-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dgt8uvIgzup+Y6EfTM5V3jwiDfsxmRGHXdtjDiRIrloi9hz3X2XAtYvyDOfPvnFq TxzjROOc9IFyLxRQ6m6azg== 0000950129-02-004807.txt : 20021001 0000950129-02-004807.hdr.sgml : 20021001 20020930175631 ACCESSION NUMBER: 0000950129-02-004807 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20021001 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTCITY FINANCIAL CORP CENTRAL INDEX KEY: 0000828678 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 760243729 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-40461 FILM NUMBER: 02777375 BUSINESS ADDRESS: STREET 1: 6400 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 BUSINESS PHONE: 2547511750 MAIL ADDRESS: STREET 1: 6400 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 FORMER COMPANY: FORMER CONFORMED NAME: FIRST CITY ACQUISITION CORP DATE OF NAME CHANGE: 19880523 FORMER COMPANY: FORMER CONFORMED NAME: FIRST CITY BANCORPORATION OF TEXAS INC/ DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTCITY FINANCIAL CORP CENTRAL INDEX KEY: 0000828678 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 760243729 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 6400 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 BUSINESS PHONE: 2547511750 MAIL ADDRESS: STREET 1: 6400 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 FORMER COMPANY: FORMER CONFORMED NAME: FIRST CITY ACQUISITION CORP DATE OF NAME CHANGE: 19880523 FORMER COMPANY: FORMER CONFORMED NAME: FIRST CITY BANCORPORATION OF TEXAS INC/ DATE OF NAME CHANGE: 19920703 SC 13E3/A 1 h97606e5sc13e3za.txt FIRSTCITY FINANCIAL CORP - AMENDMENT NO.3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 3 TO SCHEDULE TO TENDER OFFER STATEMENT UNDER TO SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 FIRSTCITY FINANCIAL CORPORATION (Name of Subject Company (Issuer)) FIRSTCITY FINANCIAL CORPORATION JAMES R. HAWKINS JAMES T. SARTAIN RICHARD E. BEAN (Name of Filing Persons (Issuer)) NEW PREFERRED STOCK, PAR VALUE $0.01 PER SHARE (Title of Class of Securities) 33761X 305 (CUSIP Number of Class of Securities) JAMES T. SARTAIN PRESIDENT AND CHIEF EXECUTIVE OFFICER FIRSTCITY FINANCIAL CORPORATION 6400 IMPERIAL DRIVE WACO, TEXAS 76712 (254) 751-1750 WITH COPIES TO: BRIAN D. BARNARD RICHARD J. VANDER WOUDE HAYNES AND BOONE, LLP SENIOR VICE PRESIDENT, 201 MAIN STREET GENERAL COUNSEL AND SECRETARY SUITE 2200 FIRSTCITY FINANCIAL CORPORATION FORT WORTH, TEXAS 76102 6400 IMPERIAL DRIVE (817) 347-6600 WACO, TEXAS 76712 (254) 751-1750
(Names, Addresses and Telephone Numbers of Persons Authorized to Receive Notices and Communications on Behalf of Filing Persons) [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [ ] third-party tender offer subject to Rule 14d-1. [X] issuer tender offer subject to Rule 13e-4. [X] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Amendment No. 3 to combined Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement (collectively, the "Schedule TO") is filed by FirstCity Financial Corporation, a Delaware corporation ("FirstCity"), James R. Hawkins ("Hawkins"), James T. Sartain ("Sartain"), and Richard E. Bean ("Bean" and together with Hawkins and Sartain, the "Filing Persons"), and relate to the offer (the "Offer") by FirstCity to exchange each issued and outstanding share of its New Preferred Stock, par value $0.01 per share (the "New Preferred Stock"), for, at the election of the holder of the New Preferred Stock, either (a) two shares of FirstCity common stock, par value $0.01 per share, and cash totaling $10.00 or (b) three shares of FirstCity common stock and cash totaling $8.00 (the "Exchange Consideration"), on the terms and subject to the conditions described in the prospectus filed as Exhibit (a)(1) hereto. FirstCity has filed with the Securities and Exchange Commission Pre-Effective Amendment No. 3 to its registration statement on Form S-4 (SEC File No. 333-90258) relating to the shares of common stock to be issued to stockholders in the Offer (the "Registration Statement"). The terms and conditions of the Offer are set forth in the prospectus which is a part of the registration statement (the "Prospectus"), and the related Letter of Transmittal, which are exhibits (a)(1) and (a)(2) hereto. ITEM 1. SUMMARY TERM SHEET Information is disclosed to security holders in a prospectus meeting the requirements of Rule 421(d) of the Securities Act of 1933. A summary term sheet is set forth on page 1 of the Prospectus. ITEM 2. SUBJECT COMPANY INFORMATION (a) Name and Address. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Information About FirstCity and Certain Affiliates" is incorporated by reference pursuant to General Instruction F to Schedule TO. (b) Securities. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Description of FirstCity's Capital Stock -- General" is incorporated by reference pursuant to General Instruction F to Schedule TO. (c) Trading Market and Price. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Market Prices and Dividends" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON (a) Name and Address. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Information About FirstCity and Certain Affiliates" and "Special Factors -- Interests of Certain Persons in the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 4. TERMS OF THE TRANSACTION (a) Material Terms. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Questions and Answers About the Exchange Offer," "The Exchange Offer," "Description of FirstCity's Capital Stock," and "Special Factors -- Material Federal Income Tax Consequences" is incorporated by reference pursuant to General Instruction F to Schedule TO. (b) Purchases. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Interests in Certain Persons in the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS (e) Agreements Involving the Subject Company's Securities. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Fees and Expenses of the 2 Exchange Offer; Source of Funds" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS (a) Purposes. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Questions and Answers About the Exchange Offer," "Special Factors -- Background of the Exchange Offer" and "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule TO. (b) Use of Securities Acquired. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Effect of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule TO. (c) Plans. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Questions and Answers About the Exchange Offer," "Special Factors -- Background of the Exchange Offer," "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer," -- Effect of the Exchange Offer" and "-- Fees and Expenses of the Exchange Offer; Source of Funds" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a) Source of Funds. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Fees and Expenses of the Exchange Offer; Source of Funds" is incorporated by reference pursuant to General Instruction F to Schedule TO. (b) Conditions. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Fees and Expenses of the Exchange Offer; Source of Funds" is incorporated by reference pursuant to General Instruction F to Schedule TO. (d) Borrowed Funds. Not applicable. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY (a) Securities Ownership. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Interests of Certain Persons in the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule TO. (b) Securities Transactions. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Recent Transactions in Securities" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED (a) Solicitations or Recommendations. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Fees and Expenses of the Exchange Offer; Source of Funds" and "The Exchange Offer -- Fees and Expenses" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 10. FINANCIAL STATEMENTS (a) Financial Information. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Selected Consolidated Financial Data" is incorporated by reference pursuant to General Instruction F to Schedule TO. (b) Pro Forma Information. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Selected Unaudited Pro Forma Consolidated Condensed Financial Data" and 3 "Unaudited Pro Forma Consolidated Condensed Financial Data" is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 11. ADDITIONAL INFORMATION (a) Agreements, Regulatory Requirements and Legal Proceedings. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "The Exchange Offer -- Certain Legal Matters" is incorporated by reference pursuant to General Instruction F to Schedule TO. (b) Other Material Information. The entirety of the Prospectus and the related Letter of Transmittal is incorporated by reference pursuant to General Instruction F to Schedule TO. ITEM 12. EXHIBITS (a)(1) -- Prospectus relating to shares of FirstCity Common Stock to be issued in the Offer (incorporated by reference from FirstCity's Pre-Effective Amendment No. 3 to its Registration Statement on Form S-4 filed on September 30, 2002) (a)(2) -- Form of Letter of Transmittal (included as Appendix A to the Prospectus, which is incorporated by reference from FirstCity's Pre-Effective Amendment No. 3 to its Registration Statement on Form S-4 filed on September 30, 2002.) (a)(3) -- Form of Notice of Guaranteed Delivery (previously filed as Exhibit 99(a)(3) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (a)(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (previously filed as Exhibit 99(a)(4) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (a)(5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (previously filed as Exhibit 99(a)(5) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (d)(1) -- Securities Purchase Agreement, dated June 11, 2002, among FirstCity, FirstCity Consumer Lending Corporation, FirstCity Funding, L.P., FirstCity Funding GP Corp., IFA Drive GP Holdings LLC, IFA Drive LP Holdings LLC, Drive Holdings LP and Drive Financial Services LP (previously filed as Exhibit 99(d)(1) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (d)(2) -- Amended and Restated Letter of Intent, dated May 25, 2002, among FirstCity and the FCHC Group (previously filed as Exhibit 99(3)(2) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (d)(3) -- Confirmation of Intent to Tender Shares of New Preferred Stock, by each of James R. Hawkins, James T. Sartain, Richard E. Bean, Dane Fulmer, Robert E. Garrison, and C. Ivan Wilson (previously filed as Exhibit 99(d)(3) to FirstCity's Amendment No. 1 to Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on July 26, 2002) (d)(4) -- Commitment Letter, dated September 25, 2002, between FirstCity Financial Corporation and BoS(USA), Inc. (filed as Exhibit 10.50 to FirstCity's Pre-Effective Amendment No. 3 to its Registration Statement on Form S-4 filed on September 30, 2002 and incorporated by reference)
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3 ITEM 2. SUBJECT COMPANY INFORMATION (d) Dividends. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Market Prices and Dividends" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (e) Prior Public Offerings. Not applicable. (f) Prior Stock Purchases. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Recent Transactions in Securities" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. 4 ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON (b) Business and Background of Entities. Not applicable. (c) Business and Background of Natural Persons. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Information About FirstCity and Certain Affiliates" and "Management -- Directors and Executive Officers" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. During the last five years, none of FirstCity, the Filing Persons, or, to the best of its knowledge, any of FirstCity's executive officers and directors has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Each of the natural persons referred to herein is a United States citizen. ITEM 4. TERMS OF THE TRANSACTION (c) Different Terms. Not applicable. (d) Appraisal Rights. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Prospectus Summary -- No Appraisal Rights in Connection with the Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (e) Provisions for Unaffiliated Security Holders. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Reasons for the Exchange Offer and Fairness of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (f) Eligibility for Listing or Trading. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Effect of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS (a) Transactions. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Background of the Exchange Offer" and "Management -- Certain Relationships and Related Transactions" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (b) Significant Corporate Events. Not applicable. (c) Negotiations or Contacts. Not applicable. ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS (a) Purposes. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Questions and Answers About the Exchange Offer," "Special Factors -- Background of the Exchange Offer" and "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (b) Alternatives. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer" and "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (c) Reasons. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Questions and Answers About the Exchange Offer," "Special Factors -- Background of the Exchange Offer," "-- Reasons for the Exchange Offer and Fairness of the Exchange 5 Offer," -- Effect of the Exchange Offer" and "-- Fees and Expenses of the Exchange Offer; Source of Funds" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (d) Effects. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Questions and Answers About the Exchange Offer," "Special Factors -- Background of the Exchange Offer," "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer," -- Effect of the Exchange Offer," "-- Fees and Expenses of the Exchange Offer; Source of Funds" and "-- Material Federal Income Tax Consequences" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. ITEM 8. FAIRNESS OF THE TRANSACTION (a) Fairness. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer," "-- Recommendation of the Special Committee and the FirstCity Board," "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer," and "-- Review of the Exchange Offer by Filing Persons" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (b) Factors Considered in Determining Fairness. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer," "-- Recommendation of the Special Committee and the FirstCity Board," "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer," "-- Review of the Exchange Offer by Filing Persons," and "-- Fairness Opinion of Keefe, Bruyette & Woods" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (c) Approval of Security Holders. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Reasons for the Exchange Offer and Fairness of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (d) Unaffiliated Representative. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer," "-- Recommendation of the Special Committee and the FirstCity Board," "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer," and "-- Fairness Opinion of Keefe, Bruyette & Woods" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (e) Approval of Directors. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer," "-- Recommendation of the Special Committee and the FirstCity Board" and "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (f) Other Offers. Not applicable. ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS (a) Report, Opinion or Appraisal. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer" and "Special Factors -- Fairness Opinion of Keefe, Bruyette & Woods" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (b) Preparer and Summary of the Report, Opinion, or Appraisal. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Fairness Opinion of Keefe, Bruyette & Woods" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. 6 (c) Availability of Documents. The information set forth in the Prospectus and the related Letter of Transmittal under the caption "Special Factors -- Fairness Opinion of Keefe, Bruyette & Woods" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. ITEM 10. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION (c) Expenses. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Description of the Terms of the Recapitalization" and "Special Factors -- Fees and Expenses of the Exchange Offer; Source of Funds" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. ITEM 12. THE SOLICITATION OR RECOMMENDATION (d) Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer" and "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. (e) Recommendations of Others. