DVI to sell assets, loan contracts of DVI Financial to ING Lease Holding

BY Carlise Newman

Chicago, Oct. 22 - DVI Inc. has entered into a letter of intent to sell certain loan contracts and the assets of the United Kingdom branch of DVI Financial Services Inc. as well as all of the assets of its European non-debtor subsidiaries to ING Lease Holding NV.

Under the agreement, ING has offered €133.7 plus VAT and any other equivalent sales taxes, subject to certain adjustments.

A hearing on the sale is scheduled for Nov. 5 at the United States Bankruptcy Court for the District of Delaware.

DVI also confirmed today that Todd Neilson of Neilson Elggren LLP has been appointed by the court as examiner in the company's case.

Neilson will investigate financial transactions, accounting practices and any allegations of fraud within the company. The company said it is supporting the examiner and is fully cooperating with the investigation.

The examiner will also investigate possible improprieties mentioned in press releases from Aug. 13 and Sept. 26, and potential claims of the company against current and former offices and directors.

On Aug. 13, DVI said in a news release that it had discovered apparent improprieties in its prior dealings with lenders, involving misrepresentations regarding the amount and nature of collateral pledged to lenders. The audit committee has begun an investigation.

On Sept. 26, DVI said that it expected to make a significant upward adjustment to the $20 million held as reserves against its loan portfolio assets. DVI said the expected increase is a result of its quarterly review of reserves.

The $20 million was previously reported in its 10-Q for the quarter ended March 31. DVI also said that it may have used $2.5 to $3.5 million for working capital which should have been sent to the limited liability companies formed in connection with its securitization transactions. The misapplication of funds happened in the two months before its bankruptcy filing on Aug. 25.

The examiner will appear in court Nov. 5 to provide the amount of time he or she will need to complete the investigation and file a report.

The company also said that Richard E. Miller executive vice president of DVI Inc. and president of DVI Financial Services has resigned effective Oct. 17 to pursue other interests. His duties will be handled by other company executives as the sale process continues.

The Jamison, Pa.-based medical finance company filed for Chapter 11 protection on Aug. 25.

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