UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT REPORT PURSUANT TO
SECTION 13
OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported): September 20,
2010
Kohlberg Capital
Corporation
(Exact
Name of Registrant as Specified in Charter)
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Delaware
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814-00735
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20-5951150
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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295
MADISON AVENUE
NEW YORK,
NY
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10017
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (212) 455-8300
(Former
Name or Former Address, if Changed Since Last Report)
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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:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01
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Entry into a Material
Definitive Agreement.
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On September 20, 2010, Kohlberg Capital
Corporation, a Delaware corporation (the “Company”), and
Kohlberg Capital Funding LLC I, a Delaware limited liability company and special
purpose, bankruptcy-remote, wholly-owned subsidiary of the Company (“Kohlberg Funding”
and, together with the Company, the “Kohlberg Entities”),
entered into a Forbearance and Settlement Agreement (the “Agreement”) with BMO
Capital Markets Corp., Fairway Finance Company LLC, Riverside Funding LLC, Bank
of Montreal and Deutsche Bank AG, New York Branch (collectively, the “Lender Parties” and,
together with the Kohlberg Entities, the “Parties”), in order
to settle all outstanding claims of the Parties under the Loan Funding and
Servicing Agreement, dated as of February 14, 2007, by and among the Kohlberg
Entities and certain of the Lender Parties, as amended from time to time (the
“Loan
Agreement”), and all related claims asserted by the Parties in connection
with the complaint filed by the Kohlberg Entities in the Supreme Court of the
State of New York on August 28, 2009 and pending as Case No. 602688/09
(collectively, the “Litigation”).
Pursuant to the Agreement, the Lender
Parties have agreed to refrain, during the Forbearance Term, from the exercise
of any right or remedy relating to any termination events alleged by any of the
Lender Parties to have occurred (or that resulted from or otherwise relates to
an event that occurred or a condition that existed prior to the date of the
Agreement and that was known or reasonably should have been known to the Lender
Parties) under the Loan Agreement and the related documents on or before
September 20, 2010, the date of the Agreement. Forbearance Term is
defined in the Agreement to include the period from the date of the Agreement
through the earliest to occur of (i) any new termination event under the Loan
Agreement (as modified by the Agreement to provide that the Kohlberg Entities’
failure to comply with certain provisions of the Loan Agreement, including those
relating to the maximum amount of outstanding advances, minimum
overcollateralization, permissible equity shortfalls and a rolling three-month
default ratio, collateral quality and required ratings for specified loans, will
not give rise to a termination event during the Forbearance Term), (ii) the
first determination date on which the Company fails to maintain an
overcollaterization ratio of at least 115%, (iii) the first date on which the
Company fails to maintain a minimum net worth of at least $150 million, (iv) the
date on which it is determined that any representation or warranty made by any
Kohlberg Entity pursuant to the Agreement is untrue or misleading in any
material respect, (v) the date on which any action is commenced challenging the
terms of the Agreement, the Loan Agreement, the amount of outstanding advances
under the Loan Agreement or the existence, priority or enforceability of the
liens or other security interests in any of the collateral securing the
obligations under the Loan Agreement, (vi) February 28, 2011 and (vii) the
failure, subject to certain exceptions, to pay to the Lender Parties amounts
sufficient to reduce the advances outstanding under the Loan Agreement as set
forth in the following amortization schedule:
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Date
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Advances Outstanding
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September
30, 2010
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$125
million or less
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November
3, 2010
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$115
million or less
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December
1, 2010
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$105
million or less
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January
3, 2011
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$95
million or less
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February
1, 2011
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$85
million or less
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February
28, 2011
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$0
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Under the terms of the Agreement, (i)
the Lender Parties have agreed to pay to Kohlberg Funding $2 million so long as
all outstanding advances under the Loan Agreement and accrued interest thereon
(exclusive of any fees or expenses, including attorneys’ fees and
indemnification payments, of the Lender Parties incurred in connection with the
Litigation or any other fees or expenses payable to the Lender Parties under the
Loan Agreement or the related documents other than fees or expenses incurred in
connection with or related to the exercise of remedies following the occurrence
of a Forbearance Term termination event) are repaid in full on or before
February 28, 2011, (ii) from September 10, 2010 through the end of the
Forbearance Term, interest on advances outstanding under the Loan Agreement will
accrue at the rate provided for under the Loan Agreement prior to the occurrence
of a termination event (equal to 0.85% above the prevailing commercial paper
rate, or prevailing LIBOR if the commercial paper market is at any time
unavailable), (iii) upon execution of the Agreement, the Kohlberg Entities have
agreed to release the Lender Parties from any and all claims that any of them
may have under the Loan Agreement and the related documents or the Litigation,
(iv) upon payment in full in accordance with the Agreement of all outstanding
advances and accrued interest thereon and all other amounts due to the Lender
Parties under the Loan Agreement, the Lender Parties have agreed to release the
Kohlberg Entities from any and all claims that any of them may have under the
Loan Agreement and the related documents or the Litigation and (v) the Parties
have agreed to file with the Supreme Court of the State of New York, within two
business days of the date of the Agreement, a stipulation of discontinuance in
order to effect the dismissal, with prejudice, of the Litigation.
