a report was issued)
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principle, except that the
report included an explanatory paragraph expressing substantial doubt about the
Company’s ability to continue as a going concern, as, at that date, the Company
had recurring losses from operations, had a stockholders’ deficit, and was
unable to meet the redemption requests of holders of its investor debt
securities in a timely manner.
During the years ended December 31,
2009 and 2008, and during the interim period from the end of the most recently
completed fiscal year through December 2, 2010, the date of resignation, there
were no disagreements with Stegman & Company on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Stegman
& Company would have caused it to make reference to such disagreement in its
report.
During
the fiscal years ended December 31, 2009 and 2008, and during the interim period
from the end of the most recently completed fiscal year through December 2,
2010, there were no “reportable events” (as defined in Item 304 of Regulation
S-K) between the Company and Stegman & Company.
The Company provided Stegman &
Company with a copy of this report prior to the date it was filed with the
Securities and Exchange Commission (the “SEC”) and requested that Stegman &
Company furnish the Company with a letter addressed to the SEC stating whether
it agrees with above statements and, if it does not agree, the respects in which
it does not agree. A copy of Stegman & Company’s letter, dated
December 6, 2010, is filed as Exhibit 16.1 to this report.
Item
9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
16.1 – Letter from Stegman & Company dated December 6, 2010 (filed
herewith)
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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 | |||
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Dated: December
6, 2010
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By:
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/s/ Robert L. Harris | |
| Robert L. Harris | |||
| President | |||
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EXHIBIT
INDEX
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Exhibit
No.
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Description
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16.1
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Letter
from Stegman & Company dated December 6, 2010 (filed
herewith)
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