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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



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FORM 10-Q



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|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from                      to

Commission
file number 001-11011



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THE FINOVA GROUP INC.

(Exact name of registrant as specified in its charter)



|                                                                                           |  |                                                
|------------------------------------------------------------------------------------------ |  | -----------------------------------------------
|Delaware (State or other jurisdiction of incorporation or organization)                    |  | 86-0695381 (I.R.S. employer identification no.)
|                                                                                           | 
|8320 North Hayden Road, Suite C112 Scottsdale, AZ (Address of principal executive offices) |  | 85258 (Zip code)                               

Registrants telephone number, including area code: 480-624-4988

N/A

(Former name, former address and
former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.

Yes  þ    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by the court.

Yes  þ    No ̈

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 8, 2007, approximately 122,041,000 shares
of Common Stock ($0.01 par value) were outstanding.



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THE FINOVA GROUP INC.

TABLE OF CONTENTS



|           |  |                                                                                                                                          |  |        
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | -------
|           |  |                                                                                                                                          |  | PageNo.
|           |  | PART I    FINANCIAL INFORMATION                                                                                                          |  |        
|Item 1.    |  | Financial Statements                                                                                                                     |  |        
|           |  | Consolidated Statements of Net Assets in Liquidation (liquidation basis) at March 31, 2007 (unaudited) and December 31, 2006             |  | 1      
|           |  | Consolidated Statement of Changes in Net Assets in Liquidation (liquidation basis) (unaudited) for the Three Months Ended March 31, 2007 |  | 2      
|           |  | Condensed Statement of Consolidated Operations (going concern basis) (unaudited) for the Three Months Ended March 31, 2006               |  | 3      
|           |  | Condensed Statement of Consolidated Cash Flows (going concern basis) (unaudited) for the Three Months Ended March 31, 2006               |  | 4      
|           |  | Notes to Interim Condensed Consolidated Financial Statements (unaudited)                                                                 |  | 5      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations Special Note Regarding Forward-Looking Statements  |  | 12     
|Item 3.    |  | Quantitative and Qualitative Disclosure about Market Risk                                                                                |  | 20     
|Item 4.    |  | Controls and Procedures                                                                                                                  |  | 20     
|           |  |                                                                                                                                         
|           |  | PART II    OTHER INFORMATION                                                                                                             |  |        
|Item 1.    |  | Legal Proceedings                                                                                                                        |  | 21     
|Item 1A.   |  | Risk Factors                                                                                                                             |  | 21     
|Item 6.    |  | Exhibits                                                                                                                                 |  | 21     
|Signatures |  | 22                                                                                                                                      





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PART I    FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

THE FINOVA GROUP INC.

CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)

(Dollars in thousands)



|                                                                                        |  |                          |         |                           |   |        
|--------------------------------------------------------------------------------------- |  | ------------------------ | ------- | ------------------------- | - | -------
|                                                                                        |  | March 31,2007(Unaudited) |         | December 31,2006(Audited)
|ASSETS                                                                                  |  |                          |         |                           |   |        
|Cash and cash equivalents                                                               |  | $                        | 235,562 |                           | $ | 177,311
|Restricted cashimpermissible restricted payments                                       |  |                          | 78,104  |                           |   | 78,104 
|Liquidating Portfolio:                                                                  |  |                          |         |                           |   |        
|Net realizable value supported by underlying loan or direct financing agreements        |  |                          | 88,152  |                           |   | 105,829
|Net realizable value supported by underlying operating leases and other owned assets    |  |                          | 21,504  |                           |   | 68,624 
|Investments                                                                             |  |                          | 9,463   |                           |   | 11,091 
|                                                                                        |  |                          |         |                           |   |        
|Total Liquidating Portfolio                                                             |  |                          | 119,119 |                           |   | 185,544
|Other assets and deposits                                                               |  |                          | 2,046   |                           |   | 2,877  
|                                                                                        |  |                          |         |                           |   |        
|Total Assets                                                                            |  | $                        | 434,831 |                           | $ | 443,836
|                                                                                        |  |                          |         |                           |   |        
|                                                                                        |  |                         
|LIABILITIES (excluding Senior Notes)                                                    |  |                          |         |                           |   |        
|Interest payable on the Senior Notes                                                    |  | $                        | 42,046  |                           | $ | 14,222 
|Accounts payable and other liabilities                                                  |  |                          | 10,328  |                           |   | 14,727 
|Reserve for estimated costs during the liquidation period                               |  |                          | 18,772  |                           |   | 24,259 
|                                                                                        |  |                          |         |                           |   |        
|Total Liabilities (excluding Senior Notes)                                              |  |                          | 71,146  |                           |   | 53,208 
|                                                                                        |  |                          |         |                           |   |        
|Net Assets Available for Settlement of Senior Notes                                     |  |                          | 363,685 |                           |   | 390,628
|Senior Notes with outstanding principal of $1.5 billion, at estimated settlement amount |  |                          | 363,685 |                           |   | 390,628
|                                                                                        |  |                          |         |                           |   |        
|Net Assets in Liquidation                                                               |  | $                        |        |                           | $ |       
|                                                                                        |  |                          |         |                           |   |        

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)

FOR THE THREE
MONTHS ENDED MARCH 31, 2007

(Dollars in thousands)

(Unaudited)



|                                                                                    |  |   |         |  
|----------------------------------------------------------------------------------- |  | - | ------- | -
|Net Assets in Liquidation at December 31, 2006                                      |  | $ |        |  
|                                                                                    | 
|Changes in net assets in liquidation from January 1, 2007 through March 31, 2007:   |  |   |         |  
|Change in estimated net realizable value of assets                                  |  |   | (1,810  | )
|Interest earned on investment of cash reserves and other operating activity         |  |   | 3,416   |  
|Increase in estimated costs during the liquidation period                           |  |   | (724    | )
|Interest accruing on the Senior Notes                                               |  |   | (27,825 | )
|Reduction in the estimated settlement of the Senior Notes                           |  |   | 26,943  |  
|                                                                                    |  |   |         |  
|Net Change in Net Assets in Liquidation from January 1, 2007 through March 31, 2007 |  | $ |        |  
|                                                                                    |  |   |         |  
|Net Assets in Liquidation at March 31, 2007                                         |  | $ |        |  
|                                                                                    |  |   |         |  

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS (GOING CONCERN BASIS)

FOR THE THREE MONTHS ENDED
MARCH 31, 2006

(Dollars in thousands, except per share data)

(Unaudited)



|                                        |  |   |             |  
|--------------------------------------- |  | - | ----------- | -
|Revenues:                               |  |   |             |  
|Interest income                         |  | $ | 3,714       |  
|Rental income                           |  |   | 1,481       |  
|Operating lease income                  |  |   | 8,389       |  
|Fees and other income                   |  |   | 5,322       |  
|                                        |  |   |             |  
|Total Revenues                          |  |   | 18,906      |  
|Interest expense                        |  |   | (38,976     | )
|Operating lease depreciation            |  |   | (1,658      | )
|                                        |  |   |             |  
|Interest Margin                         |  |   | (21,728     | )
|                                        |  |   |             |  
|Other Revenues and (Expenses):          |  |   |             |  
|Reversal of provision for credit losses |  |   | 21,103      |  
|Net gain on financial assets            |  |   | 28,783      |  
|Portfolio expenses                      |  |   | (5,484      | )
|General and administrative expenses     |  |   | (7,329      | )
|                                        |  |   |             |  
|Total Other Revenues and (Expenses)     |  |   | 37,073      |  
|                                        |  |   |             |  
|Income before income taxes              |  |   | 15,345      |  
|Income tax expense                      |  |   |            |  
|                                        |  |   |             |  
|Net Income                              |  | $ | 15,345      |  
|                                        |  |   |             |  
|Basic/diluted earnings per share        |  | $ | 0.13        |  
|                                        |  |   |             |  
|Weighted average shares outstanding     |  |   | 122,041,000 |  
|                                        |  |   |             |  

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS (GOING CONCERN BASIS)

FOR THE THREE MONTHS ENDED
MARCH 31, 2006

(Dollars in thousands)

