Item 8.01. Other Events.
Modified Exchange Act Reporting
As previously disclosed, on August 30, 2019, RAIT Financial Trust (“RAIT”) and its affiliates RAIT Funding LLC, RAIT General, Inc., RAIT Limited, Inc., Taberna Realty Finance Trust, RAIT JV TRS, LLC, and RAIT JV TRS Sub, LLC (together, the “Debtors”) filed voluntary bankruptcy cases (the “Chapter 11 Cases”) under chapter 11, Title 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Chapter 11 Cases are jointly administered under the caption In re: RAIT Funding, LLC, a Delaware limited liability company, et. al.
During the pendency of the Chapter 11 Cases, in lieu of filing Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K under Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), RAIT intends to follow the procedures outlined in Exchange Act Release No. 9660 (June 30, 1972) (“Release No. 9660”), the Securities and Exchange Commission’s (the “Commission”) Staff Legal Bulletin No. 2 (April 15, 1997) and the Commission’s related no-action correspondence. Accordingly, RAIT will file with the Commission, under cover of Current Reports on Form 8-K, copies of the monthly operating reports required to be submitted to the Bankruptcy Court. RAIT will satisfy all other provisions of the Exchange Act, including filing all Current Reports on Form 8-K (with the exception of the financial information required by Item 9.01 of Form 8-K that would be triggered by a purchase or sale of assets by RAIT) and satisfying the proxy, issuer tender offer and going-private provisions. The Current Reports on Form 8-K will include material events relating to RAIT’s expected winding up and dissolution (including as to whether any liquidation payments will be made to security holders, the amount of any liquidation payments and the amount of any expenses incurred). RAIT believes that this modified reporting program is consistent with the protection of its investors as set forth in Release No. 9660.
Monthly Operating Report
On October 30, 2019, the Debtors jointly filed a monthly operating report for the period from August 30, 2019 to September 30, 2019 (the “Monthly Operating Report”) with the Bankruptcy Court. A copy of the Monthly Operating Report is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The Monthly Operating Report, court filings and other information related to the Chapter 11 Cases are available at a website administered by the Debtors’ noticing and claims agent, Epiq Corporate Restructuring, LLC, at https://dm.epiq11.com/rait, or www.deb.uscourts,gov, the official Bankruptcy Court website. The information set forth in these websites is not incorporated into this Item 8.01.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “potential,” “should,” “will,” “plans,” “continuing,” “ongoing,” “expects,” “intends to,” and similar words or phrases. Although RAIT believes that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties that are subject to change based on various important factors, some of which are beyond our control. Such forward-looking statements include, but are not limited to, statements related to (a) the transactions contemplated by (i) the Equity and Asset Purchase Agreement, dated August 30, 2019 (the “Purchase Agreement”), by and among RAIT, certain of its direct and indirect subsidiaries, and CF RFP Holdings LLC, a Delaware limited liability company and an entity owned by funds managed by affiliates of Fortress Investment Group LLC (“Buyer”), pursuant to which, among other things, Buyer agreed to purchase certain subsidiaries and assets of RAIT (together, the “Purchased Assets”), (ii) the Restructuring and Plan Support Agreement, dated August 29, 2019, by and among RAIT, Taberna Realty Finance Trust, and TP Management LLC, an affiliate of Buyer, in its capacity as delegate collateral manager, and (iii) the Restructuring and Plan Support Agreement, dated August 31, 2019, by and among RAIT, RAIT Funding, LLC, and Kodiak CDO I., Ltd., as holder of certain preferred securities, including the Chapter 11 Cases, and (b) the ability of the Debtors to operate as a “debtor in possession” under the jurisdiction of the Bankruptcy Court. These risks, uncertainties and contingencies include, but are not limited to, (i) whether the closing conditions of the Purchase Agreement will be satisfied or waived and whether the transactions contemplated thereby will be completed as provided therein, (ii) whether RAIT or its affiliates will be able to obtain approval with respect to motions in the Chapter 11 Cases and the Bankruptcy Court’s rulings in the Chapter 11 Cases and the outcome of the Chapter 11 Cases in general; (iii) the length of time the Debtors will operate under the Chapter 11 Cases; (iv) risks associated with third-party motions in the Chapter 11
Cases, which may interfere with RAIT and its affiliates’ ability to develop and consummate the sale of the Purchased Assets; (v) the potential adverse effects of the Chapter 11 Cases on the Debtors’ liquidity, results of operations or business prospects; (vi) increased legal, advisor and other costs related to the Chapter 11 Cases and other litigation and the inherent risks involved in a bankruptcy process; and (vii) the effect of the Chapter 11 Cases on the trading price and value of RAIT securities. For additional discussion of these risks, refer to the section entitled “Risk Factors” and elsewhere in the RAIT’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Commission on March 26, 2019, Amendment No. 1 to RAIT’s Annual Report on Form 10-K/A for the year ended December 31, 2018, filed with the Commission on April 30, 2019, RAIT’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019, filed with the Commission on November 7, 2019 and RAIT’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, filed with the Commission on November 7, 2019. In light of the significant uncertainties inherent in any forward-looking information included herein, the inclusion of such information should not be regarded as a representation by RAIT or any other person that RAIT’s expectations, objectives or plans will be achieved in the timeframe anticipated or at all. RAIT undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required by law. All forward-looking statements attributable to RAIT are expressly qualified by these cautionary statements.
Cautionary Statement Regarding Financial Operating Data
The Debtors caution investors and potential investors not to place undue reliance upon the information contained in the Monthly Operating Report, which was not prepared for the purpose of providing the basis for an investment decision relating to any securities of the Debtors. The Debtors prepared the Monthly Operating Report solely for purposes of complying with the monthly operating reporting requirements applicable in the Chapter 11 Cases. The financial information contained in the Monthly Operating Report is unaudited, limited in scope, and as such, has not been subject to procedures that would typically be applied to financial statements in accordance with accounting principles generally accepted in the United States of America. These unaudited financial statements were prepared using certain assumptions and estimates. These assumptions and estimates are subject to revision. Further, the amounts shown in this statement may differ materially due to adjustments in accruals, changes in facts and circumstances, changes in estimates, further analysis, and other factors. Accordingly, there can be no assurances that, from the perspective of an investor or potential investor in RAIT’s or its subsidiaries’ securities, the financial information contained in the Monthly Operating Report is complete.