e424b3
Filed Pursuant to Rule 424(b)(3)
Registration
No. 333-131163
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 20, 2006)
NovaStar Financial, Inc.
286,645 Shares
Common Stock
Rescission Offer
This prospectus supplement updates certain information contained
in our prospectus dated January 20, 2006 relating to our
offer to rescind the previous purchase of certain shares of our
common stock pursuant to our Direct Stock Purchase and Dividend
Reinvestment Plan (the Plan). This prospectus
supplement is not complete and should be read in conjunction
with the prospectus. This prospectus supplement is qualified in
its entirety by reference to the prospectus, except to the
extent that information in this prospectus supplement modifies
and supersedes the information contained in the prospectus.
Capitalized terms not defined in this prospectus supplement
shall have the meaning assigned to such term in the prospectus.
The purpose of this prospectus supplement is to extend the
expiration date of the Rescission Offer. The Rescission Offer
was originally scheduled to expire at 5:00 p.m., Central
time, on February 21, 2006. We have extended the expiration
date of the Rescission Offer until 5:00 p.m., Central time,
on March 30, 2006 (the Expiration Date). All
references to the Expiration Date in this prospectus supplement,
the prospectus and the Rescission Offer Acceptance Form that
accompanied the prospectus shall mean 5:00 p.m., Central
time, on March 30, 2006.
Our common stock is listed on the New York Stock Exchange under
the trading symbol NFI. The last reported sale price
of our common stock (as reported on the New York Stock Exchange)
on February 15, 2006 was $26.06 per share.
YOU MAY ELECT TO ACCEPT THE RESCISSION OFFER, IN WHOLE OR IN
PART, AS SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS. YOU DO NOT NEED TO TAKE ANY ACTION TO REJECT THE
RESCISSION OFFER. IF YOU FAIL TO RESPOND TO THE RESCISSION OFFER
BY THE EXPIRATION DATE, YOU WILL BE DEEMED BY US TO HAVE
REJECTED THE RESCISSION OFFER. ACCEPTANCE OR REJECTION OF THE
RESCISSION OFFER MAY PREVENT YOU FROM MAINTAINING AN ACTION
AGAINST US IN CONNECTION WITH SHARES OF OUR COMMON STOCK
PURCHASED PURSUANT TO THE PLAN ON THE APPLICABLE DATES.
Investing in our common stock involves risks. See Risk
Factors beginning on page 5 of the prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is February 17, 2006
RECENT DEVELOPMENTS
On February 9, 2006, we announced the postponement of our
previously announced fourth quarter earnings release and
conference call. During the course of reviewing our year-end
financial results and in discussion with our independent
auditors we have decided to obtain legal opinions to further
support certain tax positions. We have consulted with our
outside tax counsel and believe we will receive these legal
opinions. Upon obtaining such opinions, we will issue our fourth
quarter earnings release and conduct a conference call. We do
not anticipate a delay in the filing of our Annual Report on
Form 10-K, which
is due on March 16, 2006.
We have extended the expiration date of the Rescission offer
until 5:00 p.m., Central time, on March 30, 2006 in
order to allow current and former Plan participants, who are
eligible to participate in the Rescission Offer, additional time
to evaluate whether to accept or reject the Rescission Offer.
Certain information appearing under the captions QUESTIONS
AND ANSWERS ABOUT THE RESCISSION OFFER, THE
RESCISSION OFFER and CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS in the prospectus is hereby
modified and superseded by the following information.
QUESTIONS AND ANSWERS ABOUT THE RESCISSION OFFER
If I havent taken action with respect the Rescission
Offer, may I still do so?
Yes. You may accept or reject the Rescission Offer at anytime
prior to the new Expiration Date (5:00 p.m., Central time,
on March 30, 2006). See THE RESCISSION
OFFER How to Accept or Reject the Rescission
Offer below for an explanation of the actions you must
take to accept or reject the Rescission Offer.
Do I have to take any action with respect to the Rescission
Offer before the original expiration date (5:00 p.m.,
Central time, on February 21, 2006)?