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Background of the Exchange Offer," "-- Reasons for the Exchange Offer and Fairness of the Exchange Offer," "-- Review of the Exchange Offer by Filing Persons," and "-- Fairness Opinion of Keefe, Bruyette & Woods" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. ITEM 14. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED (b) Employees and Corporate Assets. The information set forth in the Prospectus and the related Letter of Transmittal under the captions "Special Factors -- Fees and Expenses of the Exchange Offer; Source of Funds" and "The Exchange Offer -- Fees and Expenses" is incorporated by reference pursuant to General Instruction F to Schedule 13E-3. ITEM 16. EXHIBITS (c)(1) -- Fairness Opinion of Keefe, Bruyette & Woods dated May 22, 2002 (included as Appendix B to the Prospectus, which is incorporated by reference from FirstCity's Pre-Effective Amendment No. 3 to Registration Statement on Form S-4 filed on September 30, 2002). (c)(2) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Special Committee of FirstCity, dated March 20, 2002 (previously filed as Exhibit 99(c)(2) to FirstCity's Amendment No. 1 to Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on July 26, 2002). (c)(3) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Board of Directors of FirstCity, dated March 26, 2002 (previously filed as Exhibit 99(c)(3) to FirstCity's Amendment No. 1 to Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on July 26, 2002). (c)(4) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Special Committee, dated September 27, 2002. (c)(5) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Board of Directors of FirstCity, dated September 30, 2002. 7 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: September 30, 2002 FIRSTCITY FINANCIAL CORPORATION By: /s/ JAMES T. SARTAIN ------------------------------------ James T. Sartain President and Chief Executive Officer /s/ JAMES R. HAWKINS ------------------------------------ James R. Hawkins /s/ JAMES T. SARTAIN ------------------------------------ James T. Sartain /s/ RICHARD E. BEAN ------------------------------------ Richard E. Bean 8 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT NAME - ------- ------------ (a)(1) -- Prospectus relating to shares of FirstCity Common Stock to be issued in the Offer (incorporated by reference from FirstCity's Pre-Effective Amendment No. 3 to its Registration Statement on Form S-4 filed on September 30, 2002) (a)(2) -- Form of Letter of Transmittal (included as Appendix A to the Prospectus, which is incorporated by reference from FirstCity's Pre-Effective Amendment No. 3 to its Registration Statement on Form S-4 filed on September 30, 2002.) (a)(3) -- Form of Notice of Guaranteed Delivery (previously filed as Exhibit 99(a)(3) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (a)(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (previously filed as Exhibit 99(a)(4) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (a)(5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (previously filed as Exhibit 99(a)(5) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (c)(1) -- Fairness Opinion of Keefe, Bruyette & Woods dated May 22, 2002 (included as Appendix B to the Prospectus, which is incorporated by reference from FirstCity's Pre-Effective Amendment No. 3 to Registration Statement on Form S-4 filed on September 30, 2002) (c)(2) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Special Committee of FirstCity, dated March 20, 2002 (previously filed as Exhibit 99(c)(2) to FirstCity's Amendment No. 1 to Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on July 26, 2002). (c)(3) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Board of Directors of FirstCity, dated March 26, 2002 (previously filed as Exhibit 99(c)(3) to FirstCity's Amendment No. 1 to Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on July 26, 2002). (c)(4) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Special Committee, dated September 27, 2002. (c)(5) -- Presentation of Keefe, Bruyette & Woods, Inc. to the Board of Directors of FirstCity, dated September 30, 2002. (d)(1) -- Securities Purchase Agreement, dated June 11, 2002, among FirstCity, FirstCity Consumer Lending Corporation, FirstCity Funding, L.P., FirstCity Funding GP Corp., IFA Drive GP Holdings LLC, IFA Drive LP Holdings LLC, Drive Holdings LP and Drive Financial Services LP (previously filed as Exhibit 99(d)(1) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (d)(2) -- Amended and Restated Letter of Intent, dated May 25, 2002, among FirstCity and the FCHC Group (previously filed as Exhibit 99(3)(2) to FirstCity's Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on June 11, 2002) (d)(3) -- Confirmation of Intent to Tender Shares of New Preferred Stock, by each of James R. Hawkins, James T. Sartain, Richard E. Bean, Dane Fulmer, Robert E. Garrison, and C. Ivan Wilson (previously filed as Exhibit 99(d)(3) to FirstCity's Amendment No. 1 to Tender Offer Statement on Schedule TO and Rule 13e-3 Transaction Statement filed on July 26, 2002) (d)(4) -- Commitment Letter, dated September 25, 2002, between FirstCity Financial Corporation and BoS(USA), Inc. (filed as Exhibit 10.50 to FirstCity's Pre-Effective Amendment No. 3 to its Registration Statement on Form S-4 filed on September 30, 2002 and incorporated by reference)
EX-99.C4 3 h97606e5exv99wc4.txt PRESENTATION OF KEEFE, BRUYETTE & WOODS, INC. EXHIBIT C(4) PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF: FIRST CITY(R) FINANCIAL CORPORATION SEPTEMBER 27, 2002 JOSEPH J. SPALLUTO, MANAGING DIRECTOR KEVIN D. SPINNER, MANAGING DIRECTOR NEW YORK SAN FRANCISCO CHICAGO BOSTON HARTFORD RICHMOND COLUMBUS WWW.KBW.COM [KBW LOGO] TABLE OF CONTENTS ================================================================================
TAB SUBJECT PAGE(S) - --- ------- ------- 1. INTRODUCTION ............................................................... 4-6 2. THE RESTRUCTURING .......................................................... 8-19 3. RESTRUCTURING IMPACT TO FIRSTCITY Summary .................................................................... 21 Pro Forma Balance Sheet .................................................... 22,23 4. HISTORICAL TRADING VALUES & VOLUMES OF PREFERRED & COMMON STOCKS ........... 25-28 5. EXCHANGE OFFER VALUATION Summary & Assumptions ...................................................... 30 Valuation Table ............................................................ 31 6. LIQUIDATION ANALYSIS Summary .................................................................... 33 Asset Sale Approach ........................................................ 34-36 7. GOING PRIVATE TRANSACTIONS ................................................. 38 8. CASE STUDY COMPARISON: DYNEX CAPITAL Summary Description of Dynex Capital ....................................... 40 Relative Stock Performance ................................................. 41 Tender Offer Summary & Results ............................................. 42,43 9. ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP Summary Comparisons to FCFC ................................................ 45 AMRESCO .................................................................... 46,47 Wilshire ................................................................... 48,49 10. CONCLUSION ................................................................. 51
================================================================================ FIRSTCITY FINANCIAL CORPORATION 2 KEEFE, BRUYETTE & WOODS, INC. INTRODUCTION FIRSTCITY RESTRUCTURING TRANSACTION SUMMARY ================================================================================ o THE SPECIAL COMMITTEE HAS REQUESTED KBW RE-CONFIRM ITS FAIRNESS OPINION DELIVERED MARCH 26, 2002, IN LIGHT OF THE FOLLOWING CHANGE IN THE RESTRUCTURING: o Previously, FCFC was to sell a 20% total interest in Drive Financial Services ("Drive") to Bank of Scotland ("BOS") for $16.0 million. This is not the case in the current proposed restructuring. o In the currently proposed structure, FCFC will use its interest in Drive to secure a non-recourse loan of $16.0 million, provided that FCFC will at all times maintain a beneficial interest in 11% of Drive. After distributions from or proceeds on any sale of the 20% Drive interest exceed $16.0 million, BOS will share in 20% of the excess distributions or proceeds. o KBW has updated its presentation and opinion to reflect this change, and to reflect June 30, 2002 financial statements. In reviewing the exchange offer, KBW has not changed its previous assumptions related to the spot price or average price of New Preferred Stock, or Common Stock. KBW believes this is appropriate since the prices of the New Preferred Stock and Common Stock may have changed related, in part, due to information related to the announcement of the Restructuring and the Exchange Offer. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 4 KEEFE, BRUYETTE & WOODS, INC. FIRSTCITY RESTRUCTURING TRANSACTION SUMMARY ================================================================================ o FIRSTCITY ("FCFC") IS CONTEMPLATING ENTERING INTO A NUMBER OF TRANSACTIONS, WHICH ARE DESIGNED TO RESTRUCTURE AND RE-CAPITALIZE THE COMPANY. THESE TRANSACTIONS INCLUDE: o BOS lending $16.0 million to FCFC, non-recourse, using FCFC's interest in Drive as collateral (the "Drive Loan"), provided that FCFC will at all times maintain a beneficial interest in 11% of Drive. o The offer to exchange (the "Exchange Offer") 1,222,901 shares of FCFC's preferred stock (the "Preferred") for either: o $10.00 cash and two FCFC common shares for each Preferred share or o $8.00 cash and three FCFC common shares for each Preferred share o Residual cash from the sale of Drive and the Exchange Offer will be applied to debt reduction. o BOS will refinance the remainder of FCFC existing facilities with a $47 to $49 million commitment. o FCFC will purchase the 20% interest held by management in FCFC's indirect subsidiary, FirstCity Holdings ("FCH") in exchange for 400,000 shares of FCFC common stock and up to $3.2 million in earn-out payments. o BOS will provide new financing to FCFC, with a total commitment of $58 to $60 million. o FCFC will be released from its guaranty of $4 million of Drive's Term Loan. o BOS will release its existing option to acquire 1,975,000 shares of FCFC's common stock. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 5 KEEFE, BRUYETTE & WOODS, INC. SCOPE OF KBW ENGAGEMENT ================================================================================ o KBW has been engaged by a Special Committee of the Board of Directors. o THE SPECIAL COMMITTEE REQUESTED KBW'S OPINION AS TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE HOLDERS OF FCFC'S PREFERRED STOCK, OF THE CONSIDERATION OFFERED IN THE EXCHANGE OFFER. o The consideration includes both cash and FCFC common stock. o KBW has considered, among other things deemed to be relevant, the following: o The Drive Loan o Peer groups of, and merger and acquisition transactions involving, automobile finance companies o The consideration offered in the Exchange Offer and the valuation of the consideration o FCFC's purchase of a 20% interest in FCH o FCFC's debt refinancing, and restructuring o The past, current, and pro forma financial condition of FCFC o Certain of FCFC's publicly available financial information: 10-Qs, 10-Ks, and other filings o A draft of the S-4 to be filed related to the Restructuring o Liquidation analysis o Historical trading values of FCFC's common and preferred stocks o Premiums paid in other transactions filed with the SEC as going private transactions o Certain estimated investor recovery results from transactions involving comparable companies o Previous and prevailing economic conditions ================================================================================ FIRSTCITY FINANCIAL CORPORATION 6 KEEFE, BRUYETTE & WOODS, INC. THE RESTRUCTURING: THE DRIVE LOAN THE DRIVE LOAN ================================================================================ Summary o FCFC owns a 31% interest in Drive. o FCFC will its interest in Drive to collateralize a non-recourse $16.0 million loan from BOS. o The debt and the collateral will not be cross-collateralized with other BOS loans. A default under the Drive Loan will not constitute a default under other BOS loans. o BOS and FCFC will share in distributions from or proceeds of any sale of the 20% Drive interest. To the extent the proceeds related to the sale of the 20% interest in Drive exceed $16 million, FCFC will receive 80% of such excess, with BOS receiving 20% of such excess. o The Drive Loan is conditioned upon achieving at least 80% participation in the Exchange Offer. o BOS will release FCFC from a $4 million guaranty related to Drive's debt. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 8 KEEFE, BRUYETTE & WOODS, INC. THE DRIVE LOAN ================================================================================ Summary Balance Sheet & Income Statement
AT OR FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------ ASSETS Cash 7,395 Contracts held for sale - net 70,447 Investment Securities 77,407 Interest Receivable 1,089 Furniture & Fixtures 6,201 Service Fees Receivable 1,212 Goodwill -- Other Assets 1,820 --------------- TOTAL ASSETS 165,571 LIABILITIES Term Loan 27,500 Notes Payable to Banks 67,165 Other Liabilities 12,910 --------------- TOTAL LIABILITIES 107,575 Capital Note 32,000 TOTAL EQUITY 25,996 --------------- TOTAL LIABILITIES & EQUITY 165,571 AT OR FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------ REVENUES: Interest Income 33,335 Interest Expense (9,329) --------------- Net Interest Income 24,006 Other Income 439 Gain on Sale 39,033 Impairment of Residual Assets (3,897) Servicing Fee Income 11,986 --------------- Total Revenue 71,567 EXPENSES: Operating Expenses 45,639 Provisions on Contracts held for sale 5,377 Accounting Policy Change 783 --------------- Total Expenses 51,799 INCOME BEFORE PROVISION FOR TAXES 19,768 Other Comprehensive Income (1,800) --------------- COMBINED PRE-TAX INCOME 17,968 Pro Forma Provision for Income Taxes 7,187 --------------- PRO FORMA NET INCOME 10,781
================================================================================ FIRSTCITY FINANCIAL CORPORATION 9 KEEFE, BRUYETTE & WOODS, INC. THE DRIVE LOAN ================================================================================ Publicly-Traded Auto Finance Companies
MARKET STATS. ----------------------------- MARKET STOCK STOCK CAP. PRICE COMPANY NAME SYMBOL STATE ($ millions) ($) - ----------------------------------- ------ ----- ------------ ------------ SMALL MARKET CAPITALIZATION Union Acceptance Corporation(1) UACA IN 125 4.03 Consumer Portfolio Services CPSS CA 42 1.90 Onyx Acceptance Corporation ONYX CA 13 2.66 First Investors Financial, Inc.(2) FIFS TX 17 3.00 MEDIAN LARGE MARKET CAPITALIZATION AmeriCredit Corp.(3) ACF TX 606 7.18 WFS Financial, Inc.(4) WFSI CA 407 20.35 Credit Acceptance Corp. CACC MI 353 8.39 MEDIAN DRIVE FINANCIAL SERVICES(5) 80 NA EPS MULTIPLE - I/B/E/S --------------------------------------------------------------------------------- 2002 2003 CHANGE PRICE PRICE EST. EPS EST. EPS 2002/2003 /02E /03E COMPANY NAME ($) ($) (%) (x) (x) - ----------------------------------- ------------ ------------ ------------ ------------ ------------ SMALL MARKET CAPITALIZATION Union Acceptance Corporation(1) nm ne nm nm nm Consumer Portfolio Services 0.10 0.25 150% 19.0 7.6 Onyx Acceptance Corporation 0.30 0.45 50% 8.9 5.9 First Investors Financial, Inc.(2) 0.15 0.28 nm 20.0 10.7 100% 19.0 7.6 LARGE MARKET CAPITALIZATION AmeriCredit Corp.(3) 3.08 5.05 64% 2.3 1.4 WFS Financial, Inc.(4) 2.35 3.75 60% 8.7 5.4 Credit Acceptance Corp. 0.79 0.82 4% 10.6 10.2 60% 8.7 5.4 DRIVE FINANCIAL SERVICES(5) 10.8 NA NM 7.4 NM OTHER ------------------------------------------------ GAIN ON SALE/ RESIDUALS PRICE/ REVENUE /EQUITY BOOK COMPANY NAME (%) (%) (%) - ----------------------------------- ------------ ------------ ------------ SMALL MARKET CAPITALIZATION Union Acceptance Corporation(1) 27% 115% 72% Consumer Portfolio Services 70% 174% 59% Onyx Acceptance Corporation 35% 293% 22% First Investors Financial, Inc.(2) 0% 0% 57% 31% 144% 58% LARGE MARKET CAPITALIZATION AmeriCredit Corp.(3) 38% 110% 49% WFS Financial, Inc.(4) 3% 58% 152% Credit Acceptance Corp. 2% 0% 123% 3% 58% 123% DRIVE FINANCIAL SERVICES(5) 55% 298% 308%