(Unaudited)



|                                                                              |  |   |         |  
|----------------------------------------------------------------------------- |  | - | ------- | -
|Operating Activities:                                                         |  |   |         |  
|Net income                                                                    |  | $ | 15,345  |  
|Adjustments to reconcile net income to net cash used by operating activities: |  |   |         |  
|Reversal of provision for credit losses                                       |  |   | (21,103 | )
|Net cash gain on disposal of financial assets                                 |  |   | (27,820 | )
|Net non-cash gain on financial assets                                         |  |   | (963    | )
|Depreciation and amortization                                                 |  |   | 1,849   |  
|Deferred income taxes, net                                                    |  |   | (126    | )
|Fresh-start accretionassets                                                  |  |   | (289    | )
|Fresh-start discount amortizationSenior Notes                                |  |   | 8,028   |  
|Change in assets and liabilities:                                             |  |   |         |  
|Decrease in other assets                                                      |  |   | 435     |  
|Decrease in accounts payable and accrued expenses                             |  |   | (9,748  | )
|Increase in interest payable                                                  |  |   | 30,036  |  
|                                                                              |  |   |         |  
|Net Cash Used by Operating Activities                                         |  |   | (4,356  | )
|                                                                              |  |   |         |  
|Investing Activities:                                                         |  |   |         |  
|Proceeds from disposals of leases and other owned assets                      |  |   | 26,431  |  
|Proceeds from sales of investments                                            |  |   | 1,809   |  
|Proceeds from sales of loans and financing leases                             |  |   | 34,078  |  
|Collections and prepayments from financial assets                             |  |   | 32,658  |  
|Fundings under existing customer commitments                                  |  |   | (3,636  | )
|Deposit of impermissible restricted payments into restricted cash account     |  |   | (3,125  | )
|Recoveries of loans previously written off                                    |  |   | 1,503   |  
|                                                                              |  |   |         |  
|Net Cash Provided by Investing Activities                                     |  |   | 89,718  |  
|                                                                              |  |   |         |  
|Financing Activities:                                                         |  |   |         |  
|Principal prepayments of Senior Notes                                         |  |   | (59,359 | )
|                                                                              |  |   |         |  
|Net Cash Used by Financing Activities                                         |  |   | (59,359 | )
|                                                                              |  |   |         |  
|Increase in Cash and Cash Equivalents                                         |  |   | 26,003  |  
|Cash and Cash Equivalents, beginning of year                                  |  |   | 212,317 |  
|                                                                              |  |   |         |  
|Cash and Cash Equivalents, end of period                                      |  | $ | 238,320 |  
|                                                                              |  |   |         |  

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007

(Dollars in thousands in tables)

(Unaudited)



|A. | Nature of Operations and Plan of Liquidation
|-- | --------------------------------------------

The accompanying
financial statements and notes hereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2006. Capitalized terms
not defined herein are used as defined in the Form 10-K.

The notes to the financial statements relate to The FINOVA Group Inc. and its subsidiaries
(collectively FINOVA or the Company), including FINOVA Capital Corporation and its subsidiaries (FINOVA Capital). FINOVA is a financial services holding company. Through its principal operating subsidiary, FINOVA
Capital, the Company provided a broad range of financing and capital markets products, primarily to mid-size businesses. Throughout this document, we, us and our also refer to The FINOVA Group Inc. and its
subsidiaries.

Since emergence from chapter 11 bankruptcy proceedings in August 2001, our business activities have been limited to maximizing the value of
our portfolio through the orderly collection of our assets. These activities have included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. We have sold substantial portions
of asset portfolios and are considering future sales of our remaining assets if buyers can be found at acceptable prices; however, there can be no assurance that we will be successful in efforts to sell additional assets. We are currently offering
to sell our remaining assets both by portfolio and individual asset. We are prohibited by the Indenture governing our 7.5% Senior Secured Notes (the Senior Notes) from engaging in any new lending activities or other business, except to
honor existing customer commitments and in certain instances, to restructure financing relationships to maximize value. Any funds generated in excess of cash reserves permitted by our debt agreements have been used to reduce obligations to our
creditors.

Because substantially all of our assets (except for a few assets that could not be pledged because those assets already secured other
obligations) are pledged to secure obligations under the promissory notes of FINOVA Capital issued to us in the aggregate principal amount of the Senior Notes (the Intercompany Notes), our ability to obtain additional or alternate
financing is severely restricted. Accordingly, we intend to rely on internally generated cash flows from the liquidation of assets as our only meaningful source of liquidity.

Plan of Liquidation

On November 1, 2006, our Board of Directors (the Board) approved the Plan of
Complete Liquidation and Dissolution (the Plan of Liquidation) and the filing of a motion (the Motion) in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court). On December 4,
2006, the Bankruptcy Court granted our Motion and approved (i) the previously announced settlement of various litigations associated with The Thaxton Group, Inc. (the Thaxton Settlement), (ii) the ongoing sale of our remaining
assets, the orderly windup of our operations and our future dissolution, (iii) our sale of all or substantially all of our assets without stockholder approval and our future dissolution without stockholder approval at such time as our Board
deems to be appropriate and (iv) channeling to the Bankruptcy Court any claims against us that the holders of our Senior Notes or the indenture trustee for the Senior Notes may have arising from or in any way related to our joint chapter 11
plan, the ongoing liquidation of FINOVA, the senior secured notes, or the windup of our operations.

Our goal is to wind-up the affairs of the Company
during 2007; however, we cannot control the exact timing of resolving legal matters and claims. Accordingly, the liquidation period may extend beyond 2007 and conservative estimates are up to the end of 2008. The reserve for estimated costs
reflected in our Statement of Net Assets in Liquidation assumes a liquidation period through the end of 2007.

As a result of the aforementioned approvals,
we took steps to initiate our complete liquidation and as such, the information provided in this Report on Form 10-Q reflects our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance
with accounting principles generally accepted in the United States. Historical information



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for periods prior to December 5, 2006 is presented on a going concern basis of accounting. Under the liquidation basis of accounting, we are required to
value all assets at their estimated net realizable value, while liabilities are reported at their estimated net settlement amount. Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future
estimated general and administrative expenses and other costs expected to be incurred during the liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that
these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution.

We will continue to operate as a public company throughout the liquidation period under a Management Services Agreement with Leucadia National Corporation (Leucadia) that expires in 2011. Pursuant to that
agreement, Leucadia has designated its employees to act as Chairman of the Board (Ian M. Cumming), President (Joseph S. Steinberg) and Chief Executive Officer (Thomas E. Mara). We continue to maintain adequate cash reserves to pay all operating
expenses as they come due in accordance with the Indenture.



|B. | Significant Accounting Policies
|-- | -------------------------------

The preparation of financial
statements in conformity with U.S. generally accepted accounting principles requires us to use estimates and assumptions that affect reported amounts of assets and liabilities. These estimates are subject to known and unknown risks, uncertainties
and other factors that could materially impact the amounts reported and disclosed in the financial statements. Significant estimates include anticipated amounts and timing of future cash flows used in the calculation of net realizable value, reserve
for future costs and settlement amounts. Actual results could differ from those estimated.

Consolidation of Interim Reporting

The interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. All intercompany balances have been
eliminated in consolidation. The interim consolidated financial information is unaudited. In the opinion of management, all adjustments consisting of normal recurring items necessary to present fairly our net assets in liquidation as of
March 31, 2007 and the changes in net assets presented herein have been included in our consolidated financial statements.

For a complete listing of
our significant accounting policies, see Note B. Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2006. The policies related to the liquidation basis of accounting were the only
policies presented herein. With the adoption of the liquidation basis of accounting, all anticipated improvements or deterioration in the portfolio are fully reflected in our financial statements as facts and assumptions change.

Liquidation Basis of Accounting

With the approval of our Plan
of Liquidation by the Bankruptcy Court, our complete liquidation is considered to be imminent and as such, we adopted the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting
principles generally accepted in the United States. A Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets in Liquidation are the principal financial statements presented under the liquidation basis of accounting. Under
the liquidation basis of accounting, assets are stated at their estimated net realizable value, which is the non-discounted amount of cash, or its equivalent, into which an asset is expected to be converted in the due course of business less direct
costs, while liabilities are reported at their estimated net settlement amount, which is the non-discounted amounts of cash, or its equivalent, expected to be paid to liquidate an obligation in the due course of business, including direct costs.
Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future estimated general and administrative expenses and other costs expected to be incurred during the liquidation (exclusive of interest
expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future
distributions to be made. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the
costs associated with carrying out the Plan of Liquidation based on the assumptions set forth below. The actual values and costs associated with carrying out the Plan of Liquidation are expected to differ from amounts reflected in the accompanying
financial statements because of the plans inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is
not possible to predict with certainty the timing or aggregate amount which will ultimately be distributed to note holders and no



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assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets in Liquidation or the
price at which our Senior Notes have traded or are expected to trade in the future.

The following are the significant assumptions utilized by management
in assessing the value of our liquidating portfolio and the expected settlement amount of liabilities included in the Statement of Net Assets in Liquidation at March 31, 2007 and December 31, 2006.

Net Realizable Value Supported by Underlying Loan or Direct Financing Agreements.All loans and direct financing leases were adjusted to their estimated net
realizable values, which represent all future undiscounted cash flows expected to be collected from each of these transactions including sales and settlement proceeds, principal collections, scheduled rental payments and interest. Anticipated cash
collections were partially offset by any known direct costs and liabilities assumed by buyers including aircraft maintenance reserves and security deposits that were previously collected. The majority of the estimated net realizable values were
determined primarily based on signed contracts, settlement agreements or letters of intent to sell. The net realizable values for the remainder of the loans and direct financing leases were based upon estimated cash flows on a
transaction-by-transaction basis. Cash flow estimates are based on current information and numerous assumptions concerning future general economic conditions, specific market segments, the financial condition of our customers and collateral. Changes
in facts and assumptions have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and therefore, net realizable values.