No. The expiration date of the Rescission Offer is being
extended until 5:00 p.m., Central time, on March 30,
2006 without the need for any action by you or on your behalf.
Can I change my decision if I have previously accepted or
rejected the Rescission Offer?
Yes. See THE RESCISSION OFFER How to Accept or
Reject the Rescission Offer below for an explanation of
the actions you must take to accept or reject the Rescission
Offer.
If I continue to hold shares of NovaStar Financial, Inc.
common stock purchased pursuant to the Plan on an Applicable
Date, will the market value of such shares on the original
expiration date (5:00 p.m., Central time, on
February 21, 2006) be a factor in determining whether
accepting the Rescission Offer is economically beneficial to
me?
No. The market value of the shares you continue to hold on the
new Expiration Date (5:00 p.m., Central time, on
March 30, 2006) will determine whether acceptance of the
Rescission Offer with respect to such shares is economically
beneficial to you. See THE RESCISSION OFFER
Terms of the Rescission Offer below for an explanation of
the proceeds you will receive if you properly accept the
Rescission Offer.
Who can I call to answer my questions or to request another
copy of the prospectus or Rescission Offer Acceptance Form?
You may call Jeffrey D. Ayers, the Rescission Administrator, at
(816) 237-7000, Monday through Friday between
9:00 a.m. and 5:00 p.m., Central time, prior to the
Expiration Date if you have questions about the Rescission Offer
or need to obtain another copy of the prospectus or the
Rescission Offer Acceptance Form.
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When will I receive payment for my shares if I properly
accept the Rescission Offer?
If you properly accept the Rescission Offer, we will mail you a
check for the proceeds to which you are entitled on or before
April 7, 2006. If you hold shares subject to the Rescission
Offer through a DTC participant, we will mail the check for the
proceeds to the DTC participant, and you should contact your DTC
participant about having the proceeds properly credited to your
account.
When does the Rescission Offer expire?
The Rescission Offer will expire at 5:00 p.m., Central
time, on March 30, 2006, unless we elect to further extend
the Rescission Offer, in which case we will file another
prospectus supplement with the Commission and mail a copy to you.
THE RESCISSION OFFER
Terms of the Rescission Offer
If you elect to accept the Rescission Offer with respect to
shares that you have already sold at a loss, you will receive an
amount equal to the amount you paid for the shares less the
proceeds of the sale, plus interest, less dividends that you
received or that you were entitled to receive prior to such
sale. Interest will be paid on the amount originally paid for
the shares during the period from the date of purchase of the
shares until the date of sale of such shares. Interest will also
be paid on the loss realized from the date of sale of the shares
through the date that payment is made.
The interest rate will be determined according to federal law
because we believe that no violation of state securities laws
occurred in connection with the purchases and sales of our
common stock subject to the Rescission Offer. The interest rate
will be the weekly average 1-year constant maturity
Treasury yield, as published by the Board of Governors of the
Federal Reserve System, for the calendar week that includes the
Expiration Date. For the week ending February 10, 2006, the
interest rate would have been 4.67%.
If you elect to accept the Rescission Offer with respect to
shares that you continue to hold, you will receive an amount
equal to the amount you paid for the shares, plus interest for
the period from the date you purchased the shares through the
date payment is made, less dividends that you received or that
you are entitled to receive.
If you no longer hold all the shares of our common stock
acquired pursuant to the Plan on the Applicable Dates, we will
only repurchase those shares that are not deemed sold. Shares
are deemed sold in the order in which you purchased them. In
order to determine which shares are eligible for repurchase, all
shares acquired on your behalf pursuant to the Plan on the
Applicable Dates will be matched against all sales of shares on
or after the Applicable Dates by matching the first share
acquired with the first share sold. Only those purchases that do
not have matching sales are eligible for repurchase as part of
the Rescission Offer. You are entitled to payment for those
shares that are deemed sold at a loss. In order to determine the
amount payable with respect to shares that are sold, the
Rescission Administrator will use the same procedure as is used
to determine which shares are eligible for repurchase.
