Delta Financial to receive $100 million of financing from shareholder

By Lisa Kerner

Charlotte, N.C., Nov. 16 - Delta Financial Corp. entered into a letter of intent with an affiliate of Angelo, Gordon & Co., one of the company's principal stockholders, under which the affiliate will provide $100 million of financing.

Under the proposed transaction, AG Special Situation Corp. would purchase a new series of 10% senior secured notes from Delta Financial for an initial total principal amount of $100 million minus the principal amount outstanding under an August residual financing facility.

Should the transaction close in December, the principal amount will be between $45 million and $49 million. The initial principal amount of notes would then be between $51 million and $55 million.

The maturity of the notes will be three years after issuance, according to a form 8-K filing with the Securities and Exchange Commission.

The company would also issue 40 million shares of common stock to AG Special Situation, which may be initially issued in the form of convertible preferred stock or convertible debt securities, and would reduce the exercise price of Angelo Gordon's warrants to $1 per share. The warrants are exercisable for 10 million shares and expire in February 2009.

If the transaction closes as planned, Angelo Gordon will be the beneficial owner of some 61.4% of Delta Financial's outstanding common stock and about 66.5% if AG Special Situation exercises all of its warrants. In addition, AG Special Situation will obtain the right to elect a majority of Delta Financial's board of directors.

Closing of the proposed offering is subject to a variety of conditions including a negotiated definitive agreement. Delta Financial has agreed to refrain from entering into any competing transaction until Dec. 15. The company can, however, terminate the letter of intent if a superior proposal is received.

Delta Financial is a Woodbury, N.Y., specialty consumer finance company.

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