Net Realizable Value Supported by Underlying Operating Leases and Other Owned Assets. All owned assets (operating leases and off-lease assets) were adjusted to their estimated net realizable values, which
represent all future undiscounted cash flows expected to be collected from each of these transactions including sales proceeds and scheduled rental payments. Anticipated cash collections were partially offset by any known direct costs such as
maintenance and make ready costs for certain aircraft and liabilities assumed by buyers including aircraft maintenance reserves and security deposits that were previously collected. The majority of the estimated net realizable values were determined
primarily based on signed contracts or letters of intent to sell. The net realizable values for the remainder of the owned assets were based upon estimated cash flows on a transaction-by-transaction basis. Cash flow estimates are based on current
information and numerous assumptions concerning future general economic conditions, specific market segments, lessee performance and residual value assumptions for leases. Changes in facts and assumptions have resulted in, and may in the future
result in, significant positive or negative changes to estimated cash flows and therefore, net realizable values.

Investments. All investments are
reported at either their fair value or estimated net realizable values, based on published information, quotes by registered securities brokers or signed contracts. Investments for which market information is not readily available were valued based
on estimated future cash flows that may be realized from the investment, if any.

Reserve for Estimated Costs during the Liquidation Period. Under
the liquidation basis of accounting, we are required to estimate and accrue for costs associated with implementing and completing the Plan of Liquidation. The reserve for estimated costs includes four primary areas of accruals including people costs
(payroll, benefits and severance), Leucadia management fees, professional services and litigation costs and corporate expenses (insurance, directors fees and entity related expenses). These amounts can vary significantly due to, among other
things, the timing of assets sales, the timing and amounts associated with discharging known and contingent liabilities and claims, the costs associated with cessation of our operations including an estimate of costs subsequent to that date (which
would include reserve contingencies for the appropriate statutory periods) and the costs of retaining knowledgeable personnel and others to oversee the liquidation. As a result, we have accrued the projected costs including corporate overhead and
specific liquidation costs of severance and performance bonuses, professional fees and various other wind-up costs expected to be incurred during the projected period to complete the liquidation and dissolution. These expense accruals will be
periodically reviewed for adequacy and adjusted from time to time as projections and assumptions change. Changes to the accruals will be recorded as adjustments to net assets in liquidation in future periods.



|C. | Effects of the Liquidation Basis of Accounting
|-- | ----------------------------------------------

During the three
months ended March 31, 2007, the estimated net realizable value of our liquidating portfolio decreased a net $1.8 million primarily due to revised purchase prices on certain committed aircraft following their revaluation based upon updated
aircraft specifications and usage reports and a slight decline in the estimated net realizable value of an engine based upon bids obtained through an auction process to liquidate the asset. Additionally, during the three months ended March 31,
2007, we accrued $27.8 million of additional interest on the Senior Notes and earned interest income on cash investments and



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other operating activity of $3.4 million. As a result of the adoption of the liquidation basis of accounting and valuation of our liquidating portfolio at
its estimated net realizable value, income is no longer being recognized on our portfolio. All cash received on the portfolio is applied against its estimated net realizable value, which took into consideration all expected interest and rental
payments. Any cash received in excess of an individual assets estimated net realizable value is shown as a change in net assets in the period of collection.

Under the liquidation basis of accounting, we are also required to establish and maintain a reserve for all future general and administrative expenses and other costs expected to be incurred during the liquidation period (estimated to be
the end of 2007). The following is a summary of and changes to the reserve for estimated costs during the liquidation period:



|                                                                |  |                  |        |                        |   |        |               |  |   |       
|--------------------------------------------------------------- |  | ---------------- | ------ | ---------------------- | - | ------ | ------------- |  | - | ------
|                                                                |  | December 31,2006 |        | AdjustmentsandPayments |   |        | March 31,2007
|People costs (payroll, benefits and severance)                  |  | $                | 4,144  |                        | $ | (1,318 | )             |  | $ | 2,826 
|Leucadia management fees                                        |  |                  | 8,000  |                        |   | (2,000 | )             |  |   | 6,000 
|Professional services and litigation costs                      |  |                  | 10,431 |                        |   | (2,003 | )             |  |   | 8,428 
|General corporate expenses                                      |  |                  | 1,684  |                        |   | (166   | )             |  |   | 1,518 
|                                                                |  |                  |        |                        |   |        |               |  |   |       
|Total reserve for estimated costs during the liquidation period |  | $                | 24,259 |                        | $ | (5,487 | )             |  | $ | 18,772
|                                                                |  |                  |        |                        |   |        |               |  |   |       

During the three months ended March 31, 2007, the reserve declined to $18.8 million due to the payment of
expenses, partially offset by an increase caused by retaining certain employees for a slightly longer period of time than previously estimated. The staff retention is directly related to aircraft sales sliding into the second quarter and additional
time consumed by the equity committees review of our solvency (for further details, see Note G. Litigation and Claims), both of which have caused delays to the overall liquidation process (including the dissolution of entities and
resolution of claims).

Due to the fact that we do not have sufficient assets to fully satisfy all obligations to our creditors, any change to the
estimated net realizable value of our assets and liabilities results in a corresponding adjustment to the estimated settlement amount of the Senior Notes. During the three months ended March 31, 2007, the estimated settlement amount of the
Senior Notes was reduced by $26.9 million to a balance of $363.7 million; however, we currently estimate the Senior Note holders will receive total liquidation distributions (total principal and interest) of approximately $405.7 million, which is a
$0.9 million increase over our year-end estimate.



|D. | Liquidating Portfolio
|-- | ---------------------

As a result of the adoption of the
liquidation basis of accounting, most of the prior disclosures related to total financial assets are no longer applicable. Our liquidating portfolio is now recorded at its estimated net realizable value, which incorporates all future cash flows,
including earnings expected to be collected.

Since our total financial assets were primarily concentrated in specialized industries, we were subject to
both general economic risk and the additional risk of economic downturns within individual sectors of the economy, particularly those impacting the aviation industry. We also completed multiple financial transactions with individual borrowers and
their affiliates, resulting in a greater total exposure to those borrowers beyond the typical transaction size and increased concentration risk to economic events affecting the industries (including aviation) of those borrowers and their affiliates.

At March 31, 2007, the carrying value on a liquidation basis of our top 10 aggregate exposures to borrowers and their affiliates totaled
approximately $109.4 million and represented 98.5% of our liquidating portfolio (excluding the severance and bonus trusts of $8.1 million), as compared to our top 10 exposures (on a liquidation basis) at December 31, 2006 of $148.9 million,
which represented 84.8% of our liquidating portfolio (excluding the severance and bonus trusts of $10.1 million). The top 10 exposures at March 31, 2007 were primarily concentrated in aviation assets and the loan to The Thaxton Group, which
alone made up 75.3% of the net realizable value expected from our liquidating portfolio. We subsequently received $83.7 million on April 16, 2007 in full and final settlement of the Thaxton loan. As of the date of this report, all of our top 10
exposures have either been liquidated; are under binding definitive agreements or letters of intent to sell; or are subject to a negotiated settlement.



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At March 31, 2007, our transportation portfolio consisted of the following aircraft:

|                                                  |  |                   |  |           |  |       |  |                                 
|------------------------------------------------- |  | ----------------- |  | --------- |  | ----- |  | --------------------------------
|Aircraft Type                                     |  | Number ofAircraft |  | Passenger |  | Cargo |  | ApproximateAverage Age(in years)
|McDonnell Douglas DC10                            |  | 1                 |  |           |  | 1     |  | 32                              
|McDonnell Douglas MD-80 Series                    |  | 7                 |  | 7         |  |       |  | 23                              
|Regional jets, corporate aircraft and turbo props |  | 7                 |  | 7         |  |       |  | 24                              
|                                                  |  |                   |  |           |  |       |  |                                 
|Total                                             |  | 15                |  | 14        |  | 1     |  | 24                              
|                                                  |  |                   |  |           |  |       |  |                                 

At March 31, 2007, five aircraft were operated by domestic carriers, while 10 aircraft were operated by
foreign carriers. In addition to the aircraft, our transportation portfolio also includes two aircraft engines, a small number of miscellaneous parts and some unsecured aviation notes and claims with a total carrying value on a liquidation basis of
approximately $1.0 million as of March 31, 2007. As of the date of this report, we had 15 aircraft with a total carrying value on a liquidation basis of approximately $24.7 million. All of these assets have either been liquidated subsequent to
March 31, 2007 or are subject to a definitive agreement to sell. Due to the fact that these aircraft are operating throughout the world, additional time will be necessary to close the sales. It is to our advantage to close these transactions
when the aircraft are in tax friendly jurisdictions to minimize transfer taxes. No assurance can be given that all of these commitments will result in actual sales or the timing of such sales, but the remaining aircraft are targeted to close during
the second quarter of 2007.

