Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

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DEBT OBLIGATIONS
 3 Months Ended
Mar. 31, 2012
Debt Obligations  
DEBT OBLIGATIONS

5. DEBT OBLIGATIONS

 

The following table presents certain information regarding Newcastle’s debt obligations and related hedges at March 31, 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   $ 104,019     $ 103,853   Mar 2039   1.77%     4.90%       2.0     $ 92,666     $ 204,263     $ 193,371     $ 180,966       2.3     $ 62,037     $ 92,666  
CDO VI (E) Apr 2005     91,250       91,250   Apr 2040   0.89%     5.35%       3.1       88,315       216,854       126,376       145,348       3.3       56,748       88,315  
CDO VIII Nov 2006     572,049       570,767   Nov 2052   0.80%     2.10%       2.7       564,449       728,926       535,191       552,075       3.2       440,148       155,465  
CDO IX May 2007     480,125       481,813   May 2052   0.57%     0.57%       2.6       480,125       692,742       564,634       568,214       3.2       373,819       —  
CDO X Jul 2007     1,120,000       1,117,854   Jul 2052   0.58%     3.52%       4.5       1,120,000       1,260,004       954,666       997,130       4.7       220,931       842,485  
        2,367,443       2,365,537             2.71%       3.5       2,345,555       3,102,789       2,374,238       2,443,733       3.7       1,153,683       1,178,931  
Other Bonds and Notes Payable                                                                                              
MH loans Portfolio I (F) Apr 2010     66,103       65,345   Jul 2035   5.43%     5.43%       3.0       —       130,488       108,839       108,839       7.4       1,170       —  
MH loans Portfolio II (F) May 2011     120,412       119,340   Dec 2033   3.87%     3.87%       3.4       —       171,858       168,837       168,837       5.8       29,493       —  
Residential Mortgage Loans (G) Aug 2006     5,406       5,406   Dec 2034   LIBOR+ 0.90%     1.14%       6.7       5,406       55,640       40,229       40,229       6.8       55,640       —  
        191,921       190,091             4.33%       3.4       5,406       357,986       317,905       317,905       6.6       86,303       —  
Repurchase Agreements                                                                                              
Real estate securities, loans and properties (H) Dec 2011     7,525       7,525    Jun 2012   LIBOR+ 1.75%     1.99%       0.3       7,525       —       —       —       —       —       —  
FNMA/FHLMC securities (I) Various     226,199       226,199    May 2012   0.38%     0.38%       0.2       226,199       226,808       240,624       240,624       4.6       226,808       —  
        233,724       233,724             0.43%       0.2       233,724       226,808       240,624       240,624       4.6       226,808       —  
Corporate                                                                                              
Junior subordinated notes payable Mar 2006     51,004       51,247   Apr 2035   7.57% (K)     7.41%       23.1       —       —       —       —       —       —       —  
        51,004       51,247             7.41%       23.1       —       —       —       —       —       —       —  
Subtotal debt obligations       2,844,092       2,840,599             2.71%       3.6     $ 2,584,685     $ 3,687,583     $ 2,932,767     $ 3,002,262       4.1     $ 1,466,794     $ 1,178,931  
Financing on subprime mortgage loans subject to call option (J)     406,217       404,979                                                                                
Total debt obligations     $ 3,250,309     $ 3,245,578                                                                                

  

(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 $92.7 million and $88.3 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 March 31, 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 $48.7 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 $27.9 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 March 31, 2012, CDOs IV and VI were not in compliance with their applicable over collateralization tests.

 

In the first three months of 2012, Newcastle repurchased $30.0 million face amount of CDO bonds payable for $9.2 million. As a result, Newcastle extinguished $30.0 million face amount of CDO bonds payable and recorded a gain on extinguishment of debt of $20.7 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 March 31, 2012.