(1) June Fiscal Year, Estimate adjusted to calendar year, 2001 excludes residual valuation charge. (2) April Fiscal Year, adjusted to calendar year (3) June Fiscal Year, adjusted to calendar year (4) WFS currently under tender offer from 80% owner Westcorp (5) At or For the Year Ended December 31, 2001. Valuation implied by Drive Loan collateral of 20% for $16 million ================================================================================ FIRSTCITY FINANCIAL CORPORATION 10 KEEFE, BRUYETTE & WOODS, INC. THE DRIVE LOAN ================================================================================ Mergers and Acquisitions Involving Auto Finance Companies
SELLER'S ANNUA SELLER'S MGD. ORIGINATIONS RECEIVABLES ANN. PURCHASE IN YEAR OF SALE PORTFOLIO DATE BUYER SELLER PRICE $ MILLIONS $ MILLIONS - ---------- ------------------------------ ------------------------- --------------- ---------------- --------------- 11/19/2001 CONSUMER PORTFOLIO SERVICES MFN FINANCIAL CORPORATION $104 MILLION 279 424 11/18/1999 SUSQUEHANNA BANCSHARES HANN FINANCIAL CORP. $35 MILLION NA 800 11/16/1999 ASSOCIATES FIRST CAPITAL CORP. ARCADIA FINANCIAL, LTD. $193 MILLION 2,400 5,300 06/14/1999 FAIRLANE CREDIT, LLC TRIAD FINANCIAL CORP. $105 MILLION 425 511 (c) 07/16/1998 CAPITAL ONE FINANCIAL CORP. SUMMIT ACCEPTANCE $55 MILLION NA 260 06/23/1997 NORWEST CORP. FIDELITY ACCEPTANCE $344 MILLION 1,000 1,120 06/01/1997 HOUSEHOLD INTERNATIONAL ACC CONSUMER FINANCE $200 MILLION 484 396 03/29/1996 SOUTHERN NATIONAL CORP. REGIONAL ACCEPTANCE $167 MILLION NA 136 02/05/1996 BAYVIEW CAPITAL CORP. CTL CREDIT, INC. $65 MILLION 133 466 SELLER'S PURCHASE PURCHASE TRAILING PRICE/ PRICE/ ANN. EARNINGS(A) ANNUAL MANAGED DATE BUYER SELLER $ MILLIONS ORIGINATIONS RECEIVABLES - ---------- ------------------------------ ------------------------- --------------- --------------- --------------- 11/19/2001 CONSUMER PORTFOLIO SERVICES MFN FINANCIAL CORPORATION $ 5.1 37% 25% 11/18/1999 SUSQUEHANNA BANCSHARES HANN FINANCIAL CORP. $ 3.4 NA 4% (b) 11/16/1999 ASSOCIATES FIRST CAPITAL CORP. ARCADIA FINANCIAL, LTD. $ (6.8) 8% 4% 06/14/1999 FAIRLANE CREDIT, LLC TRIAD FINANCIAL CORP. $ 12.4 25% 21% 07/16/1998 CAPITAL ONE FINANCIAL CORP. SUMMIT ACCEPTANCE NA NA 21% 06/23/1997 NORWEST CORP. FIDELITY ACCEPTANCE $ 24.7 20% 31% 06/01/1997 HOUSEHOLD INTERNATIONAL ACC CONSUMER FINANCE $ 11.0 41% 51% 03/29/1996 SOUTHERN NATIONAL CORP. REGIONAL ACCEPTANCE $ 8.8 134% 123% 02/05/1996 BAYVIEW CAPITAL CORP. CTL CREDIT, INC. $ 5.2 151% 14% PURCHASE PURCHASE PURCHASE PREMIUM/ PRICE/ PRICE/ ANN. MARKET BOOK TRAILING DATE BUYER SELLER PRICE VALUE EARNINGS - ---------- ------------------------------ ------------------------- --------------- --------------- --------------- 11/19/2001 CONSUMER PORTFOLIO SERVICES MFN FINANCIAL CORPORATION 89% 75% 20.4X 11/18/1999 SUSQUEHANNA BANCSHARES HANN FINANCIAL CORP. NA NA 10.3X 11/16/1999 ASSOCIATES FIRST CAPITAL CORP. ARCADIA FINANCIAL, LTD. 31% 112% NM 06/14/1999 FAIRLANE CREDIT, LLC TRIAD FINANCIAL CORP. NA 144% 8.5X 07/16/1998 CAPITAL ONE FINANCIAL CORP. SUMMIT ACCEPTANCE NA NA NA 06/23/1997 NORWEST CORP. FIDELITY ACCEPTANCE NA NA 13.9X 06/01/1997 HOUSEHOLD INTERNATIONAL ACC CONSUMER FINANCE 100% 655% 18.2X 03/29/1996 SOUTHERN NATIONAL CORP. REGIONAL ACCEPTANCE 13% 423% 19.1X 02/05/1996 BAYVIEW CAPITAL CORP. CTL CREDIT, INC. 30% 132% 12.6X
NOTES: - -------------------------------------------------------------------------------- (a) trailing "core" earnings at announcement, excludes amortization and non-recurring items, fully-taxed (b) estimate based on Susquehanna's claim that the transaction would be accretive to EPS in 2000. (c) includes assumption and repayment of $60 million of unsecured debt due to ContiFinancial (d) valuation based on loan-to-collateral value of Drive Loan MEDIAN '99-'01 DEALS 25% 12% 60% 112% 10.3X MEDIAN '97 & '98 DEALS 31% 31% 100% 655% 16.0X MEDIAN '96 DEALS 142% 69% 21% 277% 15.8X ALL MEDIAN 37% 21% 31% 138% 13.9X ALL AVERAGE 63% 34% 43% 293% 13.8X
TBD(d) BANK OF SCOTLAND DRIVE FINANCIAL SERVICES $80 MILLION 400 555 $10.8 20% 14% NA 308% 7.4X
================================================================================ FIRSTCITY FINANCIAL CORPORATION 11 KEEFE, BRUYETTE & WOODS, INC. THE RESTRUCTURING: THE EXCHANGE OFFER THE EXCHANGE OFFER ================================================================================ Summary o FCFC IS CONTEMPLATING MAKING AND EXCHANGE OFFER IN WHICH HOLDERS OF FCFC'S PREFERRED STOCK WOULD HAVE THE OPPORTUNITY TO EXCHANGE ONE SHARE OF PREFERRED FOR EITHER: o $10.00 per share in cash and two shares of FCFC common stock ("Exchange Offer Choice A"), or o $8.00 per share in cash and three shares of FCFC common stock ("Exchange Offer Choice B") The current Preferred has characteristics as follows: o Legal claim of $33.4 million as of June 30, 2002 ($27.30 per share) o Par value of $21.00 per share, $6.30 per share of accrued and unpaid dividends o Dividend (currently suspended) of $2.10 per share per year o Scheduled Redemption of September 2005 o Right to elect two Board members if dividends not paid for six or more consecutive quarters, with those elected Board members serving until dividends in arrears are paid (currently could elect two Board members at annual meeting in 2002). o PREFERRED HOLDERS, POST-EXCHANGE OFFER (ASSUMING 80% PARTICIPATION AND 50-50 SPLIT ON EXCHANGE OFFER CHOICE A OR EXCHANGE OFFER CHOICE B) WILL OWN 21.8% OF FCFC. o COMPLETION OF THE EXCHANGE OFFER IS CONDITIONED UPON ACHIEVING 80% PARTICIPATION. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 13 KEEFE, BRUYETTE & WOODS, INC. THE RESTRUCTURING: PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS ================================================================================ Summary o Prior to the Restructuring, management of FCH own a 20% interest in FCH, FCFC owns the other 80%. o FCFC is contemplating acquiring this interest through the issuance of 400,000 shares of FCFC common stock, and through up to $3.20 million in "earn-out" payments based on the performance of Mexican asset pools. o The total value of the purchase is up to $3.65 million ($0.45 million in common stock, and up to $3.20 million in earn-out). o The value of 20% of FCH at $3.65 million values FCH at $18.25 million. $18.25 million represents 454% of book value, and 4.2 times FCH's trailing pre-tax income. o Pre-tax income, divided into the FCH valuation implies a 23.9% yield. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 15 KEEFE, BRUYETTE & WOODS, INC. PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS ================================================================================ Summary Income Statement & Balance Sheet of FCH
AT OR FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------ ASSETS Cash 3,059 Inventory 5,822 Note Receivable 19,765 Investment in Unconsol. Subs 26,379 Furniture & Fixtures 1,161 Accounts Receivable 394 Prepaid Expenses 283 Goodwill 74 Other Assets 360 -------------------- TOTAL ASSETS 57,297 LIABILITIES Note Payable - FirstCity 17,669 Notes Payable to Banks 31,399 Other Liabilities 1,868 -------------------- TOTAL LIABILITIES 50,936 Minority Interest 2,337 TOTAL EQUITY 4,024 -------------------- TOTAL LIABILITIES & EQUITY 57,297 AT OR FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------ REVENUES: Interest & Accretion on Perf. Loans 5,562 Earnings of Subs 6,323 Servicing Fees 10,393 Other 1,494 -------------------- Total Revenue 23,772 EXPENSES: Servicing Fees Expense 3,031 Compensation & Benefits 7,678 Occupancy 1,219 Other Non-Interest Expenses 2,765 Interest Expense 4,725 -------------------- Total Expenses 19,419 Profit / (Loss) Before Tax 4,353
================================================================================ FIRSTCITY FINANCIAL CORPORATION 16 KEEFE, BRUYETTE & WOODS, INC. THE RESTRUCTURING: DEBT RESTRUCTURING DEBT RESTRUCTURING ================================================================================ Summary o Remaining cash from the $16.0 million Drive Loan, after completing the Exchange Offer, will be applied to existing FCFC debt held by BOS. o FCFC remaining debt held by BOS, estimated at $49 million, will be restructured as follows: o $35 to $37 million - Senior Cash Flow Note This note will have a 4 year maturity and provide for all cash flow from existing investments to first pay all corporate overhead, and then principal and interest on the Senior Cash Flow Note. o $12 million - Term Note This note will have a 5 year maturity with interest only payments to be provided from existing cash flows. In conjunction, BOS will release warrants for 1,975,000 FCFC shares with a strike price of $2.31. o BOS will provide a $53 to $55 million New Acquisition Line of Credit. o BOS will provide a $5 million New Working Capital Line of Credit. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 18 KEEFE, BRUYETTE & WOODS, INC. DEBT RESTRUCTURING ================================================================================ Summary Table ($ in millions)
OUTSTANDING OUTSTANDING PRO BORROWINGS AS OF ADJUSTMENTS PER FORMA AS OF JUNE 30, 2002 RESTRUCTURING JUNE 30, 2002 ---------------- ---------------- ---------------- FIRSTCITY Company Senior Facility: Revolving Line of Credit 10 (7) 3 Term Loan A 31 (31) -- Term Loan B 12 (12) -- Term Loan C -- -- -- Term Loan E 3 (3) -- Drive Loan -- 16 16 Term Credit Facility 3 (3) -- Cash Flow Note -- 37 37 Term Note -- 12 12 FCH Note -- 3 3 Acquisition Line of Credit -- -- -- Working Capital Line of Credit -- -- -- COMMERCIAL CORP Acquisition Facility 2 -- 2 Term Facilities 3 -- 3 Equity investment facility 25 -- 25 ---------------- ---------------- ---------------- Total 89 12 101
Note: Assumes cash flow note at $37 million ================================================================================ FIRSTCITY FINANCIAL CORPORATION 19 KEEFE, BRUYETTE & WOODS, INC. RESTRUCTURING IMPACT TO FIRSTCITY RESTRUCTURING IMPACT TO FIRSTCITY ================================================================================ Summary & Major Assumptions Used o SIGNIFICANTLY INCREASES FCFC COMMON EQUITY BY: o Debt Forgiveness of, and Equity Issued to Preferred Stockholders ($17.9 million) o SIMPLIFIES FCFC DEBT OBLIGATIONS & PROVIDES NEW FINANCING o Existing Facilities With BOS Paid Off, and Restructured into 3 Notes from Current 5 o $58 to $60 million in New Acquisition and Working Capital by BOS o INCREASES COMMON EQUITY PER SHARE FROM $0.46 TO $2.41 (06/30/02 and Pro Forma at 06/30/02, respectively) o REDUCES POTENTIAL DILUTION FROM BOS WARRANTS (through release of 1,975,000 warrants at $2.31) - -------------------------------------------------------------------------------- o RESTRUCTURING - MAJOR ASSUMPTIONS o All transactions in restructuring are completed as currently contemplated o Exchange offer reaches required 80% exchange threshold o 50% of exchange participation select Exchange Offer Choice A, and 50% select Exchange Offer Choice B o FCFC current stock price is $1.14, as is price at point of transaction closings ================================================================================ FIRSTCITY FINANCIAL CORPORATION 21 KEEFE, BRUYETTE & WOODS, INC. RESTRUCTURING IMPACT TO FIRSTCITY ================================================================================ Pro Forma Balance Sheet Impact of Restructuring ($ in `000s, except per share)
DEBT 06/30/2002 DRIVE EXCHANGE 20% FCH RESTRUC. PRO FORMA ------------ ------------ ------------ ------------ ------------ ------------ Cash and Cash Equivalents 6,838 9,080 (9,080) -- -- 6,838 Portfolio Assets, net 11,591 -- -- -- -- 11,591 Loans Receivable, net 21,845 -- -- -- -- 21,845 Equity Investments 51,504 -- -- -- -- 51,504 Deferred Tax Benefit, net 20,101 -- -- -- -- 20,101 Other Assets, net 14,543 -- -- 1,613 -- 16,156 Net Assets of discontinued ops 15,175 -- -- -- -- 15,175 ------------ ------------ ------------ ------------ ------------ ------------ Total Assets 141,597 9,080 (9,080) 1,613 -- 143,210 Notes Payable 89,435 9,080 -- 3,200 (49,000) 52,715 New Credit Facilities -- -- -- -- 49,000 49,000 Other Liabilities(1) 13,763 (4,000) -- (2,043) -- 7,720 ------------ ------------ ------------ ------------ ------------ ------------ Total Liabilities 103,198 5,080 -- 1,157 -- 109,435 Redeemable Preferred Stock 33,385 -- (26,708) -- -- 6,677 Common Equity 5,014 4,000 17,628 456 -- 27,098 ------------ ------------ ------------ ------------ ------------ ------------ Liabilities and Equity 141,597 9,080 (9,080) 1,613 -- 143,210 Common Shares Outstanding 8,377 -- 2,446 400 -- 11,222 Book Value Per Share $ 0.60 $ 2.41
(1) Other liabilities includes minority interest ================================================================================ FIRSTCITY FINANCIAL CORPORATION 22 KEEFE, BRUYETTE & WOODS, INC. RESTRUCTURING IMPACT TO FIRSTCITY ================================================================================ Footnotes to Pro Forma Balance Sheet ($ in `000s, except per share) LOAN SECURED BY DRIVE FINANCIAL STAKE Cash and Cash Equivalents Cash Proceeds from Drive Loan ...................... 16,000 Excess Cash From Exchange to Repay Debt ............ (6,920) ------------ Net Change ...................................... 9,080 Equity Investments Carrying Value of Drive Interest Sold .............. -- Notes Payable Drive Loan ......................................... 16,000 Previous Loans Repayment ........................... (6,920) ------------ Net Change ...................................... 9,080 Other Liabilities Drive Debt Guaranty Release ........................ (4,000) Minority Interest Elimination ...................... -- ------------ Net Change ...................................... (4,000) Common Equity Carrying Value of Drive Interest ................... -- Minority Interest Elimination ...................... -- Release of Previously Accrued Guaranty ............. 4,000 ------------ Net Change ...................................... 4,000 EXCHANGE OFFER Cash and Cash Equivalents Cash Required for Choice A ......................... (4,892) Cash Required for Choice B ......................... (3,913) Associated Expenses ................................ (275) ------------ Net Change ...................................... (9,080) Redeemable Preferred Stock Preferred Stock Exchanged .......................... (26,708) Exchange Participation Rate ........................ 80% Common Equity Common stock issued to Preferred holders ........... 2,788 Debt forgiveness by Preferred holders .............. 15,115 Expenses ........................................... (275) ------------ Net Change ...................................... 17,628
================================================================================ FIRSTCITY FINANCIAL CORPORATION 23 KEEFE, BRUYETTE & WOODS, INC. HISTORICAL PREFERRED & COMMON STOCK PRICES & VOLUMES PREFERRED STOCK PRICE PERFORMANCE: SINCE PREFERRED ISSUANCE ================================================================================ [GRAPH]
Date FCFCO Preferred Stock ---- --------------------- 8/13/1997 22 11/13/1997 21.13 2/13/1998 22 5/13/1998 22.88 8/13/1998 22.25 11/13/1998 15.5 2/12/1999 19.5 2/13/1999 5/13/1999 16.06 8/13/1999 6 11/12/1999 8.63 11/13/1999 2/14/2000 9.5 2/13/2000 5/12/2000 6.13 5/13/2000 8/14/2000 10.25 8/13/2000 11/13/2000 10.06 2/13/2001 10 5/14/2001 8.25 5/13/2001 8/13/2001 8.25 11/13/2001 7.11 2/13/2002 7.775 5/13/2002 7.245 8/13/2002 9.94
================================================================================ FIRSTCITY FINANCIAL CORPORATION 25 KEEFE, BRUYETTE & WOODS, INC. PREFERRED STOCK PRICE PERFORMANCE: DAILY VOLUME ================================================================================ [GRAPH]
Date FCFCO Preferred Stock ---- --------------------- 8/13/1997 400 11/13/1997 2400 2/13/1998 8400 5/13/1998 900 8/13/1998 1000 11/13/1998 2000 2/12/1999 1600 2/13/1999 5/13/1999 2400 8/13/1999 8400 11/12/1999 4500 11/13/1999 2/14/2000 1100 2/13/2000 5/12/2000 0 5/13/2000 8/14/2000 11300 8/13/2000 11/13/2000 11000 2/13/2001 0 5/14/2001 8200 5/13/2001 8/13/2001 900 11/13/2001 0 2/13/2002 0 5/13/2002 0 8/13/2002 100
================================================================================ FIRSTCITY FINANCIAL CORPORATION 26 KEEFE, BRUYETTE & WOODS, INC. COMMON STOCK PRICE PERFORMANCE: SINCE PREFERRED ISSUANCE ================================================================================ [GRAPH]
Date FCFC Common Stock ---- ----------------- 8/13/1997 25.75 11/13/1997 26.5 2/13/1998 28.125 5/13/1998 31.375 8/13/1998 24.5 11/13/1998 13.5 2/12/1999 13.375 2/13/1999 5/13/1999 6.625 8/13/1999 1.7813 11/12/1999 2.25 11/13/1999 2/14/2000 3.4375 2/13/2000 5/12/2000 2.125 5/13/2000 8/14/2000 1.875 8/13/2000 11/13/2000 2.1875 2/13/2001 1.625 5/14/2001 1.5 5/13/2001 8/13/2001 1.55 11/13/2001 1.65 2/13/2002 1.165 5/13/2002 1.125 8/13/2002 1.19
================================================================================ FIRSTCITY FINANCIAL CORPORATION 27 KEEFE, BRUYETTE & WOODS, INC. COMMON STOCK PRICE PERFORMANCE: VOLUME ================================================================================ [GRAPH]
