Drive Shack Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

DEBT OBLIGATIONS

6 Months Ended

Jun. 30, 2016

The following table presents certain information regarding Newcastle’s debt obligations at June 30, 2016:



														Collateral
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		Amortized Cost Basis		Carrying Value		Weighted Average Life (Years)	Floating Rate Face Amount
Repurchase Agreements (C)
FNMA/FHLMC Securities	June 2016	361,085		361,085		July 2016	0.66%		0.66	%	0.1	—		353,585		371,260		373,097		5.6	—
		361,085		361,085					0.66	%	0.1	—		353,585		371,260		373,097		5.6	—
Golf Credit Facilities
Golf Term Loan (D)	June 2016	102,000		98,080		July 2019	LIBOR+4.70%	(E)	7.92	%	3.0	102,000		N/A		N/A		N/A		N/A	N/A
Vineyard II	Dec 1993	200		200		Dec 2043	2.20%		2.20	%	27.5	200		N/A		N/A		N/A		N/A	N/A
Capital Leases (Equipment)	May 2014 - June 2016	14,563		14,563		Jan 2022	3.00% to 16.16%		6.59	%	4.4	—		N/A		N/A		N/A		N/A	N/A
		116,763		112,843					7.74	%	3.2	102,200		N/A		N/A		N/A		N/A	N/A
Corporate
Junior subordinated notes payable	Mar 2006	51,004		51,221		Apr 2035	LIBOR+2.25%		2.84	%	18.8	51,004		N/A		N/A		N/A		N/A	N/A
		51,004		51,221					2.84	%	18.8	51,004		N/A		N/A		N/A		N/A	N/A
Subtotal debt obligations		528,852		525,149					2.39	%	2.6	$	153,204	$	353,585	$	371,260	$	373,097	5.6	$	—
Financing on subprime mortgage loans subject to call option (F)		362,931		362,931
Total debt obligations		$	891,783	$	888,080

See notes on next page.


(A)	Weighted average, including floating and fixed rate classes.


(B)	Including the effect of deferred financing costs.

(C)

These repurchase agreements had $0.1 million of accrued interest payable at June 30, 2016. The counterparties on these repurchase agreements are Citi ($247.8 million) and Morgan Stanley ($113.3 million). Newcastle has margin exposures on a total of $361.1 million repurchase agreements related to the financing of FNMA/FHLMC securities. 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. $361.1 million of repurchase agreements were repaid in July 2016 as part of the sale of the FNMA/FHLMC securities.


(D)	The golf term loan is collateralized by 22 golf properties. The carrying amount of the golf term loan is reported net of deferred financing costs of $3.9 million as of June 30, 2016.


(E)	Interest rate based on 30 day LIBOR plus 4.70% with a LIBOR floor of 1.80%. At the time of closing, Newcastle purchased a co-terminus LIBOR interest rate cap of 1.80%.


(F)	See Note 6 regarding the securitizations of Subprime Portfolios I and II.

In January 2016, Newcastle settled on a trade to sell $350.3 million face amount of agency FNMA/FHLMC fixed-rate securities at an average price of 103.2% for total proceeds of $361.3 million and repaid $348.6 million of repurchase agreements associated with these securities.

In January 2016, Newcastle settled on a trade to purchase $102.7 million face amount of agency FNMA/FHLMC fixed-rate securities at an average price of 103.2% for total proceeds of $105.9 million. This transaction was financed with $102.2 million of repurchase agreements.

On February 26, 2016, Newcastle extended the repurchase agreement on the golf loans to mature on May 31, 2016, with an option to extend to June 30, 2016. The repurchase agreement bears interest at LIBOR + 4.00%.

In April 2016, Newcastle settled on a trade to sell $347.5 million face amount of agency FNMA/FHLMC fixed-rate securities at an average price of 104.9% for total proceeds of $364.3 million and recognized a gain of approximately $5.9 million at trade date. Newcastle repaid $352.0 million of repurchase agreements associated with these securities.

In April 2016, Newcastle settled on a trade to purchase $363.1 million face amount of agency FNMA/FHLMC fixed-rate securities at an average price of 105.0% for total proceeds of $381.1 million. This transaction was financed with $366.4 million of repurchase agreements.

In April 2016, Newcastle sold a mezzanine loan with a face amount of $19.4 million at par. Newcastle subsequently repaid $11.7 million of notes payable that were collateralized by the loan.

In May 2016, the option on the repurchase agreement on the golf loans was exercised to extend the maturity to June 30, 2016.

In June 2016, Newcastle obtained third-party financing on 22 golf properties for a total of $102.0 million at a floating rate of the greater of: (i) 30-day LIBOR + 4.70% or (ii) 6.50%. At the time of closing, Newcastle purchased a co-terminus LIBOR interest rate cap of 1.80%. The financing is for a term of three years with the option for two one-year extensions. Newcastle used $64.9 million of the proceeds to repay the repurchase agreement on the golf loans.

In June 2016, Newcastle entered into a trade to sell $353.6 million face amount of agency FNMA/FHLMC fixed-rate securities at an average price of 105.5% of par for total proceeds of $373.1 million and recognized a gain on sale of securities of approximately $1.8 million. Newcastle repaid $361.1 million of repurchase agreements associated with these securities.

In June 2016, Newcastle entered into a trade to purchase $428.9 million face amount of agency FNMA/FHLMC fixed-rate securities at an average price of 105.7% of par for total proceeds of $453.1 million. This transaction was financed with $434.9 million of repurchase agreements.

The Golf business leases certain golf carts and other equipment under capital leases. The agreements typically provide for minimum rentals plus executory costs. Lease terms range from 36 to 66 months. Certain leases include bargain purchase options at lease expiration.

The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of June 30, 2016 are as follows:



July 1, 2016 - December 31, 2016	$	1,901
2017	3,900
2018	3,894
2019	3,746
2020	2,432
2021	930
Thereafter	45
Total minimum lease payments	16,848
Less: imputed interest	(2,285		)
Present value of net minimum lease payments	$	14,563

Newcastle’s golf credit facilities contain various customary loan covenants, including certain coverage ratios. Newcastle was in compliance with all of these covenants as of June 30, 2016.