- Clay County shares are collateral for a 1.7 mil loan to UWN. - The UWN loan to Clay County loan is in default. - UWN Share held by Clay County are subject to a margin call - UWN Loan to Clay County is also collateralized by a loan from Clay County to RCI (Brazilian Pizza Put). - Brazilian Pizza Hut sale would presumably pay off the Clay County Loan to RCI and therefore the UWN loan to Clay County would also be paid off. - Pizza Hut sale was supposed to close in December, but close has been delayed to late January (12/21/07 8k). - Large volume of UWN shares has traded in the last few days at very depressed prices.
Based on the above, it would make sense that the selling we've seen in UWN over the past few days was forced selling due to a margin call. UWN should have received cash from those forced sales to pay off the 1.7 mil loan. It's possible they decided to use some of that cash to buy some of the shares themselves?
IMO, if a filing shows that the Clay Country loan has been resolved (i.e. no more margin call shares left to be sold), then we should see UWN trade higher. I'm a bit surprised that UWN didn't just wait for the RCI sale to close, but then again getting paid for a loan that's in default is always a good thing. I believe that Clay County got a really bad deal on any forced UWN share sales at these levels, but I guess that's their problem.
Here's the excerpt from the 10Q.
Clay County Holdings, Inc.
At October 28, 2007, we had a note receivable of $1,741,621 from Clay County Holdings, Inc. ("CCH"). The note bears interest at 12% per annum. The note was modified effective April 30, 2006 to provide for a maturity date of April 30, 2009. As part of the modification, no principal or interest payments were due until July 31, 2007, at which time principal payments of $150,000, plus accrued interest, were due on a quarterly basis, with additional payments due at the time any payments are received by CCH on a note receivable it holds from Restaurant Connections International (�RCI�). The note is additionally secured by a pledge of the net equity of common stock of the Company owned by CCH. The stock is subject to margin calls. At the time of the extension of credit to CCH, CCH was the largest shareholder of the Company, beneficially owning approximately 16% of our outstanding stock and the President of CCH is the son-in-law of H. Thomas Winn who resigned as Chairman of the Company effective July 6, 2007.
CCH failed to make the principal payments, plus interest due on July 31, 2007 in the amount of $521,037. The Company has sent CCH a Notice of Default and initiated collections. Under the terms of the note, CCH had until September 10, 2007 to cure the Default at which time the entire principal amount plus accrued interest became due at the option of the Company. RCI is currently for sale. We have classified this receivable as long-term until a binding agreement to sell RCI has been executed.