Notice of Sale of Business and Disaster Assistance Loans

AGENCY:

Small Business Administration.

ACTION:

Notice of sale of business and disaster assistance loans—Loan Sale #2.

SUMMARY:

This notice announces the Small Business Administration's (“SBA”) intention to sell approximately 25,000 secured and unsecured business and disaster assistance loans, (collectively referred to as the “Loans”). This is the first sale of Disaster Assistance Loans and includes both business and consumer loans. The total unpaid principal balance of the Loans is approximately $1 billion. SBA previously guaranteed some of the Loans under various sections of the Small Business Investment Act, as amended, 15 U.S.C. 695 et seq. Any SBA guarantees that might have existed at one time have been paid and no SBA guaranty is available to the successful bidders in this sale. The majority of the loans originated from and are serviced by SBA. The collateral for the secured Loans includes commercial and residential real estate and other businesses and personal property located nationwide. This notice also summarizes the bidding process for the Loans.

DATES:

The Bidder Information Package will be available to qualified bidders beginning on or about May 26, 2000. The Bid Date is scheduled for August 1, 2000, and closings are scheduled to occur between August 14, 2000 and September 8, 2000. These dates are subject to change at SBA's discretion.

ADDRESSES:

Bidder Information Packages will be available from the SBA's Transaction Financial Advisor, Merrill Lynch Mortgage Capital Inc. (“Merrill Lynch”). Bidder Information Packages will only be made available to parties that have submitted a completed Confidentiality Agreement and Bidder Qualification Statement and have demonstrated that they are qualified bidders. The Confidentiality Agreement and Bidders Qualification Statement are available on the SBA Website at www.sba.gov/assets/sale2.html or by calling the SBA Loan Sale 2 Center toll-free at Merrill Lynch at (888) 590-6872. The completed Confidentiality and Bidder Qualification Statement can be sent to the attention of John Winchester, SBA Loan Sale 2, by either fax, at (212) 449-2450 or by mail, to Merrill Lynch Mortgage Capital Inc., World Financial Center, North Tower, 10th Floor, New York, NY, 10281-1310. The Due Diligence Facility is scheduled to open on or about June 2, 2000 and close on or about July 28, 2000. These dates are subject to change at SBA's discretion.

FOR FURTHER INFORMATION CONTACT:

B. John Farmakides, Program Manager, Small Business Administration, 409 Third Street, SW, Washington, DC 20416: 202-205-7134. This is not a toll free number. Hearing or speech-impaired individuals may access this number via TDD/TTY by calling the Federal Information Relay Service's toll-free number at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

SBA intends to sell approximately 25,000 secured and unsecured business and disaster assistance loans, collectively referred to as the “Loans”. The Loans include performing, sub-performing and non-performing loans. The Loans will be offered to qualified bidders in pools that will be based on such factors as performance status, collateral status, collateral type and geographic location of the collateral. A list of the Loans, loan pools and pool descriptions is contained in the Bidder Information Package. SBA will offer interested persons an opportunity to bid competitively on loan pools, subject to conditions set forth in the Bidder Information Package. SBA shall use its sole discretion to evaluate and determine winning bids. No loans will be sold individually. The Loans to be sold are located throughout the United States as well as Puerto Rico, U.S. Virgin Islands, Guam and other Pacific Islands.

The Bidding Process

To ensure a uniform and fair competitive bidding process, the terms of sale are not subject to negotiation. SBA will describe in detail the procedure for bidding on the Loans in the Bidder Information Package, which will include bid forms, a non-negotiable loan sale agreement prepared by SBA (“Loan Sale Agreement”), specific bid instructions, as well as pertinent loan information such as total outstanding unpaid principal balance, interest rate, maturity term, aggregate payment history and collateral information including geographic location and type. The Bidder Information Package also includes CD-ROMs that contain information pertaining to the Loans.