Our non-aviation portfolio, in addition to the Thaxton loan, at March 31, 2007 was comprised of assets with a net
realizable value of approximately $9.7 million, including our $8.1 million investment in two grantor trusts to secure severance and bonus obligations to our employees. These assets are held primarily for the benefit of our employees, but are
recorded as investments due to our retained interest in any excess assets. Substantially all of the other non-aviation assets are in the process of being liquidated.

The estimated net realizable value of our portfolio included, among other transactions, a number of customer judgments and claims, non-marketable private equity securities and certain obligations owed to us by
companies that are in liquidation. In many of these instances, we did not attribute any net realizable value to these assets due to our inability to predict the collection of any cash flows from the transactions with even a remote level of
confidence. Most of these transactions were previously included in due diligence materials in an attempt to sell the assets, but were excluded on multiple occasions by prospective buyers because of costs of collection and potential liability
concerns of the buyers. We continue to monitor these accounts for changes in facts and circumstances that would allow us to attribute value to these assets. As a result, there is the possibility that some net realizable value will be attributed to
these assets in the future. An increase in the estimated net realizable value of these assets, if any, will be reflected as a change in net assets in liquidation in future filings. Additionally, we continue to occasionally receive small amounts of
proceeds typically from trustees for assets that in certain cases were written off years ago. These cash flows are reflected as a change in net assets in liquidation as they are received.



|E. | Debt
|-- | ----

A summary of our total debt outstanding on a liquidation
basis was as follows:

|                                                             |  |               |            |   |                  |   |            |  
|------------------------------------------------------------ |  | ------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                             |  | March 31,2007 |            |   | December 31,2006 |  
|Senior Notes:                                                |  |               |            |   |                  |   |            |  
|Principal                                                    |  | $             | 1,483,975  |   |                  | $ | 1,483,975  |  
|Senior Notes principal estimated to not be settled or repaid |  |               | (1,120,290 | ) |                  |   | (1,093,347 | )
|                                                             |  |               |            |   |                  |   |            |  
|Senior Notes                                                 |  | $             | 363,685    |   |                  | $ | 390,628    |  
|                                                             |  |               |            |   |                  |   |            |  

During the first quarter of 2007, we made no principal prepayments on the Senior Notes. In April 2007, we
announced a partial prepayment of $59.4 million that will be paid on May 15, 2007. Following this prepayment, cumulative prepayments will total $1.54 billion or approximately 52% of the face amount ($2.97 billion) of the Senior Notes.
Additionally, bonds with a face amount of $900 thousand and outstanding principal balance of $450 thousand reverted back to us under the sunset provisions of the Indenture and on April 5, 2007 the trustee cancelled these bonds, reducing the
March 31, 2007, principal amount by



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$450 thousand. Based on the valuation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently
estimate the Senior Note holders will receive additional liquidation distributions (total principal and interest) of approximately $405.7 million, which is considerably less than the total principal and interest due of approximately $1.5 billion.
The estimated settlement amount was determined solely based on the net assets available for settlement of the Senior Notes and is subject to change due to changes in the estimated net realizable value of our net assets. We clearly do not have
sufficient assets to fully repay the Senior Note obligation.

While, the Senior Notes have a first priority security interest in substantially all of our
remaining assets, the Indenture requires us to first use any cash and cash equivalents to pay or fund operating expenses, taxes and reasonable reserves for commitments and general corporate purposes. In accordance with the terms of the Indenture, we
are required to use any excess cash as defined in the Indenture, to make semi-annual interest and principal payments on the Senior Notes. Additionally, the Indenture permits voluntary prepayments at our option, which we have previously elected to
make from time to time; however, due to the uncertainty of cash requirements associated with the wind-up of our affairs, resolution of outstanding bankruptcy claims and matters related to Thaxton, discussed below in Note G. Litigation and
Claims, we anticipate maintaining a higher cash reserve to cover these potential and uncertain expenditures, which could limit our ability to make future voluntary prepayments.

The timing and amount of distributions to Senior Note holders will depend on the timing and amount of proceeds we receive upon the sale of our remaining assets, the resolution of claims and other litigation matters,
the extent to which reserves for current or future liabilities are required and the length of time required to settle all of our matters. Our goal is to wind-up the affairs of the Company during 2007; however, we cannot control the exact timing of
resolving legal matters and claims. Accordingly, the liquidation period may extend beyond 2007 and conservative estimates are up to the end of 2008.

Stockholders should not expect any payments or distributions. The Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders would receive a distribution equal to 5.263% (i.e., 5%/95%) of each principal
prepayment. Ninety-five percent (95%) of the remaining available cash after establishment of cash reserves as defined in the Indenture will be used to make semi-annual prepayments of principal on the Senior Notes and five percent (5%) is
identified for distributions to and/or repurchases of stock from common stockholders. However, the Indenture prohibits us from making distributions to and/or repurchases from stockholders if the payments would render the Company insolvent, would be
a fraudulent conveyance or would not be permitted to be made under applicable law. Any such distribution and/or repurchase would be considered an impermissible restricted payment under the Indenture. Based upon the fact that the Senior Notes will
not be fully repaid, we are required to retain impermissible restricted payments until such time, if ever, that we are no longer restricted from making a distribution to our stockholders or until it is necessary to use the cash to satisfy our debt
obligations.

In conjunction with the prepayments of Senior Notes noted above, we will have retained a total of $81.2 million as of May 15, 2007.
Retained amounts are being segregated and reflected as restricted cash in our financial statements, pending their final disposition. We anticipate that the retained amounts will eventually be paid to our creditors, not our stockholders. If
the funds were to be paid to our stockholders, affiliates of Berkadia (jointly owned by Leucadia and Berkshire Hathaway), which owns 50% of our common stock, would receive half of the retained amounts. Berkadia has advised us that it does not
believe that stockholders are entitled to the retained amounts since we cannot fully satisfy our creditor obligations.

As previously reported, we filed a
motion in the United States Bankruptcy Court for the District of Delaware seeking an order that (1) we no longer need to direct funds into a restricted account, and (2) we may use the funds in the restricted account to satisfy our
obligations to creditors. For a further discussion of the motion and its status, see Note G. Litigation and Claims.



|F. | Income Taxes
|-- | ------------

Our federal net operating loss carryforwards of $1.3
billion have remained relatively unchanged since year end. No income tax expense or benefit was recorded during the three months ended March 31, 2007 and 2006. Any income or loss has been entirely offset by a decrease or increase in valuation
allowances against deferred tax assets, which were previously established due to concern regarding our ability to utilize income tax benefits generated from losses in prior periods. We do not expect to be able to utilize all the deferred tax assets
due to uncertainty about the amount of future earnings, a variety of loss or other tax attribute carryover limitations in the various jurisdictions in which we file tax returns and uncertainty regarding the timing of the reversal of deferred tax
liabilities.



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G. Litigation and Claims

Legal Proceedings

We are party either as plaintiff or defendant to various actions, proceedings and pending claims, including legal
actions, some of which involve claims for compensatory, punitive or other damages in significant amounts. Litigation often results from our attempts to enforce our lending agreements against borrowers and other parties to those transactions.
Litigation is subject to many uncertainties. It is possible that some of the legal actions, proceedings or claims could be decided against us. Other than the matters described below, we believe that any resulting liability from our legal proceedings
should not materially affect our net assets in liquidation or cash flows. The following matters could have a material adverse impact on our net assets in liquidation or cash flows.

Historically, it was our policy to accrue for loss contingencies, including litigation, only when the losses were probable and estimable. The determination of when losses became probable and estimable was inherently
subjective and required significant judgment. Under the liquidation basis of accounting, liabilities for loss contingencies and claims are reported at their estimated net settlement amount, which is the non-discounted amount of cash expected to be
paid to liquidate or settle an obligation in the due course of business.

If any legal proceedings result in a significant adverse judgment against us, it
is unlikely that we would be able to satisfy that liability due to our financial condition. As previously noted, due to our financial condition, we do not expect that we can satisfy all of our secured debt obligations at maturity. Attempts to
collect on those judgments could lead to future reorganization proceedings of either a voluntary or involuntary nature.

Litigation Related to Loans
to The Thaxton Group Inc. and Related Companies

Our prior periodic filings with the Securities and Exchange Commission have disclosed ongoing
litigation against FINOVA Capital with respect to The Thaxton Group Inc. (TGI) and several related entities (collectively, the Thaxton Entities).

Pursuant to an order of the Thaxton Entities bankruptcy court dated September 11, 2006, we transferred all of the cash received from the Thaxton Entities since commencement of the Thaxton Entities chapter 11
proceedings in October 2003, together with interest earned thereon (an aggregate of approximately $97.2 million), to a trust account to be held by Thaxton under order of the bankruptcy court.