Since the first Applicable Date, we have paid cash dividends of
$1.40 per share to holders of record of our common stock on
each of May 13, 2005, August 12, 2005,
November 8, 2005 and December 30, 2005. The amount and
timing of future dividends are determined by our Board of
Directors based on REIT tax requirements and business trends at
the time.
The Rescission Offer will expire at 5:00 p.m., Central
time, on March 30, 2006, unless we elect to further extend
the Rescission Offer, in which case we will file another
prospectus supplement with the Commission and mail a copy to you.
If you properly accept the Rescission Offer, we will mail you a
check for the proceeds to which you are entitled on or before
April 7, 2006. If you hold shares subject to the Rescission
Offer through a DTC
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participant, we will mail the check for the proceeds to the DTC
participant, and you should contact your DTC participant about
having the proceeds properly credited to your account.
As of February 15, 2006, the closing sale price of our
common stock (as reported on the New York Stock Exchange) was
$26.06 per share. For the fifty-two week period ending on
such date, the per share sales price of our common stock ranged
from a high of $48.60 to a low of $24.08.
How to Accept or Reject the Rescission Offer
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YOU ARE NOT LEGALLY REQUIRED TO ACCEPT THE RESCISSION
OFFER. |
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How to accept the Rescission Offer |
Acceptance of the Rescission Offer is optional if you purchased
shares of our common stock pursuant to the Plan on an Applicable
Date. Generally, acceptance of the Rescission Offer is
economically beneficial only if you have sold shares purchased
on an Applicable Date at a loss and the loss you incurred
exceeds the amount of dividends which you received or that you
were entitled to receive in connection with such shares, or if
you continue to hold shares purchased on the Applicable Dates,
the market value of our common stock on the Expiration Date is
less than the price you paid on the Applicable Dates, plus
interest, less dividends that you received or that you are
entitled to receive. You may accept the Rescission Offer in
whole or in part. If you accept the Rescission Offer in part and
change your decision and want to accept the Rescission Offer
with respect to additional shares of our common stock, you can
do this by completing and submitting another Rescission Offer
Acceptance Form for such additional shares. In the event you
elect to accept the Rescission Offer, you must complete the
Rescission Offer Acceptance Form and return it to
the attention of NovaStar Financial, Inc., 8140 Ward Parkway,
Suite 300, Kansas City, Missouri 64114, Attention: Jeffrey
D. Ayers. We must receive your properly completed Rescission
Offer Acceptance Form and all other required documentation
before the Expiration Date. Otherwise, you will be deemed to
have rejected the Rescission Offer. We will, in our sole
discretion, determine whether your Rescission Offer Acceptance
Form has been properly completed and whether your acceptance of
the Rescission Offer will be accepted or rejected.
Certain shares of our common stock sold pursuant to the Plan on
the Applicable Dates were registered in the name of the
Depository Trust Company or its nominee, which we refer to in
this prospectus as DTC. DTC facilitates the
clearance and settlement of transactions through electronic
book-entry changes in accounts of DTC participants. DTC
participants include securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations.
If you purchased, and still hold, shares of our common stock
subject to the Rescission Offer through an account maintained by
a DTC participant and you desire to accept the Rescission Offer,
you should contact your DTC participant promptly and instruct it
to accept the Rescission Offer on your behalf. See Special
procedures for DTC participants below.
If you currently own shares subject to the Rescission Offer and
you hold certificates for such shares, you must enclose with the
Rescission Offer Acceptance Form the certificates for the shares
to be repurchased by us, properly endorsed for transfer, with
your signature guaranteed by an eligible guarantor institution
such as a commercial bank, trust company, securities broker
dealer, credit union or savings & loan that is a member
of the Medallion Signature Guarantee Program. If the Plan
Administrator is presently holding certificates for the shares
to be repurchased by us, or the Plan Administrator holds such
shares in book-entry form, your signature on the Rescission
Offer Acceptance Form must be guaranteed as described above. If
you decide to accept the Rescission Offer and intend to use the
mail to return your stock certificates to us, we recommend that
you use insured registered mail, return receipt requested.