Date FCFC Common Stock ---- ----------------- 8/13/1997 8400 11/13/1997 26100 2/13/1998 5500 5/13/1998 38200 8/13/1998 26700 11/13/1998 57000 2/12/1999 16900 2/13/1999 5/13/1999 84300 8/13/1999 1300600 11/12/1999 218500 11/13/1999 2/14/2000 53600 2/13/2000 5/12/2000 1900 5/13/2000 8/14/2000 69800 8/13/2000 11/13/2000 1000 2/13/2001 1300 5/14/2001 1100 5/13/2001 8/13/2001 2700 11/13/2001 3000 2/13/2002 100 5/13/2002 0 8/13/2002 2200
================================================================================ FIRSTCITY FINANCIAL CORPORATION 28 KEEFE, BRUYETTE & WOODS, INC. EXCHANGE OFFER VALUATION EXCHANGE OFFER VALUATION ================================================================================ Summary o The valuation of Exchange Offer Choice A is $10.00 per preferred share in cash, plus 2 times the value of an FCFC common share. The last trade of FCFC common stock was $1.14, indicating $2.28 per preferred share in value (OR $12.28 IN TOTAL). However, KBW estimates FCFC's common stock book value per share, pro forma for the Restructuring at December 31, 2001, is $2.41. Valued at pro forma book value, the value per preferred share would be $14.83. o The valuation of Exchange Offer Choice B is $8.00 per preferred share in cash, plus 3 times the value of an FCFC common share. The last trade of FCFC common stock was $1.14, indicating $3.42 per preferred share in value (OR $11.42 IN TOTAL). However, KBW estimates FCFC's common stock book value per share, pro forma for the Restructuring at December 31, 2001 is $2.41. Valued at pro forma book value, the value per preferred share would be $15.24. o Assuming a 50% / 50% split, the Exchange Offer is valued at $11.85 (at FCFC last trade) or at $15.04 (at pro forma book) o MAJOR ASSUMPTIONS o 80% of current preferred shares are exchanged in the Exchange Offer. o 50% select Exchange Offer Choice A and 50% select Exchange Offer Choice B. o Current FCFC common stock price is $1.14. o Last FCFCO preferred stock price is $7.10. o 1,222,901 preferred shares outstanding pre-Exchange Offer. o Pro forma book value per FCFC common share is $2.41 (rounded). o All other Restructuring transactions close as contemplated ================================================================================ FIRSTCITY FINANCIAL CORPORATION 30 KEEFE, BRUYETTE & WOODS, INC. EXCHANGE OFFER VALUATION ================================================================================ Valuation Table ($ in `000s, except per share)
PER SHARE VALUE PREMIUM TO MARKET PRICE-TO-LEGAL CLAIM --------------------------------- --------------------- ---------------------------------- CASH PER STOCK PER TOTAL PER LAST 30-DAY JUN. 30 SEP. 30 DEC. 30 SHARE SHARE SHARE TRADE AVG. 2002 2002 2002 -------- --------- --------- -------- -------- -------- -------- -------- EXCHANGE OFFER CHOICE A ($10.00 CASH, 2 COMMON SHARES) FCFC Common Last Price $ 10.00 $ 2.28 $ 12.28 73% 62% 45% 44% 43% 50.0% $ 10.00 $ 2.41 $ 12.41 75% 64% 45% 45% 44% 66.7% $ 10.00 $ 3.22 $ 13.22 86% 74% 48% 48% 47% 75.0% $ 10.00 $ 3.62 $ 13.62 92% 80% 50% 49% 48% 90.0% $ 10.00 $ 4.35 $ 14.35 102% 89% 53% 52% 51% 100.0% $ 10.00 $ 4.83 $ 14.83 109% 96% 54% 53% 52% EXCHANGE OFFER CHOICE B ($8.00 CASH, 3 COMMON SHARES) FCFC Common Last Price $ 8.00 $ 3.42 $ 11.42 61% 51% 42% 41% 40% 50.0% $ 8.00 $ 3.62 $ 11.62 64% 53% 43% 42% 41% 66.7% $ 8.00 $ 4.83 $ 12.83 81% 69% 47% 46% 45% 75.0% $ 8.00 $ 5.43 $ 13.43 89% 77% 49% 48% 47% 90.0% $ 8.00 $ 6.52 $ 14.52 105% 91% 53% 52% 51% 100.0% $ 8.00 $ 7.24 $ 15.24 115% 101% 56% 55% 54% TOTAL EXCHANGE OFFER FCFC Common Last Price $ 9.00 $ 2.85 $ 11.85 67% 56% 43% 43% 42% 50.0% $ 9.00 $ 3.02 $ 12.02 69% 58% 44% 43% 42% 66.7% $ 9.00 $ 4.02 $ 13.02 83% 72% 48% 47% 46% 75.0% $ 9.00 $ 4.53 $ 13.53 91% 78% 50% 49% 48% 90.0% $ 9.00 $ 5.43 $ 14.43 103% 90% 53% 52% 51% 100.0% $ 9.00 $ 6.04 $ 15.04 112% 98% 55% 54% 53%
Note: Last trade of FCFC Preferred is $7.10, 30-day average was $7.58, legal claim at 6/30/02 is $27.30. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 31 KEEFE, BRUYETTE & WOODS, INC. LIQUIDATION ANALYSIS LIQUIDATION ANALYSIS ================================================================================ Summary o KBW PERFORMED A LIQUIDATION ANALYSIS, TO INCLUDE: o Sale of assets o ASSET SALE APPROACH - MAJOR ASSUMPTIONS o Assets of FCFC marketed for sale immediately o Low, Mid, and High price assumptions reviewed o Low, Mid, and High levels assume assets sold in orderly fashion o Assumes assets can be sold within 6 month time period o 6 months of declining-level parent company operating expenses (100% in month 1, 90% in month 2, etc.) o Other selling expenses are 2% of purchase price, transaction specific legal fees are fixed at $1,500,000 ================================================================================ FIRSTCITY FINANCIAL CORPORATION 33 KEEFE, BRUYETTE & WOODS, INC. LIQUIDATION ANALYSIS ================================================================================ Asset Sale Approach o The majority of FCFC's assets are illiquid, there is no readily available market for them, thus, book value is likely the best-case price one could expect to achieve in any sale (for assets that may have value for another investor). o Several types of FCFC's assets are not saleable, for instance the Deferred Tax Asset is an intangible asset. o Assets from Discontinued Operations are highly illiquid (they are primarily residual assets from home equity securitizations) and would likely only be purchased at a significant discount to carrying value. o FCFC's interest in Drive may sell for a price higher than book value. However given the current ownership structure of Drive (with BOS owning 49%) it is unclear what type of entity would purchase it. WHEN TAKEN OUTSIDE THE AUSPICES OF THE RESTRUCTURING AS A WHOLE, IT IS UNLIKELY THAT FCFC WOULD BE ABLE TO ACHIEVE COLLATERAL VALUATION AS FAVORABLE AS WHAT IS CONTEMPLATED IN CONJUNCTION WITH THE RESTRUCTURING. o Given the fact that FirstCity would no longer exist under a liquidation scenario, a) asset buyers would not have any financial backing to representations and warranties, and b) the servicing agent would no longer be able to perform its duties. BOTH (A) AND (B) WOULD PUSH ASSET SALE PRICES TOWARD THE MID AND LOW POINTS IN THE ANALYSIS TO FOLLOW. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 34 KEEFE, BRUYETTE & WOODS, INC. LIQUIDATION ANALYSIS ================================================================================ Asset Sale Approach o The following table illustrates low, mid and high expectations for cash proceeds from the sale of balance sheet assets.
PRICE/CARRYING VALUE $ GROSS PROCEEDS ---------------------------------- -------------------------------- ASSETS 06/30/2002 LOW MID HIGH LOW MID HIGH - ------------------------------- ------------ -------- -------- -------- -------- -------- -------- Cash and equivalents 6,838 100% 100% 100% 6,838 6,838 6,838 Portfolio Assets, Net 11,591 80% 90% 100% 9,273 10,432 11,591 Loans Receivable Student Loans, net 88 70% 85% 100% 62 75 88 Auto Loans, net 70% 85% 100% -- -- -- Note Receivable 21,845 80% 90% 100% 17,476 19,661 21,845 Mortgage loans held for sale 70% 85% 100% -- -- -- Equity Investments Drive Financial 8,754 75% 100% 125% 6,566 8,754 10,943 MCS 2,935 80% 90% 100% 2,348 2,642 2,935 Acquisition Partnerships 39,815 90% 95% 100% 35,834 37,824 39,815 Discontinued Operations 15,175 25% 38% 50% 3,794 5,691 7,588 Interest Receivable 986 100% 100% 100% 986 986 986 Deferred Tax Asset 20,101 0% 0% 0% -- -- -- Furniture & Fixtures 2,444 25% 50% 66% 611 1,222 1,613 Accounts Receivable 3,820 90% 95% 100% 3,438 3,629 3,820 Note Receivable - related 133 70% 85% 100% 93 113 133 Service Fees Receivable 2,035 70% 85% 100% 1,425 1,730 2,035 Prepaid Expenses 4,668 0% 15% 25% -- 700 1,167 Servicing Rights 99 70% 85% 100% 69 84 99 Goodwill 93 0% 0% 0% -- -- -- Other Assets 177 100% 100% 100% 177 177 177 ------------ -------- -------- -------- TOTAL ASSETS $ 141,597 Cash Proceeds: $ 88,988 $100,557 $111,672 ============ ======== ======== ========
================================================================================ FIRSTCITY FINANCIAL CORPORATION 35 KEEFE, BRUYETTE & WOODS, INC. LIQUIDATION ANALYSIS ================================================================================ Asset Sale Approach o As can be seen below, only our "High" expectations for asset sale prices, which are aggressive, result in any remaining proceeds for Preferred shareholders. The cash flow provided from our High price expectation is $5.88 per preferred share. o The "Mid" and "Low" price expectations do not result in any proceeds for preferred shareholders. o If equal probability weightings are applied to the Low, Mid, and High values, the expected value for Preferred shareholders would be $1.96.
$ PROCEEDS ---------------------------------------------- LOW MID HIGH ------------ ------------ ------------ Gross Cash Proceeds ................................... $ 88,988 $ 100,557 $ 111,672 Parent Expenses ....................................... (1,688) (1,688) (1,688) Direct Sale Expenses .................................. (1,780) (2,011) (2,233) Legal Expenses ........................................ (1,500) (1,500) (1,500) ------------ ------------ ------------ Net Proceeds .......................................... 84,021 95,358 106,251 ============ ============ ============ Notes Payable to Banks ................................ (84,021) (89,435) (89,435) Accounts Payable & Accrued Interest ................... -- (559) (559) Accrued Expenses ...................................... -- (2,859) (2,859) Minority Interest ..................................... -- (2,505) (6,204) Net Proceeds Available for Preferred .................. -- -- 7,194 Net Proceeds Per Preferred Share ...................... $ 0.00 $ 0.00 $ 5.88
================================================================================ FIRSTCITY FINANCIAL CORPORATION 36 KEEFE, BRUYETTE & WOODS, INC. FINANCIAL SERVICES "GOING PRIVATE" TRANSACTIONS FINANCIAL SERVICES GOING PRIVATE TRANSACTIONS ================================================================================ Summary Information & Premiums Paid
FINANCIAL TYPE OF ANN. TENDER COMPANY NAME STATE SECTOR SECURITY DEAL VALUE DATE OFFER PRICE - ---------------------------------- ----- ------------ --------------- ------------ ------------ ------------ BancWest Corporation CA Bank Common Stock $ 2,438,200 05/07/2001 $ 35.00 FVNB Corporation TX Bank Common Stock 16,875 04/27/2001 45.00 Essex Bancorp, Inc. VA Thrift Common Stock 1,538 01/31/2001 1.45 Impac Commercial Holdings, Inc. MD Real Estate Common Stock 41,410 10/13/2000 7.55 National Discount Brokers Group NJ Broker Common Stock 857,906 10/09/2000 49.00 BNC Mortgage, Inc. CA Mortgage Common Stock 52,565 02/04/2000 10.00 Bankatlantic Bancorp, Inc. FL Thrift Common Stock 39,581 01/14/2000 6.00 PIMCO Advisors Holdings L.P. CA Investments Common Stock 1,921,362 10/31/1999 38.75 Preferred Employers Holdings, Inc. FL Insurance Common Stock 16,122 09/16/1999 5.00 Hawaii National Bancshares, Inc. HI Bank Common Stock 31,995 05/04/1999 45.00 FIRSTCITY FINANCIAL CORPORATION TX ASSET PREFERRED STOCK 11,593 (a) 11.85 14,711 (b) 15.04 PRICE ONE DAY ONE DAY 30-DAY-AVG. 30-DAY-AVG. COMPANY NAME PRIOR TO ANN. PREMIUM PRIOR TO ANN. PREMIUM - ---------------------------------- ------------- ------------ ------------- ------------ BancWest Corporation $ 24.98 40.1% $ 24.61 42.2% FVNB Corporation 34.85 29.1% 33.41 34.7% Essex Bancorp, Inc. 1.40 3.6% 1.24 16.7% Impac Commercial Holdings, Inc. 7.37 2.4% 6.53 15.6% National Discount Brokers Group 25.25 94.1% 31.04 57.9% BNC Mortgage, Inc. 7.38 35.5% 6.57 52.2% Bankatlantic Bancorp, Inc. 4.81 24.7% 4.88 23.0% PIMCO Advisors Holdings L.P. 34.69 11.7% 33.52 15.6% Preferred Employers Holdings, Inc. 2.75 81.8% 2.92 71.4% Hawaii National Bancshares, Inc. 40.00 12.5% 40.75 10.4% MEDIAN: 26.9% 28.8% FIRSTCITY FINANCIAL CORPORATION 7.10 66.9% 7.58 56.2% 7.10 111.8% 7.58 98.3%
(a) Value based on exchanging for FCFC common shares at current market price. (a) Value based on exchanging for FCFC common shares at pro forma book value per share. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 38 KEEFE, BRUYETTE & WOODS, INC. CASE STUDY COMPARISON: DYNEX CAPITAL CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Description of Dynex Capital DESCRIPTION FROM DX 9/30/98 10-Q Dynex Capital, Inc. is a financial services company electing to be treated as a real estate investment trust. Dynex originates primarily mortgage loans secured by multifamily and commercial properties and loans secured by manufactured homes. Dynex will generally securitize the loans funded as collateral for collateralized bonds, thereby limiting its credit and liquidity risk and providing long-term financing for its investment portfolio. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 40 KEEFE, BRUYETTE & WOODS, INC. CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Relative Common Stock Performance: DX vs. FCFC [GRAPH]
Date FCFC (-96.4%) DX (-91.2%) ---- ------------- ----------- 1/30/1998 100 100 5/1/1998 113.656 86.321 4/30/1998 7/31/1998 99.559 75.472 7/30/1998 10/30/1998 46.696 36.321 1/29/1999 51.542 37.736 1/30/2000 4/30/1999 37.445 22.17 7/30/1999 19.824 17.925 10/29/1999 4.515 12.264 10/30/1999 1/28/2000 11.233 14.858 1/30/2000 4/28/2000 7.489 2.948 4/30/2000 7/28/2000 8.59 2.712 7/30/2000 10/27/2000 6.828 2.241 10/30/2000 2/2/2001 5.837 1.245 1/30/2001 4/27/2001 4.582 2.396 4/30/2001 7/27/2001 5.286 4.038 7/30/2001 11/2/2001 5.463 4.34 10/30/2001 2/1/2002 4.229 6.623 1/30/2002 5/3/2002 4.159 8 4/30/2002 8/2/2002 3.391 9.113 7/30/2002
================================================================================ FIRSTCITY FINANCIAL CORPORATION 41 KEEFE, BRUYETTE & WOODS, INC. CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Description of Preferred Stock Tender Offers o Dynex has completed two tender offers for its preferred stock o APRIL 30, 2001 (announcement) o SEPTEMBER 6, 2001 (announcement) o Both tenders involved offering to purchase up to maximum dollar amounts of Dynex's Series A, Series B and Series C Preferred, for cash consideration. Maximum amounts were those allowed under senior lending agreements. o The maximum amount to be tendered for the April 30th transaction was $26 million (Series A, B and C). o The maximum amount to be tendered in the September 6th transaction was $15 million (Series A, B and C). ================================================================================ FIRSTCITY FINANCIAL CORPORATION 42 KEEFE, BRUYETTE & WOODS, INC. CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Preferred Stock Tenders - Pertinent Statistics SUMMARY OF DYNEX CAPITAL 2001 PREFERRED STOCK TENDER OFFERS
Tender/ Tender Liquidation Last Liquidation Tender/ Tender Max Offer Preference Trade Preference Last Trade Dollar Value - --------------- ------------ ------------ ------------ ------------ ------------ ------------ Series A $ 16.80 $ 28.68 $ 14.10 58.6% 19.1% 3,575 Series B $ 17.15 $ 29.18 $ 14.40 58.8% 19.1% 5,106 Series C $ 21.00 $ 35.84 $ 17.75 58.6% 18.3% 6,400 Series A $ 12.24 $ 28.11 $ 11.25 43.5% 8.8% 6,120 Series B $ 12.50 $ 28.60 $ 11.50 43.7% 8.7% 9,125 Series C $ 15.30 $ 35.11 $ 13.60 43.6% 12.5% 10,751 Weighted Average..................................................... 49.1% 13.4% COMPARISON OF FCFC EXCHANGE - --------------- ------------ ------------ ------------ ------------ ------------ ------------ FCFCO (1) $ 11.85 $ 27.30 $ 7.10 43.4% 66.9% 11,593 FCFCO (2) $ 15.04 $ 27.30 $ 7.10 55.1% 111.8% 14,711
Notes: 1) Assumes value of FCFC common stock holds constant at the most recent trade 2) Assumes value of FCFC common stock is book value pro forma for the restructuring results ================================================================================ FIRSTCITY FINANCIAL CORPORATION 43 KEEFE, BRUYETTE & WOODS, INC. ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP ================================================================================ Summary DESCRIPTION FROM FCFC 9/30/98 10-Q: The Company is a diversified financial services company engaged in residential and commercial mortgage banking ("Mortgage Corp."), Portfolio Asset acquisition and resolution ("Commercial Corp.") and consumer lending ("Consumer Corp."). DESCRIPTION FROM AMMB 9/30/98 10-Q: AMRESCO is a diversified financial services company with five principal lines of business: asset management, commercial mortgage banking, home equity lending (previously residential mortgage banking), commercial finance and residential mortgage banking. DESCRIPTION FROM WFSG 9/30/98 10-Q: Wilshire Financial Services Group Inc. ("WFSG") is a diversified financial services company. WFSG conducts business in the United States and Europe, specializing in loan portfolio acquisition and securitization, correspondent lending and servicing.
