SEC Company Response from ECC Capital (ECRO) — Jan 7, 2005
ECC Capital CORP
Date: Jan. 7, 2005 · CIK: 0001300317 · Accession: 0001193125-05-003355
AI Filing Summary & Sentiment
File numbers found in text: 333-118253
Referenced dates: January 5, 2005
Letter
Division of Corporation Finance United States Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549-0306 Re: ECC Capital Corporation Registration Statement on Form S-11 filed on August 13, 2004, as amended by Amendment No. 1 to Form S-11 filed on October 29, 2004 and Amendment No. 2 to Form S-11 (File No. 333-118253) filed on December 17, 2004.
Dear Mr. Telewicz:
Thank you for taking the time today to discuss certain comments to ECC Capital Corporation’s (the “Company”) Amendment No. 2 contained in the comment letter dated January 5, 2005. As we discussed, we have included below the Company’s draft responses to comments numbered 7, 8 and 13.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, pages 54 – 82
Internal Controls, page 55
7. We have considered your responses to our prior comments 26 and 27. We are still uncertain how the control weaknesses you have identified do not have an impact on periods prior to the second quarter of 2004. It appears that you entered into securitization transactions prior to the second quarter of 2004. Additionally, please confirm to us, if true, that the Company did not have any derivative instruments prior to the second quarter of 2004.
Response:
The Company entered into one securitization transaction prior to the second quarter. The interest in the securitization retained by the Company represented .25% of the Company’s total assets as of December 31, 2003. The valuation of the retained interest was completed by a third-party contractor as of the date of the securitization and as of December 31, 2003. The Company began
Mr. Robert Telewicz
January 7, 2005
Page 2
developing its own internal model in the first quarter, when the retained interest represented .31% of the Company’s total assets as of March 31, 2004. During the second quarter of 2004 the Company began entering into significant non-recurring and more complicated transactions, including derivative transactions, hedging, a strategic alliance and larger securitizations.
As of March 31, 2004, the Company had a short position in Euro dollar futures. The transaction was not designated as a hedge under SFAS No. 133 and all changes in fair value were recorded in earnings. As of March 31, 2004 the fair value of the Euro dollar contracts was $879,000 (or .15% of the Company’s total assets at March 31, 2004).
The Company does not believe that there were any material transactions prior to the second quarter of 2004 of a nature that might have given rise to the identification of a material weakness.
8. We have reviewed your response to comment 30. With respect to the gain recognized on your securitization transaction, explain to us the differences in the assumptions used in the two methodologies that resulted in an increase in the gain recognized on the sale.
Response:
*
Financial Statements
Note N – Stock Options, page F-27
13. We have reviewed your response to our prior comment 49 and the related changes to your disclosures. It appears that the value of your stock has almost doubled from August 2004 to September 2004. In a supplemental response, explain the changes in circumstances that have caused the increase in the value of your stock.
Response:
*
* Confidential Treatment Requested by ECC Capital Corporation
Mr. Robert Telewicz
January 7, 2005
Page 3
After you have had time to review the Company’s proposed responses to comments numbered 7, 8 and 13, we would appreciate the opportunity to discuss any additional questions or concerns that you may have. Please call me at (714) 755-8094. Thank you again for taking the time to discuss these comments with us.
Warm regards,
/s/ JEEVAN B. GORE
Jeevan B. Gore
of LATHAM & WATKINS LLP
cc: Roque Santi
Greg Lubushkin
William J. Cernius
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CORRESP 1 filename1.htm SEC Response Letter Global Services Office 555 W. 5th Street, Suite 800 Los Angeles, California 90013-1010 Tel: (213) 891-1200 Fax: (213) 891-7123 www.lw.com FIRM / AFFILIATE OFFICES Boston New Jersey Brussels New York Chicago Northern Virginia Frankfurt Orange County Hamburg Paris Hong Kong San Diego London San Francisco Los Angeles Silicon Valley Milan Singapore Moscow Tokyo Washington, D.C. File No. 033678-0006 January 7, 2005 Mr. Robert Telewicz Staff Accountant Division of Corporation Finance United States Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549-0306 Re: ECC Capital Corporation Registration Statement on Form S-11 filed on August 13, 2004, as amended by Amendment No. 1 to Form S-11 filed on October 29, 2004 and Amendment No. 2 to Form S-11 (File No. 333-118253) filed on December 17, 2004. Dear Mr. Telewicz: Thank you for taking the time today to discuss certain comments to ECC Capital Corporation’s (the “Company”) Amendment No. 2 contained in the comment letter dated January 5, 2005. As we discussed, we have included below the Company’s draft responses to comments numbered 7, 8 and 13. Management’s Discussion and Analysis of Financial Condition and Results of Operations, pages 54 – 82 Internal Controls, page 55 7. We have considered your responses to our prior comments 26 and 27. We are still uncertain how the control weaknesses you have identified do not have an impact on periods prior to the second quarter of 2004. It appears that you entered into securitization transactions prior to the second quarter of 2004. Additionally, please confirm to us, if true, that the Company did not have any derivative instruments prior to the second quarter of 2004. Response: The Company entered into one securitization transaction prior to the second quarter. The interest in the securitization retained by the Company represented .25% of the Company’s total assets as of December 31, 2003. The valuation of the retained interest was completed by a third-party contractor as of the date of the securitization and as of December 31, 2003. The Company began Mr. Robert Telewicz January 7, 2005 Page 2 developing its own internal model in the first quarter, when the retained interest represented .31% of the Company’s total assets as of March 31, 2004. During the second quarter of 2004 the Company began entering into significant non-recurring and more complicated transactions, including derivative transactions, hedging, a strategic alliance and larger securitizations. As of March 31, 2004, the Company had a short position in Euro dollar futures. The transaction was not designated as a hedge under SFAS No. 133 and all changes in fair value were recorded in earnings. As of March 31, 2004 the fair value of the Euro dollar contracts was $879,000 (or .15% of the Company’s total assets at March 31, 2004). The Company does not believe that there were any material transactions prior to the second quarter of 2004 of a nature that might have given rise to the identification of a material weakness. 8. We have reviewed your response to comment 30. With respect to the gain recognized on your securitization transaction, explain to us the differences in the assumptions used in the two methodologies that resulted in an increase in the gain recognized on the sale. Response: * Financial Statements Note N – Stock Options, page F-27 13. We have reviewed your response to our prior comment 49 and the related changes to your disclosures. It appears that the value of your stock has almost doubled from August 2004 to September 2004. In a supplemental response, explain the changes in circumstances that have caused the increase in the value of your stock. Response: * * Confidential Treatment Requested by ECC Capital Corporation Mr. Robert Telewicz January 7, 2005 Page 3 After you have had time to review the Company’s proposed responses to comments numbered 7, 8 and 13, we would appreciate the opportunity to discuss any additional questions or concerns that you may have. Please call me at (714) 755-8094. Thank you again for taking the time to discuss these comments with us. Warm regards, /s/ JEEVAN B. GORE Jeevan B. Gore of LATHAM & WATKINS LLP cc: Roque Santi Greg Lubushkin William J. Cernius