Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

v2.4.0.8
DEBT OBLIGATIONS
9 Months Ended
Sep. 30, 2014
Debt Disclosure [Abstract]  
DEBT OBLIGATIONS
10.   DEBT OBLIGATIONS
 
The following table presents certain information regarding Newcastle’s debt obligations and related hedges at September 30, 2014:
 
September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateral
 
Aggregate
Debt Obligation/Collateral
Month Issued
 
Outstanding
Face
Amount
 
Carrying
Value
 
Final Stated Maturity
 
Weighted
Average
Coupon (A)
 
Weighted Average
Funding
Cost (B)
 
Weighted Average Life(Years)
 
Face Amount of
Floating Rate Debt
 
Outstanding Face Amount (C)
 
Amortized
Cost Basis (C)
 
Carrying
Value (C)
 
 Weighted Average Life
(Years)
 
Floating Rate Face Amount (C)
 
Notional
Amount of Current Hedges (D)
CDO Bonds Payable
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

CDO VI (E)
Apr 2005
 
$
92,349

 
$
92,349

 
Apr 2040
 
0.84%
 
5.36
%
 
5.2

 
$
88,894

 
$
156,016

 
$
89,826

 
$
123,941

 
2.6

 
$
34,221

 
$
130,342

CDO VIII
Nov 2006
 
71,813

 
71,770

 
Nov 2052
 
2.12%
 
6.55
%
 
2.3

 
64,213

 
226,441

 
160,931

 
175,216

 
2.2

 
89,874

 
83,673

CDO IX
May 2007
 
65,671

 
66,739

 
May 2052
 
0.72%
 
0.18
%
 
1.6

 
65,671

 
297,120

 
238,374

 
248,189

 
2.5

 
64,489

 

 
 
 
229,833

 
230,858

 
 
 
 
 
4.23
%
 
3.3

 
218,778

 
679,577

 
489,131

 
547,346

 
2.4

 
188,584

 
214,015

Other Bonds and Notes Payable
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

NCT 2013-VI IMM-1 (F)
Nov 2013
 
88,223

 
82,063

 
Apr 2040
 
LIBOR+0.25%
 
5.86
%
 
1.7

 
88,223

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

 
 
 
88,223

 
82,063

 
 
 
 
 
5.86
%
 
1.7

 
88,223

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

Repurchase Agreements (G)
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

CDO securities (F)
Dec 2013
 
63,804

 
63,804

 
Oct 2014
 
LIBOR+1.65%
 
1.81
%
 
0.1

 
63,804

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

 
 
 
63,804

 
63,804

 
 
 
 
 
1.81
%
 
0.1

 
63,804

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

Mortgage Notes Payable
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Fixed Rate - Managed Properties
 
 
157,393

 
158,037

 
Aug 2018 to
Mar 2020
 
1.66% to 4.93%
(H) (I)
4.84
%
 
4.6

 
N/A

 
N/A

 
180,655

 
180,655

 
N/A

 
N/A

 

Floating Rate - Managed Properties
 
 
278,549

 
278,549

 
Aug 2016 to
Sept 2019
 
LIBOR +2.75% to LIBOR+3.75%
(J)
4.55
%
 
3.6

 
278,549

 
N/A

 
366,598

 
366,598

 
N/A

 
N/A

 

Fixed Rate - Triple Net Lease Properties
 
 
711,422

 
711,422

 
 Jan 2021 to Jan 2024
 
3.83% to 8.00%
(K)
5.10
%
 
7.3

 
N/A

 
N/A

 
962,489

 
962,489

 
N/A

 
N/A

 

 
 
 
1,147,364

 
1,148,008

 
 
 
 
 
4.93
%
 
6.0

 
278,549

 
N/A

 
1,509,742

 
1,509,742

 
N/A

 
N/A

 

Golf Credit Facilities (L)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Loan
Dec 2013
 
49,923

 
49,923

 
Dec 2018
 
LIBOR+4.00%
(M)
4.50
%
 
3.3

 
49,923

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

Second Lien Loan
Dec 2013
 
105,575

 
105,575

 
Dec 2018
 
5.50%
 
5.50
%
 
3.3

 

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

Vineyard II
Dec 1993
 
200

 
200

 
Dec 2043
 
2.13%
 
2.13
%
 
29.2

 
200

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

Capital Leases (Equipment)
May-Sep 2014
 
4,994

 
4,994

 
Mar 2020
 
5.25% to 7.15%
 
6.96
%
 
5.5

 

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

 
 
 
160,692

 
160,692

 
 
 
 
 
5.25
%
 
3.4

 
50,123

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

Corporate
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Junior subordinated notes payable
Mar 2006
 
51,004

 
51,233

 
Apr 2035
 
7.57%
(N)
7.36
%
 
20.6

 

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

 
 
 
51,004

 
51,233

 
 
 
 
 
7.36
%
 
20.6

 

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

Subtotal debt obligations
 
 
1,740,920

 
1,736,658

 
 
 
 
 
4.87
%
 
5.4

 
$
699,477

 
$
679,577

 
$
1,998,873

 
$
2,057,088

 
2.4

 
$
188,584

 
$
214,015

Financing on subprime mortgage loans subject to call option (O)
 
