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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
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Qualified Hedges, (ii) the payment by HCP of excessive amounts of dividends, and
(iii) the failure of the Company to distribute sufficient amounts of its income
to its stockholders. In addition, it is anticipated that the Mortgage Assets
will be highly leveraged. Borrowings could result in the termination of the
Company's qualification as a REIT if (a) substantial amounts of Mortgage Assets
must be sold to make required payments, or (b) required payments on borrowings
leave the Company with insufficient amounts to distribute to its stockholders.
An inability of the Company to fund acquisitions of Mortgage Assets with
borrowings, on the other hand, could result in the termination of the Company's
qualification as a REIT if the value of the HCP Preferred exceeds 5% of the
value of the Company's total assets. See "Business -- Hedging" and "Federal
Income Tax Considerations -- Requirements for Qualification as a REIT."
 
     If the Company fails to qualify as a REIT in any taxable year and certain
relief provisions of the Code do not apply, the Company will be subject to
Federal income tax as a regular, domestic corporation, and its stockholders will
be subject to tax in the same manner as stockholders of a regular corporation.
Distributions to its stockholders in any year in which the Company fails to
qualify as a REIT would not be deductible by the Company in computing its
taxable income. As a result, the Company could be subject to income tax
liability, thereby significantly reducing or eliminating the amount of cash
available for distribution to its stockholders. Further, the Company could also
be disqualified from re-electing REIT status for the four taxable years
following the year during which it became disqualified. See "Federal Income Tax
Considerations -- Termination of Revocation of REIT Status."
 
     The Principals have no experience in managing a REIT. No assurance can be
given that future legislation, regulations, administrative interpretations or
court decisions will not significantly change the tax laws with respect to REIT
qualification or the Federal income tax consequences of such qualification. See
"Federal Income Tax Considerations -- Requirements for Qualification as a REIT."
 
POTENTIAL CHARACTERIZATION OF DISTRIBUTIONS AS UBTI; TAXATION OF TAX-EXEMPT
INVESTORS
 
     In the event that (i) the Company is subject to the rules relating to
taxable mortgage pools (discussed below) or if a pension trust owns more than
10% of the Common Stock and (a) at least one pension trust owns more than 25% of
the Common Stock, or (b) one or more pension trusts, each owning more than 10%
of the Common Stock, own in the aggregate more than 50% of the Common Stock,
(ii) a tax-exempt stockholder has incurred indebtedness to purchase or hold
Common Stock or is not exempt from Federal income taxation under certain special
sections of the Code, or (iii) any residual REMIC interests generate "excess
inclusion income," distributions to and, in the case of a stockholder described
in (ii), gains realized on the sale of Common Stock by, such tax-exempt
stockholder may be subject to Federal income tax as unrelated business taxable
income as defined in section 512 of the Code ("UBTI"). See "Federal Income Tax
Considerations -- Taxation of Tax-Exempt Stockholders."
 
TAXABLE MORTGAGE POOL RISK; INCREASED TAXATION
 
     The Company intends to enter into reverse repurchase agreements and CMO and
other secured lending transactions pursuant to which it may borrow funds with
differing maturity dates which are cross-collateralized by specific Mortgage
Loans. Some financing activities may create taxable mortgage pools. A REIT that
incurs debt obligations with two or more maturities, which are supported by
Mortgage Loans or mortgage-backed securities, may be classified as a "taxable
mortgage pool" under the Code if payments required to be made on the debt
obligations bear a specified relationship to the payments received on such
Mortgage Loans. If all or a portion of the Company were treated as a taxable
mortgage pool, the Company's status as a REIT would not be impaired, but a
portion of the Company's taxable income may, under proposed regulations, be
characterized as "excess inclusion" income and allocated to the stockholders.
Any excess inclusion income (i) could not be offset by the net operating losses
of a stockholder, (ii) would be subject to tax as UBTI to a tax-exempt
stockholder, (iii) would be subject to the application of Federal income tax
withholding at the maximum rate (without reduction for any otherwise applicable
income tax treaty) with respect to amounts allocable to foreign stockholders,
and (iv) would be taxable (at the highest corporate tax rate) to a REIT, rather
than its stockholders, to the extent allocable to shares of stock held by
disqualified organizations (generally, tax-exempt entities not subject to tax on
unrelated business income, including
 
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