| Franchise Mortgage Acceptance Co. | |||
| Ticker: | FMAX | 2049 Century Park East, Suite 350 | |
| Exchange: | NASDAQ-National Market | Los Angeles, CA 90067 | |
| Industry: | Financial (SIC Code 6162) | (310) 229-2600 | |
| # of Employees: | 123 | ||
| Type of Shares: | Common Shares | Filing Date: | 8/27/97 | |
| U.S. Shares: | 10,000,000 | Offer Date: | 11/18/97 | |
| Non-U.S. Shares: | 0 | Filing Range: | $16.00 - $18.00 | |
| Primary Shares: | 5,937,500 | Offer Price: | $18.00 | |
| Secondary Shares: | 4,062,500 | Gross Spread: | $1.26 | |
| Offering Amount: | $170,000,000 | Selling: | $0.72 | |
| Expenses: | $750,000 | Reallowance: | $0.10 | |
| Shares Out After: | 27,200,000 |
| Manager | Tier | Phone |
| Montgomery Securities | Lead Manager | (415) 627-2100 |
| CS First Boston | Co-manager | (212) 325-2000 |
| PaineWebber Incorporated | Co-manager | (212) 713-2626 |
| Issuer's Law Firm: | Freshman, Marantz, Orlanski, Cooper & Klein |
| Bank's Law Firm: | Gibson, Dunn & Crutcher |
| Auditor: | KPMG Peat Marwick |
| Registrar/Transfer Agent: | U. S. Stock Transfer Corporation |
Dollar amounts in U.S. millions except for per share data | |||||
| 6 Month Ending Financials | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/96 | 6/30/97 | 6/30/96 | 6/30/97 | ||
| Revenue: | $21.57 | $22.56 | $13.53 | Assets: | $232.96 |
| Net Income: | $9.32 | $13.96 | $7.76 | Curr Assets: | |
| EPS: | Liabilities: | $210.86 | |||
| Prior EPS: | -$92.24 | Curr Liabilities: | |||
| Cash Flow/Oper: | $87.45 | $56.63 | Equity: | $22.10 | |
| Cash Flow/Fin: | $37.30 | $35.80 | Cash: | $0.01 | |
| Cash Flow/Inv: | -$49.87 | $35.80 | |||
| Business Description |
| The company is a specialty commercial finance company engaged in the business of originating and servicing loans and equipment leases to small businesses, with a primary focus on established national and regional franchise concepts. Since commencing business in 1991, the Company believes it has become a leading lender to national and regional quick service restaurant ("QSR") franchisees, and the Company has developed a growing presence in the casual dining sector. More recently, the Company has expanded its focus to include retail energy licensees (service stations, convenience stores, truck stops, car washes and quick lube businesses) and golf operating businesses (golf courses and golf practice facilities). The Company originates long-term fixed and variable rate loan and lease products and sells such loans and leases either through securitizations or whole loan sales to institutional purchasers on a servicing retained basis. The Company believes that its loan and lease products are attractive investments to institutional investors because of the credit profile of its Borrowers (as defined herein), relatively long loan and lease terms, call protection through prepayment penalties and appropriate risk-adjusted yields. The Company also periodically makes equity investments or receives contingent equity compensation as part of its core lending and leasing business. The Company originated loans and leases through 11 marketing offices in nine states at June 30, 1997. Since the Company's inception, it has funded over $1.4 billion in loans and leases and at June 30, 1997, had a servicing portfolio of $1.1 billion. The Company's loan and lease originations grew to $458.5 million in 1996 from $218.7 million in 1995 and to $300.6 million for the six month period ended June 30, 1997 from $208.4 million for the comparable period in 1996. At June 30, 1997, the Company's average initial loan balance was $730,000 and the percentage of its loans and leases that were 90 days or more delinquent was 0.1%. |
| Competition |
| The Company faces intense competition in the business of originating and selling loans and leases. Traditional competitors in the financial services business include commercial banks, thrift institutions, diversified finance companies, asset-based lenders, specialty franchise finance companies and real estate investment trusts. Many of these competitors in the commercial finance business are substantially larger and have considerably greater financial, technical and marketing resources than the Company. In addition, many financial service organizations have formed national networks for loan and lease originations substantially similar to the Company's loan and lease programs. Competition can take many forms including convenience in obtaining a loan or lease, customer service, marketing and distribution channels, amount and term of the loan, and interest or credit ratings. In addition, the current level of gains realized by the Company and its competitors on the sale of loans and leases could attract additional competitors into this market with the possible effect of lowering gains on future loan and lease sales due to increased loan and lease origination competition. |