The Bidder Information Package will be available approximately 9 weeks prior to the Bid Date. It will contain procedures for obtaining supplemental information about the Loans. Any interested party may request a copy of the Bidder Information Package by sending a written request together with a duly executed copy of the Confidentiality Agreement and a Bidder Qualification Statement to the address specified in the ADDRESSES section of this notice.

Prior to the Bid Date, a Bidder Information Package Supplement will be mailed to all recipients of the original Bidder Information Package. It will contain the final list of loans included in Sale #2 and any final instructions for the sale.

Deposit And Liquidated Damages

Each Bidder must include with its bid a deposit equal to 10 percent of the amount of the bidder's highest bid. If a successful bidder fails to abide by the terms of the Loan Sale Agreement, including paying SBA any remaining sums due pursuant to the Loan Sale Agreement and closing within the time period specified in the Loan Sale Agreement, SBA shall retain the deposit as liquidated damages.

Due Diligence Facility

A bidder due diligence period will take place beginning on or about June 2, 2000. During the bidder due diligence period, qualified bidders may, for a non-refundable assessment of $500 US, review all asset file documents that have been imaged onto a database by visiting the due diligence facility located at 499 South Capital, SW, Suite 300, Washington, DC 20003 and/or via modem. Bidders that have paid the due diligence assessment of $500 US may also request CD-ROMs that contain substantial due diligence materials such as loan payment history and updated third party reports.

Specific instructions for ordering information in electronic format or making an appointment to visit the due diligence facility are included in the Bidder Information Package.

SBA Reservation of Rights

SBA reserves the right to remove loans from the sale at any time prior to the Bid Date, and add loans prior to the Cut-Off Date for any reason and without prejudice to its right to include any loans in a later sale. SBA also reserves the right to terminate this sale at any time prior to the Bid Date.

SBA reserves the right to use its sole discretion to evaluate and determine winning bids. SBA also reserves the right in it sole discretion and for any reason whatsoever to reject any and all bids.

SBA reserves the right to conduct a “best and final” round of bidding wherein bidders will be given the opportunity to increase their bids. A best and final round shall not be construed as a rejection of any bid or preclude SBA from accepting any bid made by a bidder.

SBA reserves the right to sell less than 100 percent of the Loans offered for sale and “re-offer” the remaining loans subsequent to the initial bid.

Ineligible Bidders

The following individuals and entities (either alone or in combination with others) are ineligible to bid on the Loans included in the sale:

(1) Any employee of SBA, any member of any such employee's household and any entity controlled by a SBA employee or by a member of such employee's household.

(2) Any individual or entity that is debarred or suspended from doing business with SBA or any other agency of the United States Government.

(3) Any contractor, subcontractor, consultant, and/or advisor (including any agent, employee, partner, director, principal, or affiliate of any of the foregoing) who will perform or has performed services for, or on-behalf of SBA, either in connection with this sale or the development of SBA's loan sale program.

(4) Any individual that was an employee, partner, director, agent or principal of any entity, or individual prescribed in paragraph (3) above at any time during which the entity or individual performed services for, or on behalf of SBA, either in connection with this sale or the development of SBA's loan sale program.

(5) Any individual or entity that has used or will use the services, directly or indirectly, of any person or entity ineligible under any of paragraphs (1) through (4) above to assist in the preparation of any bid in connection with this sale.

Loan Sale Procedure

SBA plans to use a competitive sealed bid process as the method to sell the Loans. SBA believes this method of sale optimizes the return on the sale of Loans and attracts the largest field of interested parties. This method also provides the quickest and most efficient vehicle for the SBA to dispose of the Loans.

Post Sale Servicing Requirements

The Loans will be sold servicing released. Purchasers of the Loans and their successors and assigns will be required to service the Loans in accordance with the applicable provisions of the Loan Sale Agreement for the Life of the Loans.

In addition, the Loan Sale Agreement establishes certain requirements that a servicer must satisfy in order to service the Loans.

Scope of Notice

This notice applies to Loan Sale Number #2 and does not establish agency procedures and policies for other loan sales. If there are any conflicts between this Notice and the Bidder Information Package, the Bidder Information Package shall prevail.