Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 22, 2007
Date of Report (Date of earliest event reported)
NOVASTAR FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Maryland 001-13533 74-2830661
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
8140 Ward Parkway, Suite 300, Kansas City, MO 64114
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(Address of principal executive offices)
(Zip Code)
(816) 237-7000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Wachovia Master Repurchase Agreement (2007 Servicing Rights) and Wachovia Master
Repurchase Agreement (2007 Residual Securities)
As previously disclosed, in April 2007 NovaStar Financial, Inc. ("NFI"), as
guarantor, and certain of its subsidiaries (collectively, with NFI, "NovaStar")
entered into a Master Repurchase Agreement (2007 Servicing Rights) (as amended,
the "Servicing Rights Facility") with Wachovia Bank, N.A. and certain of its
affiliates (collectively, "Wachovia Bank"), and a Master Repurchase Agreement
(2007 Residual Securities) (as amended, the "Residual Securities Facility") with
Wachovia Capital Markets, LLC and certain of its affiliates. The Servicing
Rights Facility and the Residual Securities Facility collectively provide for a
$100 million combined maximum advance amount, with a maximum advance amount of
no more than $70 million under the Servicing Rights Facility.
In order to address certain short-term liquidity requirements, on October 22,
2007, the maximum advance amount under the Servicing Rights Facility was
temporarily increased to $115 million, the combined maximum advance amount under
the Servicing Rights Facility and the Residual Securities Facility was
temporarily increased to $120 million, and NovaStar Mortgage, Inc. ("NovaStar
Mortgage") drew funds under the Servicing Rights Facility, on a short-term
basis, against the pledge of NovaStar Mortgage's right to reimbursement for
certain principal and interest advances made by NovaStar Mortgage to certain
securitization trusts in NovaStar Mortgage's capacity as servicer of the
underlying securitized mortgage loans. The October 22nd advance must be repaid
in full no later than November 5, 2007. The increase in the maximum advance
amount under the Servicing Rights Facility and the increase in the combined
maximum advance amount under the Servicing Rights Facility and the Residual
Securities Facility will expire on November 5, 2007, at which time the maximum
advance amount under the Servicing Rights Facility will revert to $70 million
and the combined maximum advance amount under the Servicing Rights Facility and
the Residual Securities Facility will revert to $100 million.
In addition, on October 23, 2007, NovaStar and Wachovia Bank entered into
Amendment Number Three to the Servicing Rights Facility to add, as eligible
collateral thereunder, NovaStar Mortgage's servicing rights with respect to
mortgage loans securitized by NovaStar pursuant to the NovaStar Mortgage Funding
Trust, Series 2007-2. The foregoing summary of the terms of Amendment Number
Three is qualified in its entirety by reference to the full text of Amendment
Number Three, which is attached hereto as Exhibit 10.1 and is incorporated
herein by reference.
In addition to the financing agreements described above, Wachovia Bank or
certain of its affiliates provide to NFI and its affiliates certain additional
previously disclosed financing facilities and routinely engage in other ordinary
course financial transactions with NFI and its affiliates, including but not
limited to financial derivative transactions and acting as an underwriter for
certain securitizations sponsored by NFI and its affiliates.
DBSP Receivables Loan and Security Agreement
On October 22, 2007, NovaStar Mortgage, NFI, NovaStar Certificates Financing
Corporation ("NCFC"), NFI Holding Corporation ("NFI Holding"), NovaStar CDO
Holdings, Inc. ("CDO Holdings"), and DB Structured Products, Inc. ("DBSP")
executed a Forbearance Agreement and Amendment Number Nine ("Amendment No. 9")
to the existing Receivables Loan and Security Agreement (the "Servicing Advance
Facility"). Among other things, Amendment No. 9 extended the Servicing Advance
Facility termination date to the earlier of (a) the closing of the sale of
NovaStar Mortgage's mortgage servicing rights to Saxon Mortgage Services, Inc.
pursuant to that certain previously disclosed Servicing Rights Transfer
Agreement, and (b) January 22, 2008.
In connection with Amendment No. 9, NovaStar Mortgage paid DBSP a forbearance
fee and customary costs and expenses incurred by DBSP in connection with
Amendment No. 9.
In addition, in connection with Amendment No. 9, on October 22, 2007, NFI
Holding and CDO Holdings became signatories to that certain Amended and Restated
Master Netting Agreement dated as of January 5, 2007, among NFI, NMI, NCFC,
NovaStar Certificates Financing LLC, and HomeView Lending, Inc. (with NFI
Holding and CDO Holdings, the "NovaStar Entities"), and DBSP and certain of its
affiliates (the "DB Entities"), by the execution of a joinder agreement with
respect thereto (the "Joinder Agreement"). The Amended and Restated Master
Netting Agreement cross-collateralizes all or substantially all financial
transactions between any NovaStar Entity and any DB Entity and, upon an event of
default under any such transaction, permits the DB Entities to, among other
remedies, treat all such transactions as in default, set off any obligation of
any DB Entity against any obligation of any NovaStar Entity thereunder, and
apply collateral provided with respect to a particular transaction against any
obligation of any NovaStar Entity under any of such transactions.
In addition to the Servicing Advance Facility, DBSP and its affiliates routinely
engage in other ordinary course financial transactions with NFI and its
affiliates, including but not limited to financial derivative transactions and
acting as an underwriter for certain securitizations sponsored by NFI and its
affiliates.
Item 2.03 Creation of a Direct Financial Obligation or an obligation under an
Off-Balance Sheet Arrangement of a Registrant
The disclosure under "Item 1.01 Entry into a Material Definitive Agreement" of
this Current Report with respect to NovaStar's Servicing Rights Facility and
Residual Securities Facility is incorporated herein by reference.
Item 9.01 Financial Statement and Exhibits
(d) Exhibits.
Exhibit No. Document
10.1 Amendment Number Three, dated as of October 22, 2007, to the
Master Repurchase Agreement (2007 Servicing Rights), dated as of
April 25, 2007, among Wachovia Bank, N.A., as Buyer, Wachovia
Capital Markets, LLC, as Agent, NovaStar Mortgage, Inc., as
Seller and a Guarantor, and NovaStar Financial, Inc., NFI Holding
Corporation, and HomeView Lending, Inc., as Guarantors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOVASTAR FINANCIAL, INC.
DATE: October 25, 2007 /s/ Todd M. Phillips
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Todd M. Phillips
Vice President, Treasurer and
Controller
Index to Exhibits
Exhibit No. Document
10.1 Amendment Number Three, dated as of October 22, 2007, to the
Master Repurchase Agreement (2007 Servicing Rights), dated as of
April 25, 2007, among Wachovia Bank, N.A., as Buyer, Wachovia
Capital Markets, LLC, as Agent, NovaStar Mortgage, Inc., as
Seller and a Guarantor, and NovaStar Financial, Inc., NFI Holding
Corporation, and HomeView Lending, Inc., as Guarantors.