FORM 8-K
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): February 5, 2007
ASTA FUNDING, INC.
(Exact Name of Registrant as Specified in Charter)
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Delaware
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0-26906
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22-3388607 |
(State Or Other
Jurisdiction Of
Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
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210 Sylvan Avenue |
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Englewood Cliffs, New Jersey
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07632 |
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(Address of Principal Executive Offices)
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(Zip Code) |
Registrants telephone number, including area code (201) 567-5648
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
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))
Item 1.01 Entry into a Material Definitive Agreement.
On February 5, 2007, Palisades Acquisition XV, LLC, an indirect wholly-owned subsidiary of
Asta Funding, Inc. (the Company) entered into a Purchase and Sale Agreement (the Portfolio
Purchase Agreement) with Great Seneca Financial Corporation, Platinum Financial Services
Corporation, Monarch Capital Corporation, Colonial Credit Corporation, Centurion Capital
Corporation, Sage Financial Corporation and Hawker Financial Corporation (collectively, the
Sellers), under which we agreed to acquire a portfolio of approximately $6.9 billion in face
value receivables (the Portfolio) for a purchase price of $300 million plus 20% of any future Net
Payments (as defined in the Portfolio Purchase Agreement) received by the Company after the Company
has received Net Payments equal to 150% of the purchase price. The Portfolio predominantly
consists of credit card accounts and includes some accounts in collection litigation and accounts
as to which the Sellers have been awarded judgments.
We made the $60 million deposit on February 5, 2007. Such deposit utilized substantially all
of the availability under our existing credit facilities. We need to borrow or raise an additional
$15 million of financing to make a second deposit due on February 16, 2007 and $225 million beyond
that to make the final payment on the Closing Date, which is also February 16, 2007, but we have
the continuing right to postpone the Closing Date until March 31, 2007, which we anticipate
exercising in whole or in part. Any extensions thereafter must be by mutual consent. If we extend
the closing beyond March 5, 2007, we will suffer certain financial penalties. If we default and
such default is not cured within any applicable cure period, the agreement states that the Sellers
may terminate the agreement and retain the deposit as damages. The purchase agreement does not
have a financing contingency, and we are seeking an increase in our current credit facility and/or
other sources of financing to fund the additional deposit and the remainder of the purchase price.
No assurances can be given that we will be able to secure such financing on favorable terms or at
all.
Under the Portfolio Purchase Agreement, we assume certain risks associated with the Portfolio.
The representations and warranties with respect to the Portfolio which we received from the
Sellers have limitations both in scope and, in certain cases, duration, including a limitation of
our put-back rights with respect to certain types of claims, a requirement that certain claims be
brought within 120 days of closing or be deemed waived, and a limitation with respect to the
Sellers responsibilities for acts of prior owners. Other than the representations contained in
the portfolio Purchase Agreement, the accounts are being sold as is. We also have the risk of
recovering our deposit if the Sellers fail to deliver the required assets at closing.
Risk Factors.
The following are additional risk factors arising from the Portfolio Purchase Agreement that
should be considered in conjunction with risk factors previously disclosed in the Companys Annual
Report on Form 10-K filed with the Securities & Exchange Commission for the period ended September
30, 2006.
The Company may be unable to secure satisfactory financing to consummate the Portfolio Purchase
Agreement.
We were required to make a $60 million deposit on executing the Portfolio Purchase Agreement.
Such deposit utilized substantially all of the availability under our existing credit facilities.
We need to borrow or raise an additional $15 million of financing to make a second deposit due on
February 16, 2007 and $225 million beyond that to make the final payment on the
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Closing Date, which is also February 16, 2007, but we have the continuing right to postpone the
Closing Date until March 31, 2007, which we anticipate exercising in whole or in part.
If we extend the closing beyond March 5, 2007, we will suffer certain financial penalties. If
we default and such default is not cured within any applicable cure period, the agreement states
that the Sellers may terminate the agreement and retain the deposit as damages. The loss of the
deposit may also cause a default in our overall financial covenants to our lenders. The purchase
agreement does not have a financing contingency, and we are seeking an increase in our current
credit facility and/or other sources of financing to fund the additional deposit and the remainder
of the purchase price. No assurances can be given that we will be able to secure such financing on
favorable terms or at all.
The terms of any financing may adversely affect our ability to generate profits from the new
portfolio.
Our decision to enter into the Portfolio Purchase Agreement was based in part on certain
assumptions we have made about the range of the terms we expect to receive for the financing needed
to consummate the Portfolio Purchase Agreement (the Requisite Financing). As we do not yet have
a commitment for the Requisite Financing, no assurances can be given that financing terms offered
to us will not be materially less favorable to us than we anticipated when bidding on the
Portfolio, which would adversely affect the net returns we realize with respect to the Portfolio.
Further, while we have the unilateral right to postpone the closing to March 31, 2007 (and may
defer it longer with the Sellers consent), if we postpone the closing beyond March 5, 2007, we
will incur a financial penalty.
The anticipated benefits of the Portfolio may not meet our expectations.
The purchase of the Portfolio will increase our assets acquired for liquidation by more than
100%, so that our near term future operating results will be highly dependent on the returns
realized from the Portfolio. While we believe that we have the capability to manage such a
significantly increased asset base, no assurances that we will not experience operational
difficulties internally or with our third party servicers in managing an asset base of this size.
Further, while we believe that the returns on the Portfolio will be at least as favorable as our
historic returns on smaller portfolio purchases, no assurances can be given with respect to initial
evaluation of the quality of the assets in the Portfolio nor with respect to our ability to manage
the Portfolio profitably.
The terms of the Portfolio Purchase Agreement may not protect us against all risks associated with
the Portfolio.
Under the Portfolio Purchase Agreement, we assume certain risks associated with the Portfolio.
The representations and warranties with respect to the Portfolio which we received from the Sellers
have limitations both in scope and, in certain cases, duration, including a limitation of our
put-back rights with respect to certain types of claims, a requirement that certain claims be
brought within 120 days of closing or be deemed waived, and a limitation with respect to the
Sellers responsibilities for acts of prior owners. Other than the representations contained in
the portfolio Purchase Agreement, the accounts are being sold as is. We also have the risk of
recovering our deposit if the Sellers fail to deliver the required assets at closing.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit 10.1 Purchase and Sale Agreement, dated February 5, 2007, among the Sellers and
Palisades Acquisition XV, LLC |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ASTA FUNDING, INC.
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By: |
/s/ Mitchell Cohen
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Mitchell Cohen |
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Chief Financial Officer |
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Date: February 9, 2007
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EXHIBIT INDEX
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Exhibit |
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Number |
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Description |
Exhibit 10.1
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Purchase and Sale Agreement, dated February 5, 2007, among the Sellers and
Palisades Acquisition XV, LLC |
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