| Business Plan |
| The Company's goal is to become a leading national small business lender in each of its target markets. The Company's growth and operating strategy is based on the following key elements: Growth in Existing Sectors. The Company plans to replicate its success in the restaurant sector in other business sectors that it has entered more recently, such as retail energy and golf, through focused product development, customer service and support. The Company forms specialized teams for each sector to assess customer needs, generate customer loyalty and enhance service and support. Management believes that its industry leadership position, relationships with major Borrowers, franchisors and vendors, and expertise within sectors will assist the Company in increasing its market share. Controlled Expansion into New Sectors. Management believes that substantial opportunities exist to extend the Company's expertise into other business sectors. The Company believes that its experience in lending to restaurant franchisees has allowed it to develop a template for efficiently originating and servicing loans and leases in other industry sectors. The Company's philosophy is to provide complete business solutions to identified industries by developing strategies and financial products which are based on industry characteristics and each Borrower's specific needs. The Company carefully reviews industry data, seeking business sectors with a combination of large funding requirements, proven cash flow generating capabilities, standardized operations, a scarcity of long-term, fixed rate funding sources and characteristics attractive to secondary market investors. Maintenance of Credit Quality. The Company's delinquency and loss experience has been extremely low, due in part to lending to experienced operators, its detailed industry knowledge, active oversight of its existing servicing portfolio, strict underwriting criteria and the Company's ability to locate qualified replacement Franchisees/Borrowers to assume delinquent loans. At June 30, 1997, the Company had only two loans 90 days or more delinquent and, from its inception in April 1991 through June 30, 1997 had experienced no credit losses. Efficient Secondary Market Execution. The Company is committed to maintaining effective secondary market execution on loans and leases that it originates and sells. The Company believes that the favorable execution it has experienced to date is primarily the result of the attractive terms and the credit quality of the loans and leases that it originates. Of the $37.5 million in gain on sale from securitizations recognized by the Company since January 1, 1996, $30.3 million was comprised of cash received by the Company at the time of securitization and not the present value of anticipated cash flows on retained interests. As a result, the Company has reduced its exposure to the risks associated with holding large amounts of such retained interests on its balance sheet. From the beginning of 1996 through June 30, 1997, the Company completed three securitizations and a whole loan sale totaling $553.0 million and $15.3 million, respectively. In all such transactions, the Company has retained the right to service the sold or securitized loans. Diversification of Revenue Sources. Management is committed to developing a diversified revenue base to reduce revenue volatility and enhance profitability. The Company continually monitors and adjusts its loan and lease products and securitization structures to improve the stability of its cash flows. Revenue sources include loan and lease origination points and fees, interest income earned prior to the sale of the loans and leases, whole loan and lease sale profits, securitization profits, loan and lease servicing fees and equity investment returns. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used to repay debt, for future loan and lease originations and equity investments, and for general corporate purposes. |
| Name of Shareholder | % Owned Before | % Owned After |
| Imperial Credit Industries, Inc. | 66.70% | 44.40% |
| FLRT, Inc. | 33.30% | 23.40% |
| Officer Name | Title | Age |
| H. Wayne Snavely | Chairman of the Board | 56 |
| Thomas J. Shuaghnessy | Executive Vice President and Chief Credit Officer | 39 |
| Raedelle A. Walker | Executive Vice President and Chief Financial Officer | 42 |
| Kevin T. Burke | Executive Vice President, Capital Markets | 39 |
| John W. Rinaldi | Executive Vice President, Loan Portfolio Management and President, Equipment Finance Group | 49 |
| Wayne L. "Buz" Knyal | President, Chief Executive Officer and Director | 51 |