The Company and Kohlberg Funding will
generally be permitted, without further consent from the Lender Parties, to make
discretionary sales of loans included in the collateral securing the Loan
Agreement so long as the proceeds from any such sale are at least equal to 90%
of par value of such loans (or, in certain circumstances, 90% of the Company’s
most recent mark-to-market valuation or 90% of such loan’s purchase
price). Other discretionary sales will require the prior written
consent of the Lender Parties.
Cautionary Statement Regarding
Forward-Looking Statements
This Current Report on Form 8-K
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. The matters discussed in this Current Report
that are forward-looking statements are based on current management expectations
that involve substantial risks and uncertainties which could cause actual
results to differ materially from the results expressed in, or implied by, these
forward-looking statements. Forward-looking statements relate to future events
(including the Kohlberg Entities’ compliance with the terms of the Agreement
described above) that may have an impact on the Company or its business. The
Company generally identifies forward-looking statements by terminology such as
“may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,”
“target,” “project,” “contemplate,” “believe,” “estimate,” “predict,”
“potential” or “continue” or the negative of these terms or other similar words.
Important assumptions for the forwarding-looking statements contained in this
Current Report include the Kohlberg Entities’ ability to comply with the terms
of the Agreement, the Loan Agreement and the related documents (including
whether Kohlberg Funding is able to make the required payments to the Lender
Parties) and the Lender Parties’ compliance with the Agreement, the Loan
Agreement and the related documents. In light of these and other uncertainties,
the inclusion of a forward-looking statement in this Current Report should not
be regarded as a representation by the Company that its plans or objectives will
be achieved. Further information about factors that could affect the
Company’s business and operations is included in its filings with the Securities
and Exchange Commission. The Company does not undertake to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required to be reported under
the rules and regulations of the Securities and Exchange
Commission.
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Item
8.01
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Other
Events.
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On September 20, 2010, the Company
issued a press release, a copy of which is attached hereto as Exhibit 99.1 and
is incorporated herein by reference.
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Item
9.01
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Financial
Statements and Exhibits.
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(d)
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Exhibits.
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Exhibit
No.
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Document
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99.1
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Press Release issued by Kohlberg
Capital Corporation dated September 20,
2010.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Kohlberg
Capital Corporation
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(Registrant)
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September
20, 2010
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By:
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/s/
Michael I. Wirth
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(Date)
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Michael
I. Wirth
Chief
Financial Officer
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EXHIBIT
INDEX
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Exhibit No.
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Document
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99.1
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Press Release issued by Kohlberg Capital
Corporation dated September 20,
2010.
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Kohlberg
Capital Corporation Declares 2010 Third Quarter Dividend of $0.17 per Share and
Announces Forbearance and Settlement Agreement with Lenders
NEW YORK,
September 17, 2010 (PRIME NEWSWIRE) -- Kohlberg Capital Corporation
(Nasdaq:KCAP) (“Kohlberg Capital” or the “Company”) today announced that its
Board of Directors has declared a cash dividend of $0.17 per share on shares of
its common stock for the quarter ending September 30, 2010. The
dividend is payable on October 29, 2010 to shareholders of record as of October
8, 2010. The quarterly dividend was determined by the Board of
Directors taking into consideration an estimated amount of distributable income
for Kohlberg Capital for the year ending December 31, 2010 and reflects
assumptions regarding extraordinary expenses associated with the re-audit of its
2007 and 2008 financial statements (including related third-party valuation
consulting services) and the legal and regulatory proceeding relating to the
previously disclosed restatements to the Company’s historical financial
statements. Such extraordinary expenses are assumed to be partially
offset by the estimated amount of dividend distributions for 2010 from Katonah
Debt Advisors, LLC, an asset management company and wholly-owned portfolio
company. In addition, the estimated 2010 distributable income treats
the extraordinary expenses as if they had been evenly distributed over the full
fiscal year and also excludes the impact of the disputed default rate of
interest currently being paid under Kohlberg Capital’s credit
facility.