On September 12, 2006, we reached a preliminary settlement (the Settlement) to resolve all outstanding claims in the ongoing litigation between us, the
Thaxton Entities, the holders of subordinated notes issued by the Thaxton Entities (the Noteholders), and the Official Committee of Unsecured Creditors of the Thaxton Entities. This Settlement will settle all of the actions involving us
and the Thaxton Entities, in particular the actions pending in the United States District Court for the District of South Carolina, Anderson Division (the District Court), including the previously described new Thaxton action commenced
in the District Court in June 2006, as well as claims in the Thaxton Entities chapter 11 proceedings (collectively, the Thaxton Litigation).

The principal terms of the Settlement were approved by our Board of Directors on September 11, 2006 and the bankruptcy court for the FINOVA Capital and Thaxton Entities bankruptcies in December 2006. The Thaxton Plan of Reorganization
was approved by the bankruptcy court on April 3, 2007, and became effective on April 16, 2007. On April 16, 2007, we received $83.7 million, representing all amounts we transferred into the trust on September 11, 2006  i.e.
all amounts paid by the Thaxton Entities to us since commencement of the Thaxton Entities chapter 11 proceedings in October 2003 (together with interest earned thereon), minus $16 million, plus interest actually earned thereon from August 16,
2006, which will be retained by the Thaxton Entities. In addition, we received complete releases from all Thaxton parties for all matters related to the Thaxton Entities and the summary judgment order of the District Court was vacated.

Thaxton Life Partners Litigation

On February 14,
2007, a group of noteholders of Thaxton Life Partners, Inc. (TLP) filed suit against the Company and FINOVA Capital (the TLP Action), unrelated to the Thaxton Entities litigation noted above. The TLP Action purports to be a
class action filed on behalf of approximately 150 TLP note holders with claims related to approximately $20 million in TLP



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notes. The TLP Action alleges that, in connection with TLPs sale of its notes, the Company, FINOVA Capital, and several other defendants participated
in a civil conspiracy, violated the South Carolina Unfair Trade Practices Act, violated the civil RICO statute, and were unjustly enriched. In its various counts, the TLP Action seeks actual, treble, and/or punitive damages.

The TLP Action is currently pending in the United States District Court for the District of South Carolina (the South Carolina District Court). We believe
that, under the terms of the TLP notes, the TLP Action must move forward in arbitration. The Company and FINOVA Capital have filed a motion with the South Carolina District Court seeking an order compelling such arbitration. No order has yet been
issued with respect to this issue. We also believe that all claims against both us and FINOVA Capital are without merit. The Company and FINOVA Capital intend to vigorously defend against the TLP note holders claims asserted against them. If,
however, the TLP Action results in a significant adverse final determination against us or FINOVA Capital, which is not anticipated, it is unlikely that the Company or FINOVA Capital would be able to satisfy that liability due to our financial
condition. As previously disclosed, due to our financial condition, we do not expect that we can satisfy all of our secured debt obligations at maturity. Attempts to collect on any such judgment could lead to future reorganization proceedings of
either a voluntary or involuntary nature.

Motion Regarding Distributions to Stockholders

As discussed more fully in Note E. Debt, the Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders would receive a
distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits distribution of those amounts due to our financial condition. Those amounts are held in a restricted account, and will total $81.2 million as of May 15,
2007. Because we will not be able to repay the Senior Notes in full, on April 1, 2005, we filed a motion in the United States Bankruptcy Court for the District of Delaware seeking an order (1) to cease directing funds into the restricted
account and (2) to allow us to use the funds in the restricted account to satisfy our obligations to creditors.

On February 1, 2006, the
Bankruptcy Court issued its order approving our April 1, 2005 motion to the extent that we will be forever insolvent. The Bankruptcy Court did not find that we are presently or will be forever insolvent. As a result, we will continue to direct
funds into the restricted account until such time that we are deemed to be forever insolvent.

On December 22, 2006, the reconstituted equity
committee filed a motion with the Bankruptcy Court seeking among other things, appointment of a financial expert to review the issue of our solvency, and up to $100,000 to accomplish this task. Over our objection, the Bankruptcy Court granted the
equity committees motion, ordering that the evaluation be completed within sixty (60) days of an order being entered approving the motion. As expected, the financial expert concluded that FINOVA is insolvent. The parties will seek a final
order of the bankruptcy court declaring FINOVAs insolvency. Once issued, the equity committee may then appeal the underlying ruling of the bankruptcy court should they so desire.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following section should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2006 and the Special Note Regarding Forward-Looking Statements included herein. Capitalized
terms not defined herein are used as defined in the Form 10-K. The following discussion relates to The FINOVA Group Inc. and its subsidiaries (collectively FINOVA or the Company), including its principal operating subsidiary,
FINOVA Capital Corporation and its subsidiaries (FINOVA Capital).

OVERVIEW

During the first quarter of 2007, we continued to make significant progress in the orderly collection and liquidation of our assets. Our liquidating portfolio declined by
approximately 36% since year-end 2006, reducing the net realizable value of our remaining assets to just over $119 million at March 31, 2007. As we previously mentioned, it has become increasingly more difficult for us to offset the incremental
costs of collecting our assets in an orderly fashion and as a result, to maximize the value of our remaining assets, we initiated efforts to accelerate the liquidation process. The vast majority of the remaining assets are expected to be liquidated
during the second quarter of 2007.

Plan of Liquidation.On November 1, 2006, our Board of Directors (the Board) approved the Plan
of Complete Liquidation and Dissolution (the Plan of Liquidation) and the filing of a motion (the Motion) in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court). On
December 4, 2006, the Bankruptcy Court granted our Motion and approved (i) the previously announced settlement of various litigations associated with The Thaxton Group, Inc. (the Thaxton



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Settlement), (ii) the ongoing sale of our remaining assets, the orderly windup of our operations and our future dissolution, (iii) our sale
of all or substantially all of our assets without stockholder approval and our future dissolution without stockholder approval at such time as our Board deems to be appropriate and (iv) channeling to the Bankruptcy Court any claims against us
that the holders of our Senior Notes or the indenture trustee for the Senior Notes may have arising from or in any way related to our joint chapter 11 plan, the ongoing liquidation of FINOVA, the senior secured notes, or the windup of our
operations.

As a result of the aforementioned approvals, we took steps to initiate our complete liquidation and as such, the information provided in this
Report on Form 10-Q reflects our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States. Historical information for
periods prior to December 5, 2006 is presented on a going concern basis of accounting. Under the liquidation basis of accounting, we are required to value all assets at their estimated net realizable value, while liabilities are reported at
their estimated net settlement amount. Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future estimated general and administrative expenses and other costs expected to be incurred during the
liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the
timing or amount of future distributions or our actual dissolution.

The timing and amount of distributions to Senior Note holders will depend on the
timing and amount of proceeds we receive upon the sale of the remaining assets, the resolution of claims and other litigation matters, the extent to which reserves for current or future liabilities are required and the length of time required to
settle all our matters. Our goal is to wind-up the affairs of the Company during 2007; however, we cannot control the exact timing of resolving legal matters and claims. Accordingly, the liquidation period may extend beyond 2007 and conservative
estimates are up to the end of 2008. The reserve for estimated costs ($18.8 million) reflected in our Statement of Net Assets in Liquidation assumes a liquidation period through the end of 2007.

We continue to retain sufficient cash reserves to fund our expenses, including the costs associated with the wind-up of our affairs, resolution of outstanding bankruptcy
claims and matters related to Thaxton. As a result, we anticipate maintaining a higher cash reserve to cover these potential and uncertain expenditures and claims, which could limit our ability to make and the timing of future voluntary principal
prepayments.

Anticipated Shortfall.In April 2007, we announced a partial prepayment of $59.4 million that will be paid on May 15, 2007.
Following this prepayment, cumulative prepayments will total $1.54 billion or approximately 52% of the face amount ($2.97 billion) of the Senior Notes. Based on the revaluation of our assets at their estimated net realizable value and liabilities at
estimated net settlement amount, we currently estimate the Senior Note holders will receive additional liquidation distributions (total principal and interest) of approximately $405.7 million, which is considerably less than the total principal and
interest due of approximately $1.5 billion. We clearly do not have sufficient assets to fully repay the Senior Note obligation. In order to eliminate the shortfall, the remaining assets (excluding cash and cash equivalents), which have already been
marked up from their historical going concern basis, would have to increase in value by more than ten times their already marked up value. We do not believe there is any chance of this occurring.

No Stockholder Payments Anticipated.While the Indenture contemplated we would make payments to our stockholders as the Senior Notes were repaid, we have not made
those payments. Distributions to stockholders are prohibited due to our financial condition. Based on our liquidation basis financial statements, we will not be able to repay more than $1.1 billion of the Senior Notes. As a result, stockholders
should not expect any payments or return on their common stock. Funds related to the restricted distributions are currently being held in a segregated account, pending their final disposition. We anticipate that those funds will eventually be paid
to our creditors, not to our stockholders. If the funds were to be paid to our stockholders, affiliates of Berkadia (which are owned by Berkshire Hathaway and Leucadia), as owner of 50% of our stock, would receive half of those payments.