FCFC AMMB WFSG ---- ---- ---- ASSET ACQUISITION Y Y Y LENDING Y Y Y SERVICING EXPERTISE Y Y Y U.S. AND ABROAD Y Y Y RESTRUCTURING Y Y Y
================================================================================ FIRSTCITY FINANCIAL CORPORATION 45 KEEFE, BRUYETTE & WOODS, INC. ALTERNATIVE COMPARISONS: AMRESCO ================================================================================ Relative Common Stock Performance: AMMB vs. FCFC [GRAPH]
Date FCFC (-96.4%) AMMB (-100.0%) ---- ------------- -------------- 1/30/1998 100 100 5/1/1998 113.656 129.217 4/30/1998 7/31/1998 99.559 100.772 7/30/1998 10/30/1998 46.696 24.476 1/29/1999 51.542 40.573 1/30/1999 4/30/1999 37.445 22.933 7/30/1999 19.824 22.051 10/29/1999 4.515 10.364 10/30/1999 1/28/2000 11.233 4.631 1/30/2000 4/28/2000 7.489 3.087 4/30/1999 7/28/2000 8.59 1.654 7/30/2000 10/27/2000 6.828 1.411 10/30/2000 2/2/2001 5.837 1.058 1/30/2001 4/27/2001 4.582 0.931 4/30/2001 7/27/2001 5.286 0.624 7/30/2001 10/26/2001 6.029 0.005 10/30/2001 2/1/2002 4.229 0.009 1/30/2002 5/3/2002 4.159 0.007 4/30/2002 8/2/2002 3.391 0.004 7/30/2002
================================================================================ FIRSTCITY FINANCIAL CORPORATION 46 KEEFE, BRUYETTE & WOODS, INC. ALTERNATIVE COMPARISONS: AMRESCO ================================================================================ Investor Recovery Results o The table compares certain aspects of the experience of particular AMRESCO note holders and FCFC's preferred holders
FCFC (1) AMMB(2) ------------- ------------------------- EVENT RESTRUCTURING REPURCHASE/SALE OF ASSETS INVESTORS PREFERRED NOTES LEGAL CLAIM $33 MILLION $617 MILLION RECOVERY PERCENTAGE(3) 42% - 45% 53%(4) EXPECTED LIQUIDATION RECOVERY(5) 0% - 22% NA
Notes: (1) Recovery percentage range is from 42% from Exchange Offer Choice B to 45% for Exchange Offer Choice A. Also assumes FCFC common stock worth the value of last trade. Does not assume any increase in FCFC common stock due to increase in pro forma book value per common share. (2) $617 million of legal claim includes $217 million of open market purchases of Senior Subordinated Notes repurchased in the fourth quarter of 2000, and $410 million of notes to receive proceeds from the company's asset sale in connection with its bankruptcy filing. Recovery percentage for AMRESCO is the blended result between 75% for the open market purchases and 41% from KBW's estimate of the recovery for note holders post-bankruptcy. Estimate is based on 8-K filing dated July 5, 2001 and the March 31, 2001 10-Q. (3) As a percentage of legal claim. (4) Implies that if a preferred stock existed at AMRESCO, similar to that of FCFC, the recovery to the preferred would have been zero. (5) KBW estimate range from Tab 6 for FCFC. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 47 KEEFE, BRUYETTE & WOODS, INC. ALTERNATIVE COMPARISONS: WILSHIRE FINANCIAL SERVICES GROUP ================================================================================ Relative Common Stock Performance: WFSG vs. FCFC [GRAPH]
Date FCFC (-96.4%) WFSG (-87.4%) ---- ------------- ------------- 1/30/1998 100 100 5/1/1998 113.656 92.788 4/30/1998 7/31/1998 99.559 81.25 7/30/1998 10/30/1998 46.696 11.779 1/29/1999 51.542 1.202 1/30/1999 4/30/1999 37.445 1.382 7/30/1999 19.824 4.808 10/29/1999 4.515 5.529 10/30/2000 1/28/2000 11.233 3.846 1/30/2000 4/28/2000 7.489 4.327 4/30/2000 7/28/2000 8.59 4.447 7/30/2000 10/27/2000 6.828 4.688 10/30/2000 2/2/2001 5.837 6.13 1/30/2001 4/27/2001 4.582 8.154 4/30/2001 7/27/2001 5.286 7.212 7/30/2001 11/2/2001 5.463 7.385 10/30/2001 2/1/2002 4.229 9.077 1/30/2002 4/26/2002 4.141 8.885 4/30/2002 8/2/2002 3.391 13.231 7/30/2002
================================================================================ FIRSTCITY FINANCIAL CORPORATION 48 KEEFE, BRUYETTE & WOODS, INC. ALTERNATIVE COMPARISONS: WILSHIRE FINANCIAL SERVICES GROUP ================================================================================ Investor Recovery Results o The table compares certain aspects of the experience of particular Wilshire note holders and FCFC's preferred holders.
FCFC(1) WFSG (2) ------------- -------------------- EVENT RESTRUCTURING BANKRUPTCY EMERGENCE INVESTORS PREFERRED NOTES LEGAL CLAIM $33 MILLION $199 MILLION RECOVERY PERCENTAGE (3) 54% - 56% 37% - 42%(4) EXPECTED LIQUIDATION RECOVERY (5) 0% - 22% 18%
Notes: (1) Recovery percentage range is from 54% from Exchange Offer Choice A to 56% for Exchange Offer Choice B. Also assumes FCFC common stock worth pro forma book value per common share (pro forma for restructuring). This compares with WFSG's estimated amount also in the table. (2) Legal claim, recovery percentage and expected liquidation recovery are WFSG's estimates include in its Solicitation and Disclosure Statement Dated February 1, 1999. Legal claim includes accrued interest. Recovery percentage based on pro forma book value of common shares received. Liquidation recovery is as a percentage of claims. (3) As a percentage of legal claim. (4) Implies that if a preferred stock existed at WFSG, similar to that of FCFC, the recovery percentage on the preferred would have been zero. (5) KBW estimate range from Tab 6 for FCFC. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 49 KEEFE, BRUYETTE & WOODS, INC. KBW CONCLUSION CONCLUSION ================================================================================ o IN KBW'S OPINION, THE CONSIDERATION OFFERED TO THE HOLDERS OF FCFC'S REDEEMABLE PREFERRED STOCK IN THE EXCHANGE OFFER, IS FAIR, FROM A FINANCIAL POINT OF VIEW. THIS OPINION IS BASED ON THE FOLLOWING: o The significant premium to the current market price of the Preferred. o The high level of premium offered, when compared to other transactions filed with the SEC as "going private transactions" in financial services sectors. o The Exchange Offer's superiority to the results of the liquidation analysis performed. o The favorable level of recovery of legal claim for the Preferred holders, of the Exchange Offer, when compared to the recovery results of transactions involving restructurings of comparable companies, and specifically relative to positions within capital structure. o The liquidity provided to the Preferred holders, compared to the current market, which provides little liquidity. ================================================================================ FIRSTCITY FINANCIAL CORPORATION 51 KEEFE, BRUYETTE & WOODS, INC. EX-99.C5 4 h97606e5exv99wc5.txt PRESENTATION OF KEEFE, BRUYETTE & WOODS, INC. EXHIBIT C(5) PRESENTATION TO THE BOARD OF DIRECTORS OF: [FIRSTCITY LOGO] SEPTEMBER 30, 2002 JOSEPH J. SPALLUTO, MANAGING DIRECTOR KEVIN D. SPINNER, MANAGING DIRECTOR NEW YORK SAN FRANCISCO CHICAGO BOSTON HARTFORD RICHMOND COLUMBUS www.kbw.com [KBW LOGO] TABLE OF CONTENTS ================================================================================
TAB SUBJECT PAGE(S) --- ------- ------- 1. INTRODUCTION ............................................................................................. 4-6 2. THE RESTRUCTURING ........................................................................................ 8-19 3. RESTRUCTURING IMPACT TO FIRSTCITY Summary .................................................................................................. 21 Pro Forma Balance Sheet .................................................................................. 22,23 4. HISTORICAL TRADING VALUES & VOLUMES OF PREFERRED & COMMON STOCKS ......................................... 25-28 5. EXCHANGE OFFER VALUATION Summary & Assumptions .................................................................................... 30 Valuation Table .......................................................................................... 31 6. LIQUIDATION ANALYSIS Summary .................................................................................................. 33 Asset Sale Approach ...................................................................................... 34-36 7. GOING PRIVATE TRANSACTIONS ............................................................................... 38 8. CASE STUDY COMPARISON: DYNEX CAPITAL Summary Description of Dynex Capital ..................................................................... 40 Relative Stock Performance ............................................................................... 41 Tender Offer Summary & Results ........................................................................... 42,43 9. ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP Summary Comparisons to FCFC .............................................................................. 45 AMRESCO .................................................................................................. 46,47 Wilshire ................................................................................................. 48,49 10. CONCLUSION ............................................................................................... 51
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 2 INTRODUCTION FIRSTCITY RESTRUCTURING TRANSACTION SUMMARY ================================================================================ o THE SPECIAL COMMITTEE HAS REQUESTED KBW RE-CONFIRM ITS FAIRNESS OPINION DELIVERED MARCH 26, 2002, IN LIGHT OF THE FOLLOWING CHANGE IN THE RESTRUCTURING: o Previously, FCFC was to sell a 20% total interest in Drive Financial Services ("Drive") to Bank of Scotland ("BOS") for $16.0 million. This is not the case in the current proposed restructuring. o In the currently proposed structure, FCFC will use its interest in Drive to secure a non-recourse loan of $16.0 million, provided that FCFC will at all times maintain a beneficial interest in 11% of Drive. After distributions from or proceeds on any sale of the 20% Drive interest exceed $16.0 million, BOS will share in 20% of the excess distributions or proceeds. o KBW has updated its presentation and opinion to reflect this change, and to reflect June 30, 2002 financial statements. In reviewing the exchange offer, KBW has not changed its previous assumptions related to the spot price or average price of New Preferred Stock, or Common Stock. KBW believes this is appropriate since the prices of the New Preferred Stock and Common Stock may have changed related, in part, due to information related to the announcement of the Restructuring and the Exchange Offer. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 4 FIRSTCITY RESTRUCTURING TRANSACTION SUMMARY ================================================================================ o FIRSTCITY ("FCFC") IS CONTEMPLATING ENTERING INTO A NUMBER OF TRANSACTIONS, WHICH ARE DESIGNED TO RESTRUCTURE AND RE-CAPITALIZE THE COMPANY. THESE TRANSACTIONS INCLUDE: o BOS lending $16.0 million to FCFC, non-recourse, using FCFC's interest in Drive as collateral (the "Drive Loan"), provided that FCFC will at all times maintain a beneficial interest in 11% of Drive. o The offer to exchange (the "Exchange Offer") 1,222,901 shares of FCFC's preferred stock (the "Preferred") for either: o $10.00 cash and two FCFC common shares for each Preferred share or o $8.00 cash and three FCFC common shares for each Preferred share o Residual cash from the sale of Drive and the Exchange Offer will be applied to debt reduction. o BOS will refinance the remainder of FCFC existing facilities with a $47 to $49 million commitment. o FCFC will purchase the 20% interest held by management in FCFC's indirect subsidiary, FirstCity Holdings ("FCH") in exchange for 400,000 shares of FCFC common stock and up to $3.2 million in earn-out payments. o BOS will provide new financing to FCFC, with a total commitment of $58 to $60 million. o FCFC will be released from its guaranty of $4 million of Drive's Term Loan. o BOS will release its existing option to acquire 1,975,000 shares of FCFC's common stock. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 5 SCOPE OF KBW ENGAGEMENT ================================================================================ o KBW has been engaged by a Special Committee of the Board of Directors. o THE SPECIAL COMMITTEE REQUESTED KBW'S OPINION AS TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE HOLDERS OF FCFC'S PREFERRED STOCK, OF THE CONSIDERATION OFFERED IN THE EXCHANGE OFFER. o The consideration includes both cash and FCFC common stock. o KBW has considered, among other things deemed to be relevant, the following: o The Drive Loan o Peer groups of, and merger and acquisition transactions involving, automobile finance companies o The consideration offered in the Exchange Offer and the valuation of the consideration o FCFC's purchase of a 20% interest in FCH o FCFC's debt refinancing, and restructuring o The past, current, and pro forma financial condition of FCFC o Certain of FCFC's publicly available financial information: 10-Qs, 10-Ks, and other filings o A draft of the S-4 to be filed related to the Restructuring o Liquidation analysis o Historical trading values of FCFC's common and preferred stocks o Premiums paid in other transactions filed with the SEC as going private transactions o Certain estimated investor recovery results from transactions involving comparable companies o Previous and prevailing economic conditions ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 6 THE RESTRUCTURING: THE DRIVE LOAN THE DRIVE LOAN ================================================================================ Summary o FCFC owns a 31% interest in Drive. o FCFC will its interest in Drive to collateralize a non-recourse $16.0 million loan from BOS. o The debt and the collateral will not be cross-collateralized with other BOS loans. A default under the Drive Loan will not constitute a default under other BOS loans. o BOS and FCFC will share in distributions from or proceeds of any sale of the 20% Drive interest. To the extent the proceeds related to the sale of the 20% interest in Drive exceed $16 million, FCFC will receive 80% of such excess, with BOS receiving 20% of such excess. o The Drive Loan is conditioned upon achieving at least 80% participation in the Exchange Offer. o BOS will release FCFC from a $4 million guaranty related to Drive's debt. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 8 THE DRIVE LOAN ================================================================================ Summary Balance Sheet & Income Statement
