Franklin Credit Holding Corporation Becomes Parent Company of Franklin Credit Management Corporation
HOLDING COMPANY FORM OF ORGANIZATIONAL STRUCTURE ADOPTED
Franklin Credit Holding Corporation (Pink Sheets: FCMC) (“Frankliin Holding”, and with its direct and indirect subsidiaries, “the Company”) today announced that, effective December 19, 2008, it became the parent company of Franklin Credit Management Corporation in the adoption of a holding company form of organizational structure.
This reorganization (the “Reorganization”) is expected to (1) result in Franklin Credit Management Corporation, which holds the Company’s servicing platform, having positive net worth as a result of having assigned and transferred to a newly formed sister company ownership of the entities holding beneficial ownership of the Company’s loan portfolio and the related indebtedness, and, accordingly, being able to comply with applicable net worth requirements to maintain licenses to service and collect loans in various jurisdictions; and (2) enhance the Company’s ability to grow its servicing business and take advantage of other corporate restructuring opportunities should they become available.
The business operations and financial condition of the Company taken as a whole, including Franklin Servicing, on a consolidated basis (the “Company”), including the Company’s consolidated substantial negative net worth, did not change as a result of the Reorganization. However, the resulting financial condition of Franklin Credit Management Corporation, which holds the servicing platform, changed, inasmuch as it now has a positive net worth.
Other than the difference in their names, the certificate of incorporation, by-laws, authorized capital stock, outstanding capital stock, board of directors and officers of Franklin Holding are the same as those of Franklin Credit Management Corporation prior to the reorganization. No post-merger exchange of stock certificates is necessary, and the outstanding shares of Franklin Credit Management Corporation Common Stock have been automatically converted into an equal number of shares of Franklin Holding Common Stock. Franklin Holding’s common stock will continue to be quoted on the Pink Sheets under the symbol “FCMC.PK.”
The Company believes that the Reorganization qualifies as a tax-free reorganization under Section 351 of the Internal Revenue Code of 1986, as amended, and, as a result, Franklin Credit Management Corporation’s stockholders will not recognize gain or loss for U.S. federal income tax purposes as a result of the Reorganization.
Concurrent with the Reorganization, the Company entered into a series of agreements with The Huntington National Bank (“Huntington”), its lead lending bank, which included, among other amendments, guaranties of the indebtedness to Huntington by various new entities in the Company’s structure and Huntington waiving the Company’s breach of its covenant to comply with all laws, rules and regulations to the extent such breach resulted from the Company’s failure to satisfy a minimum net worth requirement prior to the reorganization.
The Forbearance Agreements continue to be subject to a scheduled maturity date of May 15, 2009.
For additional information regarding the Reorganization, please refer to the Company’s Form 8-K filing with the Securities and Exchange Commission dated December 24, 2008.
Source: Franklin Credit Holding Corporation