Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

v2.4.0.6
DEBT OBLIGATIONS
 6 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
DEBT OBLIGATIONS

 

5. DEBT OBLIGATIONS

 

The following table presents certain information regarding Newcastle’s debt obligations and related hedges at June 30, 2012:

 

                                        Collateral        
Debt Obligation/Collateral  

Month

Issued

  

Outstanding

Face

Amount

    

Carrying

Value

   Final Stated Maturity  

Unhedged Weighted

Average

Funding Cost (A)

    

Weighted Average

Funding

Cost (B)

  

Weighted Average Maturity

(Years)

  

Face

Amount

of Floating Rate

Debt

     Outstanding Face Amount (C)    

Amortized

Cost Basis (C)

    

Carrying

Value (C)

  

Weighted Average Maturity

(Years)

    

Floating Rate Face

Amount

(C)

    

Aggregate

Notional

Amount of Current Hedges (D)

  
                                                                         
CDO Bonds Payable                                                                        
CDO IV (E)   Mar 2004   $ 94,912     $ 94,774   Mar 2039     1.85%       4.96 %   1.7   $ 83,617     $ 188,784     $ 178,159     $ 167,159     2.2     $ 51,438     $ 83,617  
CDO VI (E)   Apr 2005     91,359       91,359   Apr 2040     0.90%       5.35 %   5.1     88,376       213,627       123,951       142,506     3.0       54,968       88,376  
CDO VIII   Nov 2006     567,613       566,434   Nov 2052     0.79%       2.10 %   2.8     560,013       729,131       538,300       551,905     2.8       438,747       155,132  
CDO IX   May 2007     478,905       480,426   May 2052     0.61       0.61 %   2.6     478,905       695,919       569,341       572,351     2.8       373,904       -  
CDO X   Jul 2007     1,120,000       1,117,655   Jul 2052     0.59%       3.38 %   4.0     1,120,000       1,235,436       951,744       998,116     4.5       214,451       811,054  
          2,352,789       2,350,648                 2.65 %   3.4     2,330,911       3,062,897       2,361,495       2,432,037     3.4       1,133,508       1,138,179  
Other Bonds and Notes Payable                                                                                            
MH loans Portfolio I (F)   Apr 2010     61,345       60,685   Jul 2035     5.44%       5.44 %   2.9     -       125,948       105,225       105,225     6.9       1,095       -  
MH loans Portfolio II (F)   May 2011     113,936       113,007   Dec 2033     3.90%       3.90 %   3.4     -       165,494       162,402       162,402     5.8       28,121       -  
Residential Mortgage Loans (G)   Aug 2006     5,309       5,309   Dec 2034   LIBOR+ 0.90%       1.15 %   6.6     5,309       54,744       40,007       40,007     6.7       54,744       -  
          180,590       179,001                 4.34 %   3.3     5,309       346,186       307,634       307,634     6.3       83,960       -  
Repurchase Agreements                                                                                                
Real estate securities, loans and properties (H)   Dec 2011     7,384       7,384   Oct 2012   LIBOR+ 2.00%       2.25 %   0.3     7,384       -       -       -     -       -       -  
FNMA/FHLMC securities (I)   Various     316,126       316,126   Aug 2012     0.42%       0.42 %   0.1     316,126       315,646       337,810       337,610     4.7       315,646       -  
          323,510       323,510                 0.46 %   0.1     323,510       315,646       337,810       337,810     4.7       315,646       -  
Corporate                                                                                                
Junior subordinated notes payable   Mar 2006     51,004       51,246   Apr 2035     7.57%(K)       7.41 %   22.8     -       -       -       -     -       -       -  
          51,004       51,246                 7.41 %   22.8     -       -       -       -     -       -       -  
Subtotal debt obligations         2,907,893       2,904,405                 2.59 %   3.3   $ 2,659,730     $ 3,724,729     $ 3,006,771     $ 3,077,313     3.8     $ 1,533,114     $ 1,138,179  
Financing on subprime mortgage loans subject to call option   (J)     406,217       405,247                                                                              
Total debt obligations       $ 3,314,110     $ 3,309,652                                                                              

 

(A) Weighted average, including floating and fixed rate classes and including the amortization of deferred financing costs.
(B) Including the effect of applicable hedges.
(C) Including restricted cash available for reinvestment in CDOs.
(D) Including a $42.4 million notional amount of interest rate cap agreements in CDO X and a $83.6 million and $88.4 million notional amount of interest rate swap agreements in CDO IV and CDO VI, respectively, which were economic hedges not designated as hedges for accounting purposes.
(E) These CDOs were not in compliance with their applicable over collateralization tests as of June 30, 2012. Newcastle is not receiving cash flows from these CDOs (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 these CDOs to remain out of compliance for the foreseeable future.
(F) Excluding $36.9 million and $17.0 million face amount of other bonds payable relating to MH loans Portfolio I and Portfolio II, respectively, and $48.0 million face amount of notes payable relating to residential mortgage loans sold to certain Newcastle CDOs, which were eliminated in consolidation.
(G) Notes payable issued to CDO V, that are no longer eliminated since the deconsolidation of CDO V.
(H) The counterparty of this repurchase agreement is Bank of America. It is secured by $27.3 million face amount of senior notes issued by Newcastle CDO VI, which is eliminated in consolidation. The maximum recourse to Newcastle is $1.9 million.
(I) The counterparties on these repurchase agreements are Bank of America and Goldman Sachs. Interest rates on these repurchase agreements are fixed, but will be reset on a short-term basis.
(J) Issued in April 2006 and July 2007. See Note 4 regarding the securitizations of Subprime Portfolios I and II.
(K) LIBOR + 2.25% after April 2016.

 

 

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, our cash flow and liquidity are negatively impacted upon such a failure. As of June 30, 2012, CDOs IV and VI were not in compliance with their applicable over collateralization tests.

 

In the first six months of 2012, Newcastle repurchased $30.1 million face amount of CDO bonds payable for $9.2 million. As a result, Newcastle extinguished $30.1 million face amount of CDO bonds payable and recorded a gain on extinguishment of debt of $20.8 million.

 

Newcastle’s non-CDO financings contain various customary loan covenants. Newcastle was in compliance with all of the covenants in its non-CDO financings as of June 30, 2012.