AT OR FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------ ASSETS Cash 7,395 Contracts held for sale - net 70,447 Investment Securities 77,407 Interest Receivable 1,089 Furniture & Fixtures 6,201 Service Fees Receivable 1,212 Goodwill -- Other Assets 1,820 ----------------- TOTAL ASSETS 165,571 LIABILITIES Term Loan 27,500 Notes Payable to Banks 67,165 Other Liabilities 12,910 ----------------- TOTAL LIABILITIES 107,575 Capital Note 32,000 TOTAL EQUITY 25,996 ----------------- TOTAL LIABILITIES & EQUITY 165,571 REVENUES: Interest Income 33,335 Interest Expense (9,329) ----------------- Net Interest Income 24,006 Other Income 439 Gain on Sale 39,033 Impairment of Residual Assets (3,897) Servicing Fee Income 11,986 ----------------- Total Revenue 71,567 EXPENSES: Operating Expenses 45,639 Provisions on Contracts held for sale 5,377 Accounting Policy Change 783 ----------------- Total Expenses 51,799 INCOME BEFORE PROVISION FOR TAXES 19,768 Other Comprehensive Income (1,800) ----------------- COMBINED PRE-TAX INCOME 17,968 Pro Forma Provision for Income Taxes 7,187 ----------------- PRO FORMA NET INCOME 10,781
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 9 THE DRIVE LOAN ================================================================================ Publicly-Traded Auto Finance Companies
MARKET STATS. EPS MULTIPLE - I/B/E/S ------------------- --------------------------------------------- MARKET STOCK 2002 2003 CHANGE PRICE PRICE CAP. PRICE EST. EPS EST. EPS 2002 / 2003 / 02E / 03E STOCK ------------ ----- -------- -------- ----------- ----- ----- Company Name SYMBOL STATE ($ millions) ($) ($) ($) (%) (x) (x) - ------------ ------ ----- ------------ ----- -------- -------- ----------- ----- ----- SMALL MARKET CAPITALIZATION Union Acceptance Corporation(1) UACA IN 125 4.03 nm ne nm nm nm Consumer Portfolio Services CPSS CA 42 1.90 0.10 0.25 150% 19.0 7.6 Onyx Acceptance Corporation ONYX CA 13 2.66 0.30 0.45 50% 8.9 5.9 First Investors Financial, Inc.(2) FIFS TX 17 3.00 0.15 0.28 nm 20.0 10.7 MEDIAN 100% 19.0 7.6 LARGE MARKET CAPITALIZATION AmeriCredit Corp.(3) ACF TX 606 7.18 3.08 5.05 64% 2.3 1.4 WFS Financial, Inc.(4) WFSI CA 407 20.35 2.35 3.75 60% 8.7 5.4 Credit Acceptance Corp. CACC MI 353 8.39 0.79 0.82 4% 10.6 10.2 MEDIAN 60% 8.7 5.4 DRIVE FINANCIAL SERVICES(5) 80 NA 10.8 NA NM 7.4 NM
OTHER -------------------------- GAIN ON SALE / RESIDUALS PRICE REVENUE / EQUITY / BOOK STOCK ------- --------- ------ Company Name SYMBOL STATE (%) (%) (%) - ------------ ------ ----- ------- --------- ------ SMALL MARKET CAPITALIZATION Union Acceptance Corporation(1) UACA IN 27% 115% 72% Consumer Portfolio Services CPSS CA 70% 174% 59% Onyx Acceptance Corporation ONYX CA 35% 293% 22% First Investors Financial, Inc.(2) FIFS TX 0% 0% 57% 31% 144% 58% LARGE MARKET CAPITALIZATION AmeriCredit Corp.(3) ACF TX 38% 110% 49% WFS Financial, Inc.(4) WFSI CA 3% 58% 152% Credit Acceptance Corp. CACC MI 2% 0% 123% 3% 58% 123% DRIVE FINANCIAL SERVICES(5) 55% 298% 308%
(1) June Fiscal Year, Estimate adjusted to calendar year, 2001 excludes residual valuation charge. (2) April Fiscal Year, adjusted to calendar year (3) June Fiscal Year, adjusted to calendar year (4) WFS currently under tender offer from 80% owner Westcorp (5) At or For the Year Ended December 31, 2001. Valuation implied by Drive Loan collateral of 20% for $16 million ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 10 THE DRIVE LOAN ================================================================================ Mergers and Acquisitions Involving Auto Finance Companies
SELLER'S ANNUAL SELLER'S ORIGINATIONS MGD. SELLER'S IN YEAR RECEIVABLES TRAILING ANN. PURCHASE OF SALE PORTFOLIO EARNINGS(a) DATE BUYER SELLER PRICE $ MILLIONS $ MILLIONS $ MILLIONS - ---- ----- ------ -------- ------------ ----------- ----------- 11/19/2001 CONSUMER PORTFOLIO SERVICES MFN FINANCIAL CORPORATION $104 MILLION 279 424 $ 5.1 11/18/1999 SUSQUEHANNA BANCSHARES HANN FINANCIAL CORP. $ 35 MILLION NA 800 $ 3.4(c) 11/16/1999 ASSOCIATES FIRST CAPITAL CORP. ARCADIA FINANCIAL, LTD. $193 MILLION 2,400 5,300 $(6.8) 6/14/1999 FAIRLANE CREDIT, LLC TRIAD FINANCIAL CORP. $105 MILLION(c) 425 511 $12.4 7/16/1998 CAPITAL ONE FINANCIAL CORP. SUMMIT ACCEPTANCE $ 55 MILLION NA 260 NA 6/23/1997 NORWEST CORP. FIDELITY ACCEPTANCE $344 MILLION 1,000 1,120 $24.7 6/1/1997 HOUSEHOLD INTERNATIONAL ACC CONSUMER FINANCE $200 MILLION 484 396 $11.0 3/29/1996 SOUTHERN NATIONAL CORP. REGIONAL ACCEPTANCE $167 MILLION NA 136 $ 8.8 2/5/1996 BAYVIEW CAPITAL CORP. CTL CREDIT, INC. $ 65 MILLION 133 466 $ 5.2
PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE PRICE / PRICE / PREMIUM / PRICE / PRICE/ ANN. ANNUAL MANAGED MARKET BOOK TRAILING DATE BUYER SELLER ORIGINATIONS RECEIVABLES PRICE VALUE EARNINGS - ---- ----- ------ ------------ ----------- --------- ------- -------- 11/19/2001 CONSUMER PORTFOLIO SERVICES MFN FINANCIAL CORPORATION 37% 25% 89% 75% 20.4x 11/18/1999 SUSQUEHANNA BANCSHARES HANN FINANCIAL CORP. NA 4% NA NA 10.3x 11/16/1999 ASSOCIATES FIRST CAPITAL CORP. ARCADIA FINANCIAL, LTD. 8% 4% 31% 112% nm 6/14/1999 FAIRLANE CREDIT, LLC TRIAD FINANCIAL CORP. 25% 21% NA 144% 8.5x 7/16/1998 CAPITAL ONE FINANCIAL CORP. SUMMIT ACCEPTANCE NA 21% NA NA NA 6/23/1997 NORWEST CORP. FIDELITY ACCEPTANCE 20% 31% NA NA 13.9x 6/1/1997 HOUSEHOLD INTERNATIONAL ACC CONSUMER FINANCE 41% 51% 100% 655% 18.2x 3/29/1996 SOUTHERN NATIONAL CORP. REGIONAL ACCEPTANCE 134% 123% 13% 423% 19.1x 2/5/1996 BAYVIEW CAPITAL CORP. CTL CREDIT, INC. 151% 14% 30% 132% 12.6x
NOTES: (A) trailing "core" earnings at announcement, excludes amortization and non-recurring items, fully-taxed (b) estimate based on Susquehanna's claim that the transaction would be accretive to EPS in 2000. (c) includes assumption and repayment of $60 million of unsecured debt due to ContiFinancial (d) valuation based on loan-to-collateral value of Drive Loan
PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE PRICE / PRICE / PREMIUM / PRICE / PRICE/ ANNUAL MANAGED MARKET BOOK TRAILING ORIGINATIONS RECEIVABLES PRICE VALUE EARNINGS ------------ ----------- --------- ------- -------- MEDIAN '99-'01 DEALS 25% 12% 60% 112% 10.3X MEDIAN '97 & '98 DEALS 31% 31% 100% 655% 16.0X MEDIAN '96 DEALS 142% 69% 21% 277% 15.8X ALL MEDIAN 37% 21% 31% 138% 13.9X ALL AVERAGE 63% 34% 43% 293% 13.8X
SELLER'S ANNUAL SELLER'S ORIGINATIONS MGD. SELLER'S PURCHASE IN YEAR RECEIVABLES TRAILING PRICE / ANN. PURCHASE OF SALE PORTFOLIO EARNINGS(a) ANNUAL DATE BUYER SELLER PRICE $ MILLIONS $ MILLIONS $ MILLIONS ORIGINATIONS - ---- ----- ------ -------- ------------ ----------- ----------- ------------ TBD(d) BANK OF SCOTLAND DRIVE FINANCIAL SERVICES $80 MILLION 400 555 $10.8 20%
PURCHASE PURCHASE PURCHASE PURCHASE PRICE / PREMIUM / PRICE / PRICE/ ANN. MANAGED MARKET BOOK TRAILING DATE BUYER SELLER RECEIVABLES PRICE VALUE EARNINGS - ---- ----- ------ ----------- --------- ------- -------- TBD(d) BANK OF SCOTLAND DRIVE FINANCIAL SERVICES 14% NA 308% 7.4X
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 11 THE RESTRUCTURING: THE EXCHANGE OFFER THE EXCHANGE OFFER ================================================================================ Summary o FCFC IS CONTEMPLATING MAKING AND EXCHANGE OFFER IN WHICH HOLDERS OF FCFC'S PREFERRED STOCK WOULD HAVE THE OPPORTUNITY TO EXCHANGE ONE SHARE OF PREFERRED FOR EITHER: o $10.00 per share in cash and two shares of FCFC common stock ("Exchange Offer Choice A"), or o $8.00 per share in cash and three shares of FCFC common stock ("Exchange Offer Choice B") The current Preferred has characteristics as follows: o Legal claim of $33.4 million as of June 30, 2002 ($27.30 per share) o Par value of $21.00 per share, $6.30 per share of accrued and unpaid dividends o Dividend (currently suspended) of $2.10 per share per year o Scheduled Redemption of September 2005 o Right to elect two Board members if dividends not paid for six or more consecutive quarters, with those elected Board members serving until dividends in arrears are paid (currently could elect two Board members at annual meeting in 2002). o PREFERRED HOLDERS, POST-EXCHANGE OFFER (ASSUMING 80% PARTICIPATION AND 50-50 SPLIT ON EXCHANGE OFFER CHOICE A OR EXCHANGE OFFER CHOICE B) WILL OWN 21.8% OF FCFC. o COMPLETION OF THE EXCHANGE OFFER IS CONDITIONED UPON ACHIEVING 80% PARTICIPATION. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 13 THE RESTRUCTURING: PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS ================================================================================ Summary o Prior to the Restructuring, management of FCH own a 20% interest in FCH, FCFC owns the other 80%. o FCFC is contemplating acquiring this interest through the issuance of 400,000 shares of FCFC common stock, and through up to $3.20 million in "earn-out" payments based on the performance of Mexican asset pools. o The total value of the purchase is up to $3.65 million ($0.45 million in common stock, and up to $3.20 million in earn-out). o The value of 20% of FCH at $3.65 million values FCH at $18.25 million. $18.25 million represents 454% of book value, and 4.2 times FCH's trailing pre-tax income. o Pre-tax income, divided into the FCH valuation implies a 23.9% yield. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 15 PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS ================================================================================ Summary Income Statement & Balance Sheet of FCH
AT OR FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------ ASSETS Cash 3,059 Inventory 5,822 Note Receivable 19,765 Investment in Unconsol. Subs 26,379 Furniture & Fixtures 1,161 Accounts Receivable 394 Prepaid Expenses 283 Goodwill 74 Other Assets 360 -------- TOTAL ASSETS 57,297 LIABILITIES Note Payable - FirstCity 17,669 Notes Payable to Banks 31,399 Other Liabilities 1,868 -------- TOTAL LIABILITIES 50,936 Minority Interest 2,337 TOTAL EQUITY 4,024 -------- TOTAL LIABILITIES & EQUITY 57,297 REVENUES: Interest & Accretion on Perf. Loans 5,562 Earnings of Subs 6,323 Servicing Fees 10,393 Other 1,494 -------- Total Revenue 23,772 EXPENSES: Servicing Fees Expense 3,031 Compensation & Benefits 7,678 Occupancy 1,219 Other Non-Interest Expenses 2,765 Interest Expense 4,725 -------- Total Expenses 19,419 Profit / (Loss) Before Tax 4,353
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 16 THE RESTRUCTURING: DEBT RESTRUCTURING DEBT RESTRUCTURING ================================================================================ Summary o Remaining cash from the $16.0 million Drive Loan, after completing the Exchange Offer, will be applied to existing FCFC debt held by BOS. o FCFC remaining debt held by BOS, estimated at $49 million, will be restructured as follows: o $35 to $37 million - Senior Cash Flow Note This note will have a 4 year maturity and provide for all cash flow from existing investments to first pay all corporate overhead, and then principal and interest on the Senior Cash Flow Note. o $12 million - Term Note This note will have a 5 year maturity with interest only payments to be provided from existing cash flows. In conjunction, BOS will release warrants for 1,975,000 FCFC shares with a strike price of $2.31. o BOS will provide a $53 to $55 million New Acquisition Line of Credit. o BOS will provide a $5 million New Working Capital Line of Credit. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 18 DEBT RESTRUCTURING ================================================================================ Summary Table ($ in millions)
OUTSTANDING OUTSTANDING PRO BORROWINGS AS OF ADJUSTMENTS PER FORMA AS OF JUNE 30, 2002 RESTRUCTURING JUNE 30, 2002 ---------------- --------------- --------------- FIRSTCITY Company Senior Facility: Revolving Line of Credit 10 (7) 3 Term Loan A 31 (31) -- Term Loan B 12 (12) -- Term Loan C -- -- -- Term Loan E 3 (3) -- Drive Loan -- 16 16 Term Credit Facility 3 (3) -- Cash Flow Note -- 37 37 Term Note -- 12 12 FCH Note -- 3 3 Acquisition Line of Credit -- -- -- Working Capital Line of Credit -- -- -- COMMERCIAL CORP Acquisition Facility 2 -- 2 Term Facilities 3 -- 3 Equity investment facility 25 -- 25 Total 89 12 101 -- -- ---
Note: Assumes cash flow note at $37 million ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 19 RESTRUCTURING IMPACT TO FIRSTCITY RESTRUCTURING IMPACT TO FIRSTCITY ================================================================================ Summary & Major Assumptions Used o SIGNIFICANTLY INCREASES FCFC COMMON EQUITY BY: o Debt Forgiveness of, and Equity Issued to Preferred Stockholders ($17.9 million) o SIMPLIFIES FCFC DEBT OBLIGATIONS & PROVIDES NEW FINANCING o Existing Facilities With BOS Paid Off, and Restructured into 3 Notes from Current 5 o $58 to $60 million in New Acquisition and Working Capital by BOS o INCREASES COMMON EQUITY PER SHARE FROM $0.46 TO $2.41 (06/30/02 and Pro Forma at 06/30/02, respectively) o REDUCES POTENTIAL DILUTION FROM BOS WARRANTS (through release of 1,975,000 warrants at $2.31) - -------------------------------------------------------------------------------- o RESTRUCTURING - MAJOR ASSUMPTIONS o All transactions in restructuring are completed as currently contemplated o Exchange offer reaches required 80% exchange threshold o 50% of exchange participation select Exchange Offer Choice A, and 50% select Exchange Offer Choice B o FCFC current stock price is $1.14, as is price at point of transaction closings ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 21 RESTRUCTURING IMPACT TO FIRSTCITY ================================================================================ Pro Forma Balance Sheet Impact of Restructuring ($ in `000s, except per share)