As discussed in Note G. Litigation and Claims, we filed a motion in the United States Bankruptcy Court for the District of Delaware, seeking an order that
(1) we no longer need to direct funds into a restricted account, and (2) we may use the funds in the restricted account to satisfy our obligations to creditors.



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No Restructuring Plan Contemplated.On numerous occasions, we have been asked whether there is some plan to save
the Company and our net operating loss carryforwards (NOL). As we have noted for some time, the Board remains willing to consider legitimate proposals presented by note holders or others, but we are not formulating a restructuring plan
intended to enable us to emerge as a healthy company.

Many obstacles exist to creation of a viable restructuring plan. A restructuring presumes a sensible
business plan emerging from that process. In light of our dwindling asset base, the composition of our remaining assets and the competitive environment, we believe it would be difficult, if not futile, in these circumstances to develop a business
model that can produce returns to the creditors and/or new investors greater than that expected from the present course. Absent that, or a substantial new investment in FINOVA, we believe it would be difficult to obtain the requisite approval to
restructure the present debt obligations. The task becomes more difficult as the portfolio continues to shrink. We caution investors to carefully evaluate applicable tax regulations, which restrict the ability to transfer or use NOLs in a variety of
circumstances. Our financial statements do not anticipate using the NOLs for those and other reasons.

HIGH INVESTMENT RISK OF SECURITIES. As previously
stated, we will not be able to fully repay the Senior Notes or make any distributions to our stockholders, absent a court order in connection with the motion referred to above. Consequently, investing in our Senior Notes and common stock involves a
high level of risk.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements continue to be prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to use estimates and assumptions that affect reported
amounts of assets and liabilities. These estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the amounts reported and disclosed in the financial statements. See Item 1A. Risk
Factors and Special Note Regarding Forward-Looking Statements in our Annual Report on Form 10-K for the year ended December 31, 2006 for more information on these risks and uncertainties. We believe the following to be among
the most critical judgment areas in the application of our accounting policies.

Liquidation Basis of Accounting

With the approval of our Plan of Liquidation by the Bankruptcy Court, our complete liquidation is considered to be imminent and as such, we adopted the liquidation basis
of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States. A Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets in Liquidation
are the principal financial statements presented under the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value, which is the non-discounted amount of cash, or its
equivalent, into which an asset is expected to be converted in the due course of business less direct costs, while liabilities are reported at their estimated net settlement amount, which is the non-discounted amounts of cash, or its equivalent,
expected to be paid to liquidate an obligation in the due course of business, including direct costs. Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future estimated general and administrative
expenses and other costs expected to be incurred during the liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be
realized. Such amounts should not be taken as an indication of the timing or amount of future distributions to be made. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates,
based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the Plan of Liquidation based on the assumptions set forth below. The actual values and costs associated with carrying out
the Plan of Liquidation are expected to differ from amounts reflected in the accompanying financial statements because of the plans inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary
with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is not possible to predict with certainty the timing or aggregate amount which will ultimately be distributed to note holders and no assurance can be given that
the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets in Liquidation or the price at which our Senior Notes have traded or are expected to trade in the future.

The following are the significant assumptions utilized by management in assessing the value of our liquidating portfolio and the expected settlement amount of
liabilities included in the Statement of Net Assets in Liquidation at March 31, 2007 and December 31, 2006.



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Net Realizable Value Supported by Underlying Loan or Direct Financing Agreements.All loans and direct financing
leases were adjusted to their estimated net realizable values, which represent all future undiscounted cash flows expected to be collected from each of these transactions including sales and settlement proceeds, principal collections, scheduled
rental payments and interest. Anticipated cash collections were partially offset by any known direct costs and liabilities assumed by buyers including aircraft maintenance reserves and security deposits that were previously collected. The majority
of the estimated net realizable values were determined primarily based on signed contracts, settlement agreements or letters of intent to sell. The net realizable values for the remainder of the loans and direct financing leases were based upon
estimated cash flows on a transaction-by-transaction basis. Cash flow estimates are based on current information and numerous assumptions concerning future general economic conditions, specific market segments, the financial condition of our
customers and collateral. Changes in facts and assumptions have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and therefore, net realizable values.

Net Realizable Value Supported by Underlying Operating Leases and Other Owned Assets. All owned assets (operating leases and off-lease assets) were adjusted to
their estimated net realizable values, which represent all future undiscounted cash flows expected to be collected from each of these transactions including sales proceeds and scheduled rental payments. Anticipated cash collections were partially
offset by any known direct costs such as maintenance and make ready costs for certain aircraft and liabilities assumed by buyers including aircraft maintenance reserves and security deposits that were previously collected. The majority of the
estimated net realizable values were determined primarily based on signed contracts or letters of intent to sell. The net realizable values for the remainder of the owned assets were based upon estimated cash flows on a transaction-by-transaction
basis. Cash flow estimates are based on current information and numerous assumptions concerning future general economic conditions, specific market segments, lessee performance and residual value assumptions for leases. Changes in facts and
assumptions have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and therefore, net realizable values.

Investments. All investments are reported at either their fair value or estimated net realizable values, based on published information, quotes by registered securities brokers or signed contracts. Investments
for which market information is not readily available were valued based on estimated future cash flows that may be realized from the investment, if any.

Reserve for Estimated Costs during the Liquidation Period. Under the liquidation basis of accounting, we are required to estimate and accrue for costs associated with implementing and completing the Plan of Liquidation. The reserve
for estimated costs includes four primary areas of accruals including people costs (payroll, benefits and severance), Leucadia management fees, professional services and litigation costs and corporate expenses (insurance, directors fees and
entity related expenses). These amounts can vary significantly due to, among other things, the timing of assets sales, the timing and amounts associated with discharging known and contingent liabilities and claims, the costs associated with
cessation of our operations including an estimate of costs subsequent to that date (which would include reserve contingencies for the appropriate statutory periods) and the costs of retaining knowledgeable personnel and others to oversee the
liquidation. As a result, we have accrued the projected costs including corporate overhead and specific liquidation costs of severance and performance bonuses, professional fees and various other wind-up costs expected to be incurred during the
projected period to complete the liquidation and dissolution. These expense accruals will be periodically reviewed for adequacy and adjusted from time to time as projections and assumptions change. Changes to the accruals will be recorded as
adjustments to net assets in liquidation in future periods.

With the adoption of the liquidation basis of accounting, all anticipated improvements or
deterioration in the portfolio are fully reflected in our financial statements as facts and assumptions change.



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CHANGES IN NET ASSETS AND RESULTS OF OPERATIONS

The following table summarizes the changes in net assets in liquidation for the three months ended March 31, 2007 (dollars in thousands):



|                                                                                |  |   |         |  
|------------------------------------------------------------------------------- |  | - | ------- | -
|Net Assets in Liquidation at December 31, 2006                                  |  | $ |        |  
|                                                                                | 
|Changes in net assets in liquidation for the three months ended March 31, 2007: |  |   |         |  
|Change in estimated net realizable value of assets                              |  |   | (1,810  | )
|Interest earned on investment of cash reserves and other operating activity     |  |   | 3,416   |  
|Increase in estimated costs during the liquidation period                       |  |   | (724    | )
|Interest accruing on the Senior Notes                                           |  |   | (27,825 | )
|Reduction in the estimated settlement of the Senior Notes                       |  |   | 26,943  |  
|                                                                                |  |   |         |  
|Net change in value of assets and liabilities                                   |  |   |        |  
|                                                                                |  |   |         |  
|Net Assets in Liquidation at March 31, 2007                                     |  | $ |        |  
|                                                                                |  |   |         |  

Changes in Net Assets in Liquidation for the three months ended March 31, 2007

During the three months ended March 31, 2007, the estimated net realizable value of our liquidating portfolio decreased a net $1.8 million primarily due to revised
purchase prices on certain committed aircraft following their revaluation based upon updated aircraft specifications and usage reports and a slight decline in the estimated net realizable value of an engine based upon bids obtained through an
auction process to liquidate the asset.

During the three months ended March 31, 2007, we accrued $27.8 million of additional interest on the Senior
Notes and earned interest income on cash investments and other operating activity of $3.4 million. As a result of the adoption of the liquidation basis of accounting and valuation of our liquidating portfolio at its estimated net realizable value,
income is no longer being recognized on the portfolio. All cash received on the portfolio is applied against its estimated net realizable value, which took into consideration all expected interest and rental payments. Any cash received in excess of
an individual assets estimated net realizable value is shown as a change in net assets in the period of collection.

Additionally, as previously
discussed, we established a reserve for estimated costs during the liquidation period (estimated to be the end of 2007) and all future expenditures for operating expenses are charged directly against the reserve. During the three months ended
March 31, 2007, the reserve declined to $18.8 million due to the payment of expenses, partially offset by an increase caused by retaining certain employees for a slightly longer period of time than previously estimated. The staff retention is
directly related to aircraft sales sliding into the second quarter and additional time consumed by the equity committees review of our solvency (for further details, see Note G. Litigation and Claims), both of which have caused
delays to the overall liquidation process (including the dissolution of entities and resolution of claims).