If you have already sold shares subject to the Rescission Offer
at a loss, you must enclose with the Rescission Offer Acceptance
Form proof reasonably satisfactory to us evidencing the bona
fide sale of such shares to a third party, including the sale
price for such shares. Satisfactory proof of the sale price of
such shares may take the form of a receipt from the broker,
dealer or other person conducting the sale. The sale price may
have been paid in either cash or property. If the sale price was
paid in property, the price
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will be deemed to be the fair market value of such property at
the time of sale. If the proof of the sale price is not
reasonably satisfactory to us, we may require additional proof.
In addition, we may require evidence that any sale of such
shares was a bona fide transfer to a third party.
If you hold the shares of common stock subject to the Rescission
Offer through a broker or other nominee who accepts the
Rescission Offer on your behalf, your broker or nominee may
charge you a commission for doing so. You should consult with
your broker or nominee to determine whether any charges will
apply.
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How to reject the Rescission Offer |
You do not need to take any action to reject the Rescission
Offer. If you change your decision and want to reject the
Rescission Offer, in whole or in part, after having submitted
the Rescission Offer Acceptance Form then you may reject the
Rescission Offer by sending a notice that includes your name,
signature, address, social security number or taxpayer
identification number, a clear indication that you are rejecting
the Rescission Offer and the shares to which the rejection
relates to the attention of NovaStar Financial, Inc., 8140 Ward
Parkway, Suite 300, Kansas City, Missouri 64114, Attention:
Jeffrey D. Ayers. We must receive this notice of
rejection before the Expiration Date. Otherwise, you will be
deemed to have accepted the Rescission Offer pursuant to your
elections on the Rescission Offer Acceptance Form(s).
If a DTC participant accepted the Rescission Offer on your
behalf by submitting a Rescission Offer Acceptance Form and you
want to reject the Rescission Offer, then you must instruct the
DTC participant to submit a notice of rejection according to the
procedure described above.
If we receive a notice of rejection before the Expiration Date
and you had enclosed certificates for shares of common stock
with your Rescission Offer Acceptance Form, we will promptly
return the certificates to you.
IF YOU FAIL TO NOTIFY US IN WRITING OF YOUR ACCEPTANCE OF THE
RESCISSION OFFER PRIOR TO THE EXPIRATION DATE (OR ONLY ACCEPT
THE RESCISSION OFFER IN PART), YOU WILL BE DEEMED TO HAVE
REJECTED THE RESCISSION OFFER WITH RESPECT TO THE SHARES OF
COMMON STOCK THAT YOU DID NOT ACCEPT. ACCEPTANCE OR REJECTION OF
THE RESCISSION OFFER MAY NOT TERMINATE YOUR RIGHT TO BRING A
CIVIL ACTION AGAINST US FOR FAILURE TO REGISTER THE SHARES UNDER
FEDERAL SECURITIES LAWS. HOWEVER, FEDERAL LAW DOES PROVIDE THAT
YOU MAY LOSE ANY RESCISSION RIGHTS UNDER FEDERAL SECURITIES LAWS
ONE YEAR FROM THE DATE OF PURCHASE OF SUCH SHARES AND THREE
YEARS FROM THE DATE SUCH SHARES WERE BONA FIDE OFFERED TO THE
PUBLIC.
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Special procedures for DTC participants |
To accept the Rescission Offer on behalf of a beneficial owner
of shares of our common stock registered in the name of DTC, a
DTC participant must:
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complete the Rescission Offer Acceptance Form and return it to
us along with: |
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for all shares you want us to rescind that have been previously
sold at a loss, proof reasonably satisfactory to us evidencing
the bona fide sale of such shares to a third party, including
the sale price for such shares; and |
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initiate a Deposit/Withdrawal At Custodian (DWAC)
transaction to transfer to us the shares of our common stock
that are registered in the name of DTC and being repurchased by
us pursuant to the Rescission Offer. We will notify the DTC
participant of the date that the DWAC transaction should be
initiated. Upon instruction from us, the Plan Administrator will
approve DWAC transactions to effect the transfer of such shares. |
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Satisfactory proof of sale may take the form of a receipt from
the broker, dealer or other person conducting the sale. The
signature of a DTC participant on the Rescission Offer
Acceptance Form is not required to be guaranteed if the DTC
participant is a member of the Medallion Signature Guarantee
Program and the DTC participant affixes its Medallion stamp on
the Rescission Offer Acceptance Form.