DEBT 6/30/2002 DRIVE EXCHANGE 20% FCH RESTRUC. PRO FORMA --------- -------- -------- -------- -------- --------- Cash and Cash Equivalents 6,838 9,080 (9,080) -- -- 6,838 Portfolio Assets, net 11,591 -- -- -- -- 11,591 Loans Receivable, net 21,845 -- -- -- -- 21,845 Equity Investments 51,504 -- -- -- -- 51,504 Deferred Tax Benefit, net 20,101 -- -- -- -- 20,101 Other Assets, net 14,543 -- -- 1,613 -- 16,156 Net Assets of discontinued ops 15,175 -- -- -- -- 15,175 -------- -------- -------- -------- -------- -------- Total Assets 141,597 9,080 (9,080) 1,613 -- 143,210 Notes Payable 89,435 9,080 -- 3,200 (49,000) 52,715 New Credit Facilities -- -- -- -- 49,000 49,000 Other Liabilities (1) 13,763 (4,000) -- (2,043) -- 7,720 -------- -------- -------- -------- -------- -------- Total Liabilities 103,198 5,080 -- 1,157 -- 109,435 Redeemable Preferred Stock 33,385 -- (26,708) -- -- 6,677 Common Equity 5,014 4,000 17,628 456 -- 27,098 -------- -------- -------- -------- -------- -------- Liabilities and Equity 141,597 9,080 (9,080) 1,613 -- 143,210 Common Shares Outstanding 8,377 -- 2,446 400 -- 11,222 Book Value Per Share $ 0.60 $ 2.41
(1) Other liabilities includes minority interest ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 22 RESTRUCTURING IMPACT TO FIRSTCITY ================================================================================ Footnotes to Pro Forma Balance Sheet ($ in `000s, except per share) LOAN SECURED BY DRIVE FINANCIAL STAKE Cash and Cash Equivalents Cash Proceeds from Drive Loan ......................... 16,000 Excess Cash From Exchange to Repay Debt ............... (6,920) --------- Net Change ....................................... 9,080 Equity Investments Carrying Value of Drive Interest Sold ................. -- Notes Payable Drive Loan ............................................ 16,000 Previous Loans Repayment .............................. (6,920) --------- Net Change ....................................... 9,080 Other Liabilities Drive Debt Guaranty Release ........................... (4,000) Minority Interest Elimination ......................... -- --------- Net Change ....................................... (4,000) Common Equity Carrying Value of Drive Interest ...................... -- Minority Interest Elimination ......................... -- Release of Previously Accrued Guaranty ................ 4,000 --------- Net Change ....................................... 4,000 EXCHANGE OFFER Cash and Cash Equivalents Cash Required for Choice A ............................ (4,892) Cash Required for Choice B ............................ (3,913) Associated Expenses ................................... (275) --------- Net Change ....................................... (9,080) Redeemable Preferred Stock Preferred Stock Exchanged ............................. (26,708) Exchange Participation Rate ........................... 80% Common Equity Common stock issued to Preferred holders .............. 2,788 Debt forgiveness by Preferred holders ................. 15,115 Expenses .............................................. (275) --------- Net Change ....................................... 17,628
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 23 HISTORICAL PREFERRED & COMMON STOCK PRICES & VOLUMES PREFERRED STOCK PRICE PERFORMANCE: SINCE PREFERRED ISSUANCE ================================================================================ [GRAPH]
Date FCFCO Preferred Stock ---- --------------------- 8/13/1997 22 11/13/1997 21.13 2/13/1998 22 5/13/1998 22.88 8/13/1998 22.25 11/13/1998 15.5 2/12/1999 19.5 2/13/1999 5/13/1999 16.06 8/13/1999 6 11/12/1999 8.63 11/13/1999 2/14/2000 9.5 2/13/2000 5/12/2000 6.13 5/13/2000 8/14/2000 10.25 8/13/2000 11/13/2000 10.06 2/13/2001 10 5/14/2001 8.25 5/13/2001 8/13/2001 8.25 11/13/2001 7.11 2/13/2002 7.775 5/13/2002 7.245 8/13/2002 9.94
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 25 PREFERRED STOCK PRICE PERFORMANCE: DAILY VOLUME ================================================================================ [GRAPH]
Date FCFCO Preferred Stock ---- --------------------- 8/13/1997 400 11/13/1997 2400 2/13/1998 8400 5/13/1998 900 8/13/1998 1000 11/13/1998 2000 2/12/1999 1600 2/13/1999 5/13/1999 2400 8/13/1999 8400 11/12/1999 4500 11/13/1999 2/14/2000 1100 2/13/2000 5/12/2000 0 5/13/2000 8/14/2000 11300 8/13/2000 11/13/2000 11000 2/13/2001 0 5/14/2001 8200 5/13/2001 8/13/2001 900 11/13/2001 0 2/13/2002 0 5/13/2002 0 8/13/2002 100
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 26 COMMON STOCK PRICE PERFORMANCE: SINCE PREFERRED ISSUANCE ================================================================================ [GRAPH]
Date FCFC Common Stock ---- ----------------- 8/13/1997 25.75 11/13/1997 26.5 2/13/1998 28.125 5/13/1998 31.375 8/13/1998 24.5 11/13/1998 13.5 2/12/1999 13.375 2/13/1999 5/13/1999 6.625 8/13/1999 1.7813 11/12/1999 2.25 11/13/1999 2/14/2000 3.4375 2/13/2000 5/12/2000 2.125 5/13/2000 8/14/2000 1.875 8/13/2000 11/13/2000 2.1875 2/13/2001 1.625 5/14/2001 1.5 5/13/2001 8/13/2001 1.55 11/13/2001 1.65 2/13/2002 1.165 5/13/2002 1.125 8/13/2002 1.19
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 27 COMMON STOCK PRICE PERFORMANCE: VOLUME ================================================================================ [GRAPH]
Date FCFC Common Stock ---- ----------------- 8/13/1997 8400 11/13/1997 26100 2/13/1998 5500 5/13/1998 38200 8/13/1998 26700 11/13/1998 57000 2/12/1999 16900 2/13/1999 5/13/1999 84300 8/13/1999 1300600 11/12/1999 218500 11/13/1999 2/14/2000 53600 2/13/2000 5/12/2000 1900 5/13/2000 8/14/2000 69800 8/13/2000 11/13/2000 1000 2/13/2001 1300 5/14/2001 1100 5/13/2001 8/13/2001 2700 11/13/2001 3000 2/13/2002 100 5/13/2002 0 8/13/2002 2200
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 28 EXCHANGE OFFER VALUATION EXCHANGE OFFER VALUATION ================================================================================ Summary o The valuation of Exchange Offer Choice A is $10.00 per preferred share in cash, plus 2 times the value of an FCFC common share. The last trade of FCFC common stock was $1.14, indicating $2.28 per preferred share in value (OR $12.28 IN TOTAL). However, KBW estimates FCFC's common stock book value per share, pro forma for the Restructuring at December 31, 2001, is $2.41. Valued at pro forma book value, the value per preferred share would be $14.83. o The valuation of Exchange Offer Choice B is $8.00 per preferred share in cash, plus 3 times the value of an FCFC common share. The last trade of FCFC common stock was $1.14, indicating $3.42 per preferred share in value (OR $11.42 IN TOTAL). However, KBW estimates FCFC's common stock book value per share, pro forma for the Restructuring at December 31, 2001 is $2.41. Valued at pro forma book value, the value per preferred share would be $15.24. o Assuming a 50% / 50% split, the Exchange Offer is valued at $11.85 (at FCFC last trade) or at $15.04 (at pro forma book) o MAJOR ASSUMPTIONS o 80% of current preferred shares are exchanged in the Exchange Offer. o 50% select Exchange Offer Choice A and 50% select Exchange Offer Choice B. o Current FCFC common stock price is $1.14. o Last FCFCO preferred stock price is $7.10. o 1,222,901 preferred shares outstanding pre-Exchange Offer. o Pro forma book value per FCFC common share is $2.41 (rounded). o All other Restructuring transactions close as contemplated ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 30 EXCHANGE OFFER VALUATION ================================================================================ Valuation Table ($ in `000s, except per share)
PER SHARE VALUE PREMIUM TO MARKET PRICE-TO-LEGAL CLAIM --------------- ----------------- -------------------- CASH PER STOCK PER TOTAL PER LAST 30-DAY JUN. 30 SEP. 30 DEC. 30 SHARE SHARE SHARE TRADE AVG. 2002 2002 2002 -------- --------- --------- ----- ------ ------- ------- ------- EXCHANGE OFFER CHOICE A ($10.00 CASH, 2 COMMON SHARES) FCFC Common Last Price $ 10.00 $ 2.28 $ 12.28 73% 62% 45% 44% 43% 50.0% $ 10.00 $ 2.41 $ 12.41 75% 64% 45% 45% 44% 66.7% $ 10.00 $ 3.22 $ 13.22 86% 74% 48% 48% 47% 75.0% $ 10.00 $ 3.62 $ 13.62 92% 80% 50% 49% 48% 90.0% $ 10.00 $ 4.35 $ 14.35 102% 89% 53% 52% 51% 100.0% $ 10.00 $ 4.83 $ 14.83 109% 96% 54% 53% 52% EXCHANGE OFFER CHOICE B ($8.00 CASH, 3 COMMON SHARES) FCFC Common Last Price $ 8.00 $ 3.42 $ 11.42 61% 51% 42% 41% 40% 50.0% $ 8.00 $ 3.62 $ 11.62 64% 53% 43% 42% 41% 66.7% $ 8.00 $ 4.83 $ 12.83 81% 69% 47% 46% 45% 75.0% $ 8.00 $ 5.43 $ 13.43 89% 77% 49% 48% 47% 90.0% $ 8.00 $ 6.52 $ 14.52 105% 91% 53% 52% 51% 100.0% $ 8.00 $ 7.24 $ 15.24 115% 101% 56% 55% 54% TOTAL EXCHANGE OFFER FCFC Common Last Price $ 9.00 $ 2.85 $ 11.85 67% 56% 43% 43% 42% 50.0% $ 9.00 $ 3.02 $ 12.02 69% 58% 44% 43% 42% 66.7% $ 9.00 $ 4.02 $ 13.02 83% 72% 48% 47% 46% 75.0% $ 9.00 $ 4.53 $ 13.53 91% 78% 50% 49% 48% 90.0% $ 9.00 $ 5.43 $ 14.43 103% 90% 53% 52% 51% 100.0% $ 9.00 $ 6.04 $ 15.04 112% 98% 55% 54% 53%
Note: Last trade of FCFC Preferred is $7.10, 30-day average was $7.58, legal claim at 6/30/02 is $27.30. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 31 LIQUIDATION ANALYSIS LIQUIDATION ANALYSIS ================================================================================ Summary o KBW PERFORMED A LIQUIDATION ANALYSIS, TO INCLUDE: o Sale of assets o ASSET SALE APPROACH - MAJOR ASSUMPTIONS o Assets of FCFC marketed for sale immediately o Low, Mid, and High price assumptions reviewed o Low, Mid, and High levels assume assets sold in orderly fashion o Assumes assets can be sold within 6 month time period o 6 months of declining-level parent company operating expenses (100% in month 1, 90% in month 2, etc.) o Other selling expenses are 2% of purchase price, transaction specific legal fees are fixed at $1,500,000 ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 33 LIQUIDATION ANALYSIS ================================================================================ Asset Sale Approach o The majority of FCFC's assets are illiquid, there is no readily available market for them, thus, book value is likely the best-case price one could expect to achieve in any sale (for assets that may have value for another investor). o Several types of FCFC's assets are not saleable, for instance the Deferred Tax Asset is an intangible asset. o Assets from Discontinued Operations are highly illiquid (they are primarily residual assets from home equity securitizations) and would likely only be purchased at a significant discount to carrying value. o FCFC's interest in Drive may sell for a price higher than book value. However given the current ownership structure of Drive (with BOS owning 49%) it is unclear what type of entity would purchase it. WHEN TAKEN OUTSIDE THE AUSPICES OF THE RESTRUCTURING AS A WHOLE, IT IS UNLIKELY THAT FCFC WOULD BE ABLE TO ACHIEVE COLLATERAL VALUATION AS FAVORABLE AS WHAT IS CONTEMPLATED IN CONJUNCTION WITH THE RESTRUCTURING. o Given the fact that FirstCity would no longer exist under a liquidation scenario, a) asset buyers would not have any financial backing to representations and warranties, and b) the servicing agent would no longer be able to perform its duties. BOTH (A) AND (B) WOULD PUSH ASSET SALE PRICES TOWARD THE MID AND LOW POINTS IN THE ANALYSIS TO FOLLOW. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 34 LIQUIDATION ANALYSIS ================================================================================ Asset Sale Approach o The following table illustrates low, mid and high expectations for cash proceeds from the sale of balance sheet assets.
PRICE / CARRYING VALUE $ GROSS PROCEEDS ------------------------------------------------------------------------------------------- ASSETS 6/30/2002 LOW MID HIGH LOW MID HIGH - ------ --------- --- --- ---- --- --- ---- Cash and equivalents 6,838 100% 100% 100% 6,838 6,838 6,838 Portfolio Assets, Net 11,591 80% 90% 100% 9,273 10,432 11,591 Loans Receivable Student Loans, net 88 70% 85% 100% 62 75 88 Auto Loans, net 70% 85% 100% -- -- -- Note Receivable 21,845 80% 90% 100% 17,476 19,661 21,845 Mortgage loans held for sale 70% 85% 100% -- -- -- Equity Investments Drive Financial 8,754 75% 100% 125% 6,566 8,754 10,943 MCS 2,935 80% 90% 100% 2,348 2,642 2,935 Acquisition Partnerships 39,815 90% 95% 100% 35,834 37,824 39,815 Discontinued Operations 15,175 25% 38% 50% 3,794 5,691 7,588 Interest Receivable 986 100% 100% 100% 986 986 986 Deferred Tax Asset 20,101 0% 0% 0% -- -- -- Furniture & Fixtures 2,444 25% 50% 66% 611 1,222 1,613 Accounts Receivable 3,820 90% 95% 100% 3,438 3,629 3,820 Note Receivable - related 133 70% 85% 100% 93 113 133 Service Fees Receivable 2,035 70% 85% 100% 1,425 1,730 2,035 Prepaid Expenses 4,668 0% 15% 25% -- 700 1,167 Servicing Rights 99 70% 85% 100% 69 84 99 Goodwill 93 0% 0% 0% -- -- -- Other Assets 177 100% 100% 100% 177 177 177 ---------- -------- ---------- ---------- TOTAL ASSETS $ 141,597 Cash Proceeds: $ 88,988 $ 100,557 $ 111,672 ========== ======== ========== ==========
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 35 LIQUIDATION ANALYSIS ================================================================================ Asset Sale Approach o As can be seen below, only our "High" expectations for asset sale prices, which are aggressive, result in any remaining proceeds for Preferred shareholders. The cash flow provided from our High price expectation is $5.88 per preferred share. o The "Mid" and "Low" price expectations do not result in any proceeds for preferred shareholders. o If equal probability weightings are applied to the Low, Mid, and High values, the expected value for Preferred shareholders would be $1.96.