 
406,217

 
406,217

 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Total debt obligations
 
 
$
2,147,137

 
$
2,142,875

 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 


   
(A)
Weighted average, including floating and fixed rate classes.
(B)
Including the effect of applicable hedges and deferred financing cost. For fixed rate mortgage notes payable, the weighted average funding cost is calculated based on the average rate during the nine months ended September 30, 2014.
(C)
Excluding (i) restricted cash held in CDOs to be used for principal and interest payments of CDO debt, and (ii) operating cash from the senior housing business.
(D)
Including the $130.3 million portion of the notional amount of interest rate swap in CDO VI, which acted as an economic hedge that was not designated as a hedge for accounting purposes.
(E)
This CDO was not in compliance with its applicable over collateralization tests as of September 30, 2014. Newcastle is not receiving cash flows from this CDO (other than senior management fees and cash flows on senior classes of bonds that were repurchased), since net interest is being used to repay debt, and expects this CDO to remain out of compliance for the foreseeable future.
(F)
Represents financings of previously repurchased Newcastle CDO bonds for which the collateral is eliminated in consolidation.
(G)
These repurchase agreements had less than $0.1 million of accrued interest payable at September 30, 2014. $63.8 million face amount of these repurchase agreements were renewed subsequent to September 30, 2014. The counterparty on these repurchase agreements is Bank of America ($63.8 million). Newcastle has margin exposure on a $63.8 million repurchase agreement related to the financing of certain Newcastle CDO VIII and CDO IX notes. To the extent that the value of the collateral underlying these repurchase agreements declines, Newcastle may be required to post margin, which could significantly impact its liquidity.
(H)
For loans totaling $40.7 million issued in August 2013, Newcastle bought down the interest rate to 4% for the first two years. Thereafter, the interest rate will range from 5.99% to 6.76%.
(I)
For a loan with a total balance of $11.4 million, the interest rate for the first two years is based on the applicable US Treasury Security rates. The interest rate for years 3 through 5 is 4.5%, 4.75% and 5.0%, respectively.
(J)
$165.0 million of the floating rate mortgages have a LIBOR floor of 1.0%.
(K)
For loans with a total balance $358.4 million and $313.5 million, Newcastle bought down the interest rate to 4.00% and 3.83%, respectively, until January 2019. Thereafter, the interest rates will increase to 4.99% and 4.56%, respectively.
(L)
The golf credit facilities are collateralized by all of the assets of the golf business.
(M)
Interest rate on this is based on 3 month LIBOR with a LIBOR floor of 0.5%.
(N)
LIBOR +2.25% after April 2016.
(O)
Issued in April 2006 and July 2007 and secured by the general credit of Newcastle. See Note 6 regarding the securitizations of Subprime Portfolio I and II.
 
Each CDO financing is subject to tests that measure the amount of over collateralization and excess interest in the transaction.  Failure to satisfy these tests would cause the principal and/or interest cashflow that would otherwise be distributed to more junior classes of securities (including those held by Newcastle) to be redirected to pay down the most senior class of securities outstanding until the tests are satisfied. As a result, Newcastle’s cash flow and liquidity are negatively impacted upon such a failure. As of September 30, 2014, CDO VI was not in compliance with its over collateralization tests. Based upon Newcastle's current calculations, Newcastle expects this CDO to remain out of compliance for the foreseeable future.
 
In July 2014, Newcastle financed an additional $20.0 million face amount of previously repurchased CDO bonds payable with repurchase agreements for $12.0 million.  These repurchase agreements bear interest at one month LIBOR + 1.65%, mature in August 2014 and are subject to customary margin provisions.
 
As of September 30, 2014, Newcastle has unused borrowing capacity of $4.6 million on the golf credit facilities.
 
The Golf business leases equipment under capital lease agreements. The agreements normally provide for minimum rentals plus executory costs. Lease terms are 66 months with a purchase price option at the termination of the lease.
 
The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of September 30, 2014 are as follows:
October 1, 2014 - December 31, 2014
$
260

2015
1,041

2016
1,041

2017
1,041

2018
1,041

2019 and thereafter
1,670

Total minimum lease payments
6,094

Less: imputed interest
1,100

Present value of net minimum lease payments
$
4,994


 
Newcastle’s non-CDO financings, mortgage notes payable and golf credit facilities contain various customary loan covenants. Newcastle was in compliance with all of these covenants as of September 30, 2014.
 
In June 2013, Newcastle completed the purchase of $116.8 million aggregate face amount of securities that are collateralized by certain Newcastle CDO VIII Class I notes for an aggregate purchase of approximately $103.1 million, or an average price of 88.3% of par. Simultaneously, Newcastle financed the purchase with $60.0 million received pursuant to a master repurchase agreement with the seller of the securities (“CDO VIII Repack”). The terms of the repurchase agreement included a rate of one-month LIBOR plus 150 bps and a 30-day maturity. The purchase of the securities and the repurchase agreement were treated as a linked transaction and accordingly recorded on a net basis as a non-hedge derivative instrument, with changes in market value recorded on the statement of income. In May 2014, the CDO VIII Class I notes were repaid in full and the repurchase agreement was terminated.