CV Holdings, Inc. Announces NPL Portfolio Acquisition JV and Preferred Equity Investment with Real Estate Private Equity Firm

October 13, 2014


Rick Koenigsberger or Ken Witkin or

Press Release

CV Holdings, Inc. Announces NPL Portfolio Acquisition JV and Preferred Equity Investment with Real Estate Private Equity Firm

Newport Beach, CA. October 13, 2014 /PRNewswire/ — CV Holdings, Inc. (Other OTC: CVHL) today reported that it has entered into a joint venture (“JV”) with a prominent real estate private equity firm (the “Investor”), pursuant to which the JV will manage an initial $50MM of capital for the purpose of acquiring portfolios of non performing residential loans (NPLs), which have been the core business of the Company. The JV is a non-discretionary commitment to be funded on a deal by deal basis as NPL transactions are acquired.

In connection with the JV, the Company also issued, in a private placement, shares of a newly created Senior Preferred Stock (the “Preferred”) of the Company to the Investor for the purpose of funding the Company’s co-invest requirements under the JV. The Investor has agreed to purchase up to $7,500,000 of Preferred, which will be issued in conjunction with the co- investment obligations of the Company under the JV, and also has the option to purchase an additional $7,500,000 of Preferred subject to certain terms and conditions. The Company is obligated to co-invest up to 10% of every NPL deal in the JV and is required to use the proceeds from the Preferred issuances, if drawn, to fulfill that commitment. The issuances and funding of the Preferred will occur concurrently with the closings of NPL deals in the JV, both of which will be subject to the approval by the Investor. In addition, the Company is issuing to the Investor warrants to purchase up to 4,148,532 shares of Common Stock of the Company (the “Warrants”), only a portion of which will be exercisable upon issuance, with the remainder subject to vesting as the Preferred is funded and in certain other circumstances. The warrants were nominally priced with a strike price of $0.01 per share, as they are an equity kicker for the Preferred investment.

The Preferred has the option to pay or accrue a 10% dividend and will be optionally redeemable by the Company under certain circumstances. In addition, the Investor will have the right to demand a mandatory redemption at the fifth anniversary of the closing. Under certain circumstances the Investor could demand such redemption at the third anniversary of the closing. The Investor will have certain corporate governance rights, depending on the level of the Preferred funded, including a board seat and approval rights over major corporate decisions.

The Company recently issued an initial $500,000 of Preferred in conjunction with a NPL investment by the JV that was closed on September 30, 2014. Future issuances of the Preferred require Investor approval, and no assurances can be given that the Investor will purchase the Preferred or that a specific NPL deal will be approved by the Investor.

Although the Preferred has a liquidation preference that is senior to the holders of Common Stock, the Preferred is not convertible into Common Stock, and therefore itself does not dilute the existing voting power or ownership of the holders of Common Stock. Nevertheless, the Warrants being issued in conjunction with the Preferred will dilute the common stock, as described below. On a pro forma basis, assuming the full vesting and exercise of the Warrants, the Company’s outstanding shares would increase from the currently fully diluted 47,708,116 to 51,856,648. This number is subject to further change to reflect any applicable additional shares issuable to the Investor under the anti-dilution provisions of the Warrant.

About CV Holdings, Inc.

We have two business units, with our legacy business being as a commercial real estate, specialty finance company primarily focused on managing a diversified portfolio of commercial real estate-related loans and securities and our current business in commercial real estate and residential NPLs.

Our Common Stock is currently quoted on the OTC Markets Group, or OTC Markets. While not a requirement, the OTC Markets Group encourages companies having their securities quoted thereon to provide adequate current information in accordance with its disclosure guidelines. We will evaluate the need to issue press releases containing information similar to such information disclosed herein. We do not undertake any obligation nor do we give any assurance that we will provide timely periodic disclosures or any public disclosure at all. The information provided in this press release is not complete and does not purport to be complete.

We elected to qualify as a real estate investment trust, or REIT, for U. S. federal income tax purposes commencing with the taxable year ended December 31, 2005. We intend to continue to qualify as a REIT. As a REIT, we generally will not be subject to U. S. federal income tax on that portion of our income that we distribute to our stockholders for so long as we continue to qualify as a REIT, including distributing at least 90% of our annual “REIT taxable income” to our stockholders. We conduct our operations so as to not be or become regulated as an investment company under the Investment Company Act of 1940. The Company has not had federal taxable income since 2007 and does not expect any federal taxable income in the foreseeable future.

Forward-Looking Information and Other Information

This press release contains forward-looking statements based upon the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company or are within its control.

If a change occurs, the Company’s business, financial condition, liquidity and results of operations may vary materially from those expressed in its forward-looking statements.

The factors that could cause actual results to vary from the Company’s forward-looking statements include: the success of the JV; the availability of attractive NPL investments; the subsequent investments by the Investor; the U.S. general economy; the Company’s liquidity and ability to continue to cover its operating cash requirements; the Company’s future operating results; its business operations and prospects; availability, terms and deployment of short-term and long-term capital; availability of qualified employees; changes in interest rates; adverse development in the debt securities, credit and capital markets, adverse developments in the commercial finance and real estate markets; performance and financial condition of borrowers and corporate customers; any future litigation that may arise; the ultimate resolution of the Company’s numerous defaulted loans; the performance of the Company’s joint venture investments; the ability to continue as a going concern. The Company undertakes no obligation to publicly update or revise any of the forward-looking statements.