IF A DTC PARTICIPANT FAILS TO NOTIFY US IN WRITING OF YOUR
ACCEPTANCE OF THE RESCISSION OFFER ON OR PRIOR TO THE EXPIRATION
DATE, YOU WILL BE DEEMED TO HAVE REJECTED THE RESCISSION OFFER.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the prospectus contain
forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking
statements are those that predict or describe future events or
trends and that do not relate solely to historical matters. You
can generally identify forward-looking statements as statements
containing the words believe, expect,
will, continue, anticipate,
intend, may, estimate,
project, plan, assume,
seek to or other similar expressions or the negative
of those terms, although not all forward-looking statements
contain these identifying words. Statements regarding the
following subjects contained or incorporated by reference in
this prospectus supplement or the prospectus are forward-looking
by their nature:
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our business strategy; |
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our ability to manage risk, including credit risk; |
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our understanding of our competition; |
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market trends; |
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projected sources and uses of funds from operations; |
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potential liability with respect to legal proceedings; and |
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potential effects of proposed legislation and regulatory action. |
You should not place undue reliance on our forward-looking
statements because the matters they describe are subject to
known and unknown risks, uncertainties and other unpredictable
factors, many of which are beyond our control. Our
forward-looking statements are based on the information
currently available to us and are applicable only as of the date
on the cover of this prospectus supplement or, in the case of
forward-looking statements incorporated by reference, as of the
date of the filing that includes the statement. New risks and
uncertainties arise from time to time, and it is impossible for
us to predict these matters or how they may affect us. Over
time, our actual results, performance or achievements will
likely differ from the anticipated results, performance or
achievements that are expressed or implied by our
forward-looking statements, and such difference might be
significant and materially adverse to our stockholders. Such
factors include, but are not limited to:
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those identified under the Risk Factors section of
the prospectus; |
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those identified from time to time in our public filings with
the Commission; |
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our ability to generate sufficient liquidity on favorable terms; |
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the size and frequency of our securitizations; |
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interest rate fluctuations on our assets that differ from those
on our liabilities; |
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increases in prepayment or default rates on our mortgage assets; |
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changes in assumptions regarding estimated loan losses and fair
value amounts; |
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changes in origination and resale pricing of mortgage loans; |
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our compliance with applicable local, state and federal laws and
regulations or opinions of counsel relating thereto and the
impact of new local, state or federal legislation or regulations
or opinions of counsel relating thereto or court decisions on
our operations; |
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the initiation of margin calls under our credit facilities; |
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the ability of our servicing operations to maintain high
performance standards and to maintain appropriate ratings from
rating agencies; |
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our ability to expand origination volume while maintaining an
acceptable level of overhead; |
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our ability to adapt to and implement technological changes; |
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the stability of residential property values; |
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the outcome of litigation or regulatory actions pending against
us or other legal contingencies; |
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the impact of losses resulting from natural disasters; and |
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the impact of general economic conditions. |
We have no duty to, and do not intend to, update or revise the
forward-looking statements in this prospectus supplement or the
prospectus after the date of this prospectus supplement, even if
subsequent events cause us to become aware of new risks or cause
our expectations to change regarding the forward-looking matters
discussed or incorporated by reference in this prospectus
supplement or the prospectus. We have identified some of the
important factors that could cause future events to differ from
our current expectations and they are described in the
prospectus under the caption Risk Factors and in our
periodic reports on
Form 10-Q and
Form 10-K,
including under the captions Risk Factors and
Safe Harbor Statement, which you should review
carefully. Please consider our forward-looking statements in
light of those risks as you read this prospectus supplement and
the prospectus.
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