Due to the fact that we do not have sufficient
assets to fully satisfy all obligations to our creditors, any change to the estimated net realizable value of our assets and liabilities results in a corresponding adjustment to the estimated settlement amount of the Senior Notes. During the three
months ended March 31, 2007, the estimated settlement amount of the Senior Notes was reduced by $26.9 million to a balance of $363.7 million; however, we currently estimate the Senior Notes holders will receive total liquidation distributions
(total principal and interest) of approximately $405.7 million, which is a $0.9 million increase over our year-end estimate.

Results of Operations for
the three months ended March 31, 2006

During the three months ended March 31, 2006, we generated net income (on a going concern basis) of
$15.3 million. In general, the net income was primarily attributable to asset realization in excess of recorded carrying amounts, partially offset by a negative interest margin and normal operating expenses. Under the going concern basis, asset
realization in excess of recorded carrying amounts was primarily reflected in the financial statements as reversals of excess reserve for credit losses, net gains from sales of financial assets and the recognition of suspended income upon the payoff
of assets.



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During 2006, the aircraft-finance market continued to display a high level of activity and in certain instances improved
aircraft values. As a result, our transportation portfolio continued to generate cash in excess of recorded carrying amounts, which resulted in $23.5 million of the $28.8 million net gains we recognized during the first quarter of 2006.
Additionally, results for the first quarter of 2006 were enhanced by a revaluation of our non-aviation assets in conjunction with their classification as held for sale and subsequent sale, which resulted in $14.7 million of our $21.1 million
reversal of provision for credit losses.

Our asset realization in excess of recorded carrying amounts was partially offset by a $21.7 million negative
interest margin, which is primarily due to our portfolio containing a lower level of earning assets ($104.7 million at March 31, 2006) than the principal amount of outstanding debt ($1.6 billion at March 31, 2006) and a high aggregate cost
of funds (aggregate effective rate of 13.6% for the first quarter of 2006).

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Because substantially all of our assets (except for a few assets that could not be pledged because those assets already secured other obligations) are pledged to secure
obligations under the Intercompany Notes securing the Senior Notes, our ability to obtain additional or alternate financing is severely restricted. Berkadia has no obligation to lend additional sums to or to further invest in FINOVA. Accordingly, we
intend to rely on internally generated cash flows from the liquidation of assets as our only meaningful source of liquidity.

The terms of the Indenture
prohibit us from using available funds (after certain permitted uses) for any purpose other than to satisfy our obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, we are
permitted to establish a cash reserve in an amount not to exceed certain defined criteria. Due to our limited sources of liquidity, the estimation of cash reserves is critical to our overall liquidity. Cash reserve estimations are subject to known
and unknown risks, uncertainties, and other factors that could materially impact the amounts determined. Failure to adequately estimate a cash reserve in one period could result in insufficient liquidity to meet obligations in that period, or in a
subsequent period, if actual cash requirements exceed the cash reserve estimates. Historically, cash reserves typically equaled anticipated cash flows to cover operating costs, tax payments, fundings under existing customer commitments, interest
payments and any other necessary cash flows expected to occur during the next six month period. We have the discretion to and have from time to time adjusted our cash reserve methodology. As we continue to liquidate assets, our incoming cash flows
will diminish and the estimation of cash reserves will become increasingly more critical to ensure we retain sufficient funds to meet obligations (including, but not limited to, interest payments on the Senior Notes, settlement of known and unknown
claims and normal operating expenses) as they become due throughout the liquidation process.

In accordance with the terms of the Indenture, we are
required to use any excess cash, as defined in the Indenture, to make semi-annual interest and principal payments on the Senior Notes. Additionally, the Indenture permits voluntary prepayments at our option, which we have previously elected to make
from time to time; however, due to the uncertainty of cash requirements associated with the wind-up of our affairs, resolution of outstanding bankruptcy claims and matters related to Thaxton, discussed in Note G. Litigation and Claims,
we anticipate maintaining a higher cash reserve to cover these potential and uncertain expenditures, which could limit our ability to make future voluntary prepayments.

The timing and amount of distributions to Senior Note holders will depend on the timing and amount of proceeds we receive upon the sale of our remaining assets, the resolution of claims and other litigation matters,
the extent to which reserves for current or future liabilities are required and the length of time required to settle all of our matters. Our goal is to wind-up the affairs of the Company during 2007; however, we cannot control the exact timing of
resolving legal matters and claims. Accordingly, the liquidation period may extend beyond 2007 and conservative estimates are up to the end of 2008. The reserve for estimated costs ($18.8 million) reflected in our Statement of Net Assets in
Liquidation assumes a liquidation period through the end of 2007.

During the first quarter of 2007, we made no principal prepayments on the Senior Notes.
In April 2007, we announced a partial prepayment of $59.4 million that will be paid on May 15, 2007. Following this prepayment, cumulative prepayments will total $1.54 billion or approximately 52% of the face amount ($2.97 billion) of the
Senior Notes. Based on the valuation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently estimate the Senior Note holders will receive additional liquidation distributions (total
principal and interest) of approximately $405.7 million, which is considerably less than the total principal and interest due of approximately $1.5 billion. The estimated settlement amount was determined solely based on the net assets available for
settlement of the Senior Notes and is subject to change due to changes in the estimated net realizable value of our net assets. We clearly do not have sufficient assets to fully repay the Senior Note obligation.



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The Senior Notes have a first priority security interest in substantially all of our remaining assets; however, as noted
above, the Indenture requires us to first use any cash and cash equivalents to pay or to fund operating expenses, taxes and reasonable reserves for commitments and general corporate purposes.

Stockholders should not expect any payments or distributions. The Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders would
receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits us from making distributions to and/or repurchases from stockholders if the payments would render the Company insolvent, would be a fraudulent
conveyance or would not be permitted to be made under applicable law. Any such distribution and/or repurchase would be considered an impermissible restricted payment under the Indenture. Based upon the fact that the Senior Notes will not be fully
repaid, we are required to retain impermissible restricted payments until such time, if ever, that we are no longer restricted from making a distribution to our stockholders or until it is necessary to use the cash to satisfy our debt obligations.

In conjunction with the prepayments of Senior Notes noted above, we will have retained a total of $81.2 million as of May 15, 2007. Retained amounts
are being segregated and reflected as restricted cash in our financial statements, pending their final disposition. We anticipate that the retained amounts will eventually be paid to our creditors, not our stockholders. If the funds were to
be paid to our stockholders, affiliates of Berkadia (jointly owned by Leucadia and Berkshire Hathaway), which owns 50% of our common stock, would receive half of the retained amounts. Berkadia has advised us that it does not believe that
stockholders are entitled to the retained amounts since we cannot fully satisfy our creditor obligations.

As previously reported, we filed a motion in the
United States Bankruptcy Court for the District of Delaware seeking an order that (1) we no longer need to direct funds into a restricted account, and (2) we may use the funds in the restricted account to satisfy our obligations to
creditors. For a further discussion of the motion and its status, see Note G. Litigation and Claims.

Based on our financial condition and
imminent liquidation, there will not be sufficient funds available to fully repay the outstanding principal on the Senior Notes or make any 5% distribution to common stockholders, absent a court order in connection with the motion referred to above.
As a result, there will not be a return to our stockholders. Consequently, investing in the Senior Notes and common stock involves a high level of risk.

Obligations and Commitments

For a detailed listing of our significant contractual obligations and contingent commitments, refer to
our Annual Report on Form 10-K for the year ended December 31, 2006. There have not been any material changes during the three months ended March 31, 2007, except for the payment of our quarterly management fees to Leucadia.

Collection of the Portfolio

As noted previously, our current
business activities have been limited to maximizing the value of our portfolio through the orderly collection of assets. These activities include collection efforts pursuant to underlying contractual terms, negotiation of prepayments, sales of
assets or collateral. We have sold substantial portions of asset portfolios and are considering future sales of our remaining assets if buyers can be found at acceptable prices; however, there can be no assurance that we will be successful in
efforts to sell additional assets. We are currently offering to sell our remaining assets both by portfolio and individual asset. Due to restrictions contained in the Indenture as well as our general inability to access capital in the public and
private markets, our only viable source of cash flow is from the collection of our portfolio.



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The following table presents the activity in our liquidating portfolio for the three months ended March 31, 2007:



|                                                   |  |   |         |  
|-------------------------------------------------- |  | - | ------- | -
|Liquidating Portfolio at December 31, 2006         |  | $ | 185,544 |  
|                                                   | 
|Cash activity:                                     |  |   |         |  
|Collections and proceeds                           |  |   | (64,442 | )
|                                                   | 
|Non-cash activity:                                 |  |   |         |  
|Change in estimated net realizable value of assets |  |   | (1,983  | )
|                                                   |  |   |         |  
|Liquidating Portfolio at March 31, 2007            |  | $ | 119,119 |  
|                                                   |  |   |         |  

Our liquidating portfolio declined to $119.1 million at March 31, 2007, down from $185.5 million at
December 31, 2006. During the first quarter of 2007, our cash activity was comprised of customer collections (including recoveries) and proceeds received from the sale of assets, while non-cash activity resulted in a decrease to the estimated
net realizable value of certain assets. The decrease in value of these assets was primarily due to revised purchase prices on certain committed aircraft following their revaluation based upon updated aircraft specifications and usage reports and a
slight decline in the estimated net realizable value of an engine based upon bids obtained through an auction process to liquidate the asset.