$ PROCEEDS ------------------------------------------ LOW MID HIGH ---------- ---------- ---------- Gross Cash Proceeds ........................... $ 88,988 $ 100,557 $ 111,672 Parent Expenses ............................... (1,688) (1,688) (1,688) Direct Sale Expenses .......................... (1,780) (2,011) (2,233) Legal Expenses ................................ (1,500) (1,500) (1,500) ---------- ---------- ---------- Net Proceeds .................................. 84,021 95,358 106,251 ========== ========== ========== Notes Payable to Banks ........................ (84,021) (89,435) (89,435) Accounts Payable & Accrued Interest ........... -- (559) (559) Accrued Expenses .............................. -- (2,859) (2,859) Minority Interest ............................. -- (2,505) (6,204) Net Proceeds Available for Preferred .......... -- -- 7,194 Net Proceeds Per Preferred Share .............. $ 0.00 $ 0.00 $ 5.88
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 36 FINANCIAL SERVICES "GOING PRIVATE" TRANSACTIONS FINANCIAL SERVICES GOING PRIVATE TRANSACTIONS ================================================================================ Summary Information & Premiums Paid
FINANCIAL TYPE OF ANN. TENDER COMPANY NAME STATE SECTOR SECURITY DEAL VALUE DATE OFFER PRICE - ------------------------------------------------------------------------------------------------------------------------------ BancWest Corporation CA Bank Common Stock $ 2,438,200 05/07/2001 $ 35.00 FVNB Corporation TX Bank Common Stock 16,875 04/27/2001 45.00 Essex Bancorp, Inc. VA Thrift Common Stock 1,538 01/31/2001 1.45 Impac Commercial Holdings, Inc. MD Real Estate Common Stock 41,410 10/13/2000 7.55 National Discount Brokers Group NJ Broker Common Stock 857,906 10/09/2000 49.00 BNC Mortgage, Inc. CA Mortgage Common Stock 52,565 02/04/2000 10.00 Bankatlantic Bancorp, Inc. FL Thrift Common Stock 39,581 01/14/2000 6.00 PIMCO Advisors Holdings L.P. CA Investments Common Stock 1,921,362 10/31/1999 38.75 Preferred Employers Holdings, Inc. FL Insurance Common Stock 16,122 09/16/1999 5.00 Hawaii National Bancshares, Inc. HI Bank Common Stock 31,995 05/04/1999 45.00 FIRSTCITY FINANCIAL CORPORATION TX ASSET PREFERRED STOCK 11,593 (a) 11.85 ------------------------------ 14,711 (b) 15.04 PRICE ONE DAY ONE DAY 30-DAY-AVG. 30-DAY-AVG. COMPANY NAME STATE PRIOR TO ANN. PREMIUM PRIOR TO ANN. PREMIUM - ------------------------------------------------------------------------------------------------------------------ BancWest Corporation CA $ 24.98 40.1% $ 24.61 42.2% FVNB Corporation TX 34.85 29.1% 33.41 34.7% Essex Bancorp, Inc. VA 1.40 3.6% 1.24 16.7% Impac Commercial Holdings, Inc. MD 7.37 2.4% 6.53 15.6% National Discount Brokers Group NJ 25.25 94.1% 31.04 57.9% BNC Mortgage, Inc. CA 7.38 35.5% 6.57 52.2% Bankatlantic Bancorp, Inc. FL 4.81 24.7% 4.88 23.0% PIMCO Advisors Holdings L.P. CA 34.69 11.7% 33.52 15.6% Preferred Employers Holdings, Inc. FL 2.75 81.8% 2.92 71.4% Hawaii National Bancshares, Inc. HI 40.00 12.5% 40.75 10.4% -------------------------------------------------------------------- Median: 26.9% 28.8% FIRSTCITY FINANCIAL CORPORATION TX 7.10 66.9% 7.58 56.2% -------------------------------------------------------------------- 7.10 111.8% 7.58 98.3%
(a) Value based on exchanging for FCFC common shares at current market price. (a) Value based on exchanging for FCFC common shares at pro forma book value per share. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 38 CASE STUDY COMPARISON: DYNEX CAPITAL CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Description of Dynex Capital DESCRIPTION FROM DX 9/30/98 10-Q Dynex Capital, Inc. is a financial services company electing to be treated as a real estate investment trust. Dynex originates primarily mortgage loans secured by multifamily and commercial properties and loans secured by manufactured homes. Dynex will generally securitize the loans funded as collateral for collateralized bonds, thereby limiting its credit and liquidity risk and providing long-term financing for its investment portfolio. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 40 CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Relative Common Stock Performance: DX vs. FCFC [GRAPH]
Date FCFC (-96.4%) DX (-91.2%) ---- ------------- ----------- 1/30/1998 100 100 5/1/1998 113.656 86.321 4/30/1998 7/31/1998 99.559 75.472 7/30/1998 10/30/1998 46.696 36.321 1/29/1999 51.542 37.736 1/30/1999 4/30/1999 37.445 22.17 7/30/1999 19.824 17.925 10/29/1999 4.515 12.264 10/30/1999 1/28/2000 11.233 14.858 1/30/2000 4/28/2000 7.489 2.948 4/30/2000 7/28/2000 8.59 2.712 7/30/2000 10/27/2000 6.828 2.241 10/30/2000 2/2/2001 5.837 1.245 1/30/2001 4/27/2001 4.582 2.396 4/30/2001 7/27/2001 5.286 4.038 7/30/2001 11/2/2001 5.463 4.34 10/30/2001 2/1/2002 4.229 6.623 1/30/2002 4/26/2002 4.141 7.642 4/30/2002 8/2/2002 3.391 9.113 7/30/2002
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 41 CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Description of Preferred Stock Tender Offers o Dynex has completed two tender offers for its preferred stock o APRIL 30, 2001 (announcement) o SEPTEMBER 6, 2001 (announcement) o Both tenders involved offering to purchase up to maximum dollar amounts of Dynex's Series A, Series B and Series C Preferred, for cash consideration. Maximum amounts were those allowed under senior lending agreements. o The maximum amount to be tendered for the April 30th transaction was $26 million (Series A, B and C). o The maximum amount to be tendered in the September 6th transaction was $15 million (Series A, B and C). ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 42 CASE STUDY COMPARISON: DYNEX CAPITAL ================================================================================ Preferred Stock Tenders - Pertinent Statistics SUMMARY OF DYNEX CAPITAL 2001 PREFERRED STOCK TENDER OFFERS
Tender / Tender Liquidation Last Liquidation Tender / Tender Max Offer Preference Trade Preference Last Trade Dollar Value ----------- ---------- ---------- ----------- ---------- ------------ Series A $ 16.80 $ 28.68 $ 14.10 58.6% 19.1% 3,575 Series B $ 17.15 $ 29.18 $ 14.40 58.8% 19.1% 5,106 Series C $ 21.00 $ 35.84 $ 17.75 58.6% 18.3% 6,400 Series A $ 12.24 $ 28.11 $ 11.25 43.5% 8.8% 6,120 Series B $ 12.50 $ 28.60 $ 11.50 43.7% 8.7% 9,125 Series C $ 15.30 $ 35.11 $ 13.60 43.6% 12.5% 10,751 Weighted Average ............................................................... 49.1% 13.4% COMPARISON OF FCFC EXCHANGE FCFCO(1) $ 11.85 $ 27.30 $ 7.10 43.4% 66.9% 11,593 FCFCO(2) $ 15.04 $ 27.30 $ 7.10 55.1% 111.8% 14,711
Notes: 1) Assumes value of FCFC common stock holds constant at the most recent trade. 2) Assumes value of FCFC common stock is book value pro forma for the restructuring results. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 43 ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP ================================================================================ Summary DESCRIPTION FROM FCFC 9/30/98 10-Q: The Company is a diversified financial services company engaged in residential and commercial mortgage banking ("Mortgage Corp."), Portfolio Asset acquisition and resolution ("Commercial Corp.") and consumer lending ("Consumer Corp."). DESCRIPTION FROM AMMB 9/30/98 10-Q: AMRESCO is a diversified financial services company with five principal lines of business: asset management, commercial mortgage banking, home equity lending (previously residential mortgage banking), commercial finance and residential mortgage banking. DESCRIPTION FROM WFSG 9/30/98 10-Q: Wilshire Financial Services Group Inc. ("WFSG") is a diversified financial services company. WFSG conducts business in the United States and Europe, specializing in loan portfolio acquisition and securitization, correspondent lending and servicing.
FCFC AMMB WFSG ---- ---- ---- ASSET ACQUISITION Y Y Y LENDING Y Y Y SERVICING EXPERTISE Y Y Y U.S. AND ABROAD Y Y Y RESTRUCTURING Y Y Y
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 45 ALTERNATIVE COMPARISONS: AMRESCO ================================================================================ Relative Common Stock Performance: AMMB vs. FCFC [GRAPH]
Date FCFC (-96.4%) AMMB (-100.0%) ---- ------------- -------------- 1/30/1998 100 100 5/1/1998 113.656 129.217 4/30/1998 7/31/1998 99.559 100.772 7/30/1998 10/30/1998 46.696 24.476 1/29/1999 51.542 40.573 1/30/1999 4/30/1999 37.445 22.933 7/30/1999 19.824 22.051 10/29/1999 4.515 10.364 10/30/1999 1/28/2000 11.233 4.631 1/30/2000 4/28/2000 7.489 3.087 4/30/2000 7/28/2000 8.59 1.654 7/30/2000 10/27/2000 6.828 1.411 10/30/2000 2/2/2001 5.837 1.058 1/30/2001 4/27/2001 4.582 0.931 4/30/2001 7/27/2001 5.286 0.624 7/30/2001 11/2/2001 5.463 0.005 10/30/2001 2/1/2002 4.229 0.009 1/30/2002 5/3/2002 4.159 0.007 4/30/2002 8/2/2002 3.391 0.004 7/30/2002
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 46 ALTERNATIVE COMPARISONS: AMRESCO ================================================================================ Investor Recovery Results o The table compares certain aspects of the experience of particular AMRESCO note holders and FCFC's preferred holders
FCFC(1) AMMB(2) ------------- --------------------------- EVENT RESTRUCTURING REPURCHASE / SALE OF ASSETS INVESTORS PREFERRED NOTES LEGAL CLAIM $33 MILLION $617 MILLION RECOVERY PERCENTAGE (3) 42% - 45% 53%(4) EXPECTED LIQUIDATION RECOVERY (5) 0% - 22% NA
Notes: (1) Recovery percentage range is from 42% from Exchange Offer Choice B to 45% for Exchange Offer Choice A. Also assumes FCFC common stock worth the value of last trade. Does not assume any increase in FCFC common stock due to increase in pro forma book value per common share. (2) $617 million of legal claim includes $217 million of open market purchases of Senior Subordinated Notes repurchased in the fourth quarter of 2000, and $410 million of notes to receive proceeds from the company's asset sale in connection with its bankruptcy filing. Recovery percentage for AMRESCO is the blended result between 75% for the open market purchases and 41% from KBW's estimate of the recovery for note holders post-bankruptcy. Estimate is based on 8-K filing dated July 5, 2001 and the March 31, 2001 10-Q. (3) As a percentage of legal claim. (4) Implies that if a preferred stock existed at AMRESCO, similar to that of FCFC, the recovery to the preferred would have been zero. (5) KBW estimate range from Tab 6 for FCFC. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 47 ALTERNATIVE COMPARISONS: WILSHIRE FINANCIAL SERVICES GROUP ================================================================================ Relative Common Stock Performance: WFSG vs. FCFC [GRAPH]
Date FCFC (-96.4%) WFSG (-87.4%) ---- ------------- ------------- 1/30/1998 100 100 5/1/1998 113.656 92.788 4/30/1998 7/31/1998 99.559 81.25 7/30/1998 10/30/1998 46.696 11.779 1/29/1999 51.542 1.202 1/30/1999 4/30/1999 37.445 1.382 7/30/1999 19.824 4.808 10/29/1999 4.515 5.529 10/30/1999 1/28/2000 11.233 3.846 1/30/2000 4/28/2000 7.489 4.327 4/30/2000 7/28/2000 8.59 4.447 7/30/2000 10/27/2000 6.828 4.688 10/30/2000 2/2/2001 5.837 6.13 1/30/2001 4/27/2001 4.582 8.154 4/30/2001 7/27/2001 5.286 7.212 7/30/2001 11/2/2001 5.463 7.385 10/30/2001 2/1/2002 4.229 9.077 1/30/2002 5/3/2002 4.159 9.423 4/30/2002 8/2/2002 3.391 13.231 7/30/2002
================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 48 ALTERNATIVE COMPARISONS: WILSHIRE FINANCIAL SERVICES GROUP ================================================================================ Investor Recovery Results o The table compares certain aspects of the experience of particular Wilshire note holders and FCFC's preferred holders.
FCFC(1) WFSG(2) ------------- -------------------- EVENT RESTRUCTURING BANKRUPTCY EMERGENCE INVESTORS PREFERRED NOTES LEGAL CLAIM $33 MILLION $199 MILLION RECOVERY PERCENTAGE(3) 54% - 56% 37% - 42%(4) EXPECTED LIQUIDATION RECOVERY(5) 0% - 22% 18%
Notes: (1) Recovery percentage range is from 54% from Exchange Offer Choice A to 56% for Exchange Offer Choice B. Also assumes FCFC common stock worth pro forma book value per common share (pro forma for restructuring). This compares with WFSG's estimated amount also in the table. (2) Legal claim, recovery percentage and expected liquidation recovery are WFSG's estimates include in its Solicitation and Disclosure Statement Dated February 1, 1999. Legal claim includes accrued interest. Recovery percentage based on pro forma book value of common shares received. Liquidation recovery is as a percentage of claims. (3) As a percentage of legal claim. (4) Implies that if a preferred stock existed at WFSG, similar to that of FCFC, the recovery percentage on the preferred would have been zero. (5) KBW estimate range from Tab 6 for FCFC. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 49 KBW CONCLUSION CONCLUSION ================================================================================ o IN KBW'S OPINION, THE CONSIDERATION OFFERED TO THE HOLDERS OF FCFC'S REDEEMABLE PREFERRED STOCK IN THE EXCHANGE OFFER, IS FAIR, FROM A FINANCIAL POINT OF VIEW. THIS OPINION IS BASED ON THE FOLLOWING: o The significant premium to the current market price of the Preferred. o The high level of premium offered, when compared to other transactions filed with the SEC as "going private transactions" in financial services sectors. o The Exchange Offer's superiority to the results of the liquidation analysis performed. o The favorable level of recovery of legal claim for the Preferred holders, of the Exchange Offer, when compared to the recovery results of transactions involving restructurings of comparable companies, and specifically relative to positions within capital structure. o The liquidity provided to the Preferred holders, compared to the current market, which provides little liquidity. ================================================================================ FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC. 51 -----END PRIVACY-ENHANCED MESSAGE-----