Kohlberg
Capital has adopted a dividend reinvestment plan (“DRIP”) that provides for
reinvestment of dividends on behalf of stockholders, unless a stockholder elects
to receive cash. As a result, if Kohlberg Capital declares a cash dividend,
stockholders who have not “opted out” of the dividend reinvestment plan will
have their cash dividends automatically reinvested in additional shares of
Kohlberg Capital common stock, rather than receiving the cash
dividends. Please contact your broker or other financial intermediary
for more information regarding the DRIP.
Forbearance
and Settlement Agreement with Lenders
On
September 20, 2010, the Company and Kohlberg Capital Funding LLC I, the
Company’s special purpose, bankruptcy-remote, wholly-owned subsidiary, entered
into a forbearance and settlement agreement relating to their revolving credit
facility with BMO Capital Markets Corp., Deutsche Bank AG and the other lender
parties in order to settle all outstanding claims asserted in connection with
the Company-initiated credit facility litigation. Subject to the
terms and conditions of the settlement, which are more fully described in the
Company’s recent filing with the SEC, the lender parties have agreed to refrain
from exercising any right or remedy relating to previously alleged termination
events under the credit facility through February 28, 2011. The lender
parties have agreed to reset the interest rate on outstanding borrowings during
the forbearance period to originally stated terms of 0.85% above the prevailing
commercial paper rate (or prevailing LIBOR if the commercial paper market is at
any time unavailable). The parties have further agreed to a mutual
release of claims conditioned, in the case of the lender parties’ release, on
the payment in full on or prior to February 28, 2011 of the amounts outstanding
under the credit facility. Upon such payment, the lender parties will
remit to Kohlberg Capital Funding a cash settlement payment of $2 million or
will credit this amount toward the amounts outstanding under the credit
facility. Dayl Pearson, the Company’s President and Chief Executive
Officer, commented on the settlement: “This settlement removes the uncertainty
of the potential maturity at the end of September and provides the Company with
the ability to manage the repayment of the facility through the end of February
2011. The resetting of the interest rate to the original rate of CP +
85bps will significantly reduce our interest expense during the forbearance
period and the receipt of the settlement payment from the lenders upon full
repayment of the facility by the end of February 2011 is expected to offset our
litigation costs.”
About
Kohlberg Capital Corporation (KCAP):
Kohlberg
Capital Corporation is a publicly traded, internally managed business
development company. Our middle market investment business
originates, structures, finances and manages a portfolio of term loans,
mezzanine investments and selected equity securities in middle market companies.
Our wholly-owned portfolio company, Katonah Debt Advisors, manages CLO Funds
that invest in broadly syndicated corporate term loans, high-yield bonds and
other credit instruments.
Kohlberg
Capital Corporation’s filings with the Securities and Exchange Commission,
earnings releases, press releases and other financial, operational and
governance information are available on the Company’s website at www.kohlbergcapital.com.
Forward
Looking Statements
This
press release contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. The
matters discussed in this press release, as well as in future oral and written
statements by management of Kohlberg Capital Corporation, that are
forward-looking statements are based on current management expectations that
involve substantial risks and uncertainties which could cause actual results to
differ materially from the results expressed in, or implied by, these
forward-looking statements. Forward-looking statements relate to future events
or our future financial performance. We generally identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,”
“believes,” “estimates,” “predicts,” “potential” or “continue” or the negative
of these terms or other similar words. Important assumptions include our ability
to originate new investments, achieve certain margins and levels of
profitability, the availability of additional capital and the ability to repay
our outstanding indebtedness when due, maintain certain debt to asset ratios and
comply with the terms of the forbearance and settlement agreement described
above. In light of these and other uncertainties, the inclusion of a projection
or forward-looking statement in this press release should not be regarded as a
representation by us that our plans or objectives will be achieved. Further
information about factors that could affect our financial and other results is
included in our filings with the Securities and Exchange Commission. We do not
undertake to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as required
to be reported under the rules and regulations of the Securities and Exchange
Commission.
KCAP-G
Contact:
Kohlberg
Capital Corporation
Denise
Rodriguez, Investor Relations
(212)
455-8300
info@kohlbergcapital.com