The
remaining portfolio as of March 31, 2007 is primarily comprised of aviation assets and the loan to The Thaxton Group. Refer to Note G. Litigation and Claims for a further discussion of the settlement of the Thaxton litigation.

As of the date of this report, we had 15 aircraft with a total carrying value on a liquidation basis of approximately $24.7 million. All of these assets
have either been liquidated subsequent to March 31, 2007 or are subject to a definitive agreement to sell. Due to the fact that these aircraft are operating throughout the world, additional time will be necessary to close the sales. It is to
our advantage to close these transactions when the aircraft are in tax friendly jurisdictions to minimize transfer taxes. No assurance can be given that all of these commitments will result in actual sales or the timing of such sales, but the
remaining aircraft are targeted to close during the second quarter of 2007. In addition to the aircraft, our transportation portfolio also includes two aircraft engines, a small number of miscellaneous parts and some unsecured aviation notes and
claims with a total carrying value on a liquidation basis of approximately $1.0 million as of March 31, 2007.

Our non-aviation portfolio, in addition
to the Thaxton loan, at March 31, 2007 was comprised of assets with a net realizable value of approximately $9.7 million, including our $8.1 million investment in two grantor trusts to secure severance and bonus obligations to our employees.
These assets are held primarily for the benefit of our employees, but are recorded as investments due to our retained interest in any excess assets. Substantially all of the other non-aviation assets are in the process of being liquidated.

The estimated net realizable value of our portfolio included, among other transactions, a number of customer judgments and claims, non-marketable private
equity securities and certain obligations owed to us by companies that are in liquidation. In many of these instances, we did not attribute any net realizable value to these assets due to our inability to predict the collection of any cash flows
from the transactions with even a remote level of confidence. Most of these transactions were previously included in due diligence materials in an attempt to sell the assets, but were excluded on multiple occasions by prospective buyers because of
costs of collection and potential liability concerns of the buyers. We continue to monitor these accounts for changes in facts and circumstances that would allow us to attribute value to these assets. As a result, there is the possibility that some
net realizable value will be attributed to these assets in the future. An increase in the estimated net realizable value of these assets, if any, will be reflected as a change in net assets in liquidation in future filings. Additionally, we continue
to occasionally receive small amounts of proceeds typically from trustees for assets that in certain cases were written off years ago. These cash flows are reflected as a change in net assets in liquidation as they are received.

As we continue to liquidate assets, our incoming cash flows will diminish and the estimation of cash reserves will become increasingly more critical to ensure we retain
sufficient funds to meet obligations (including, but not limited to, interest payments on the Senior Notes, settlement of known and unknown claims and normal operating expenses) as they become due throughout the liquidation process. Due to the
uncertainty of cash requirements associated with the wind-up of our affairs, resolution of outstanding bankruptcy claims and matters related to Thaxton, discussed in Note G. Litigation and Claims, we anticipate maintaining a higher cash
reserve to cover these potential and uncertain expenditures, which could limit our ability to make future voluntary prepayments.



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Our goal is to wind-up the affairs of the Company during 2007; however, we cannot control the exact timing of resolving
legal matters and claims. Accordingly, the liquidation period may extend beyond 2007 and conservative estimates are up to the end of 2008. We will continue to operate as a public company throughout the liquidation period under a Management Services
Agreement with Leucadia that expires in 2011.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report are forward-looking, in that they do not discuss historical fact, but instead reflect future expectations, projections,
intentions, or other items. Forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include assumptions, estimates and valuations implicit
in the financial statements and related notes, as well as matters discussed throughout this report including, but not limited to projections, our Plan of Liquidation, sections captioned Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations and Item 3. Quantitative and Qualitative Disclosure About Market Risk. They are also made in documents incorporated in this report by reference, or in which this report may be
incorporated.

Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in
this report, the words estimate, expects, anticipates, believes, plans, intends and similar expressions are intended to identify forward-looking statements that involve known
and unknown risks and uncertainties. The risks, uncertainties and other factors that could cause our actual results or performance to differ materially from those contemplated by the forward-looking statements include, but are not limited to, the
following: whether we can assure Senior Note holders of the timing or amount of their liquidating distributions; whether potential purchasers of our assets may try to take advantage of our liquidation process and offer less-than-optimal prices for
our assets; the increasing difficulty in offsetting costs of collecting the remaining portfolio in view of our decreasing asset pool; our Board may abandon the Plan of Liquidation; whether new securities lawsuits will be filed against us; our
ability to sell the remaining assets; the impact of general economic conditions and the performance of our borrowers; the instability and uncertainty in the airline industry, which could adversely affect the value of our aircraft portfolio, lease
rates and demand; our reliance on third parties for information that may not be accurate; our increasing exposure to concentrations of credit risk; current and future legal and administrative claims and proceedings against us that may result in
increased costs and diversion of managements attention; current and future obligations to creditors; our ability to meet obligations is impacted by cash reserve estimations; cash investments are subject to credit exposure and interest rate
fluctuations; our ability to retain our employees; our ability to utilize tax attributes; and our ability to be exempt from the registration requirements of the Investment Company Act of 1940. For additional information, see Part I, Item 1A.
Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2006.

Undue reliance should not be placed on these forward-looking
statements, which are applicable only as of the date of this Report. We do not intend to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. We cannot predict
the risk from reliance on forward-looking statements in light of the many factors that could affect their accuracy.



|Item 3. | Quantitative and Qualitative Disclosure About Market Risk
|------- | ---------------------------------------------------------

There
were no material changes from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2006.



|Item 4. | Controls and Procedures
|------- | -----------------------



|(a) | Our management evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of March 31, 2007. Based on their evaluation, our principal executive and principal financial officers concluded that our
disclosure controls and procedures were effective as of March 31, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(b) | There has been no change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal
quarter ended March 31, 2007, that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules issued there under, we are scheduled to include in our Annual Report on Form 10-K for the year ending December 31, 2007 a report on
managements assessment of the effectiveness of our internal controls over financial reporting. Our independent registered public accountants will not be required to attest to and report on managements assessment until the end of 2008.

The process of complying with these requirements includes a comprehensive evaluation and documentation of our internal controls over
financial reporting. In this regard, management is prepared to dedicate internal resources and adopt a detailed plan to (i) document our internal controls over financial reporting, (ii) assess the adequacy of our internal controls over
financial reporting, (iii) take steps to improve control processes where appropriate and (iv) validate through testing that controls are functioning as documented. There can be no assurance that deficiencies or weaknesses in the design or
operation of internal controls over financial reporting will not be found and, if found, that we will have sufficient time to remediate any such deficiencies or weaknesses and perform testing procedures before the end of 2007.

We believe that any system of internal accounting controls, no matter how well designed and operated, can provide only reasonable (and not absolute)
assurance that all of our objectives will be met, including the detection of fraud. Furthermore, no evaluation of internal accounting controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

We continue to reduce our workforce, consolidate operations and outsource certain functions. Accordingly, responsibility for
administration, management and review of many of our assets has transitioned among our remaining personnel. In conjunction with further reductions in personnel and the relocation of our corporate office, we have transitioned most of our accounting
and business support applications to manual processes supported by a system of manual internal controls and spreadsheets. Management has supervised these transitions and has implemented procedures we believe provide effective disclosure and internal
controls over financial reporting. We are assessing the efficacy of these procedures and will continue to do so in subsequent periods.

PART
II    OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

See Part I, Item 1, Note G.
Litigation and Claims for a discussion of certain legal proceedings.



|Item 1A. | Risk Factors
|-------- | ------------

There were no material changes from the information
provided in our Annual Report on Form 10-K for the year ended December 31, 2006.



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                                            
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|32.1 |  | Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2 |  | Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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THE FINOVA GROUP INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.

THE FINOVA GROUP INC.

(Registrant)



|                  |  |  |  |     |  |                     |  |                                                                                                           
|----------------- |  |  |  | --- |  | ------------------- |  | ----------------------------------------------------------------------------------------------------------
|                  |  |  | 
|Date: May 9, 2007 |  |  |  | By: |  | /s/ Richard A. Ross
|                  |  |  |  |     |  |                     |  | Richard A. Ross, Senior Vice President  Chief Financial Officer & Treasurer (principal financial officer)



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EXHIBIT INDEX



|              |  |                                                                                                                                            
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                
|              | 
|31.1          |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|              | 
|31.2          |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|              | 
|32.1          |  | Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|              | 
|32.2          |  | Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.