Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

v2.4.0.6
DEBT OBLIGATIONS
 3 Months Ended
Mar. 31, 2013
DebtObligationsAbstract  
DEBT OBLIGATIONS
8.   DEBT OBLIGATIONS
 
The following table presents certain information regarding Newcastle’s debt obligations and related hedges at March 31, 2013:
 
                                               
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
   $ 71,604     $ 71,537  
Mar 2039
     1.93 %       5.08 %     1.2     $ 60,804     $ 153,780     $ 141,221     $ 140,589       1.6     $ 42,747     $ 60,804  
CDO VI (E)
  
Apr 2005
     91,688       91,689  
Apr 2040
     0.86 %       5.35 %     4.5       88,554       177,513       91,701       119,428       2.8       48,073       88,554  
CDO VIII
  
Nov 2006
     478,289       477,447  
Nov 2052
     0.80 %       2.36 %     1.7       470,689       672,349       489,664       522,209       2.3       349,172       154,100  
CDO IX
  
May 2007
     373,412       374,887  
May 2052
     0.60 %       0.60 %     1.4       373,412       613,694       491,396       503,618       2.6       299,787       —  
          1,014,993       1,015,560                   2.17 %     1.8       993,459       1,617,336       1,213,982       1,285,844       2.4       739,779       303,458  
Other Bonds and Notes Payable
                                                                                                        
MH Loans Portfolio I (F)
  
Apr 2010
     65,995       62,276  
Jul 2035
     6.31 %       6.31 %     4.1       —       114,355       96,752       96,752       6.3       851       —  
MH Loans Portfolio II
  
May 2011
     112,046       111,447  
Dec 2033
     4.47 %       4.47 %     3.9       —       146,865       144,274       144,274       5.5       24,374       —  
          178,041       173,723                   5.13 %     4.0       —       261,220       241,026       241,026       5.9       25,225       —  
Repurchase Agreements (G)
                                                                                                        
Non-Agency RMBS (H)
  
Various
     158,029       158,029  
 Apr 2013
  
LIBOR+2.00%
     2.20 %     0.1       158,029       330,871       208,446       233,813       6.8       330,871       —  
FNMA/FHLMC securities (I)
  
Various
     1,315,557       1,315,557  
 Apr 2013
     0.44 %       0.44 %     0.1       1,315,557       1,309,855       1,396,401       1,400,430       4.1       1,309,855       —  
          1,473,586       1,473,586                   0.63 %     0.1       1,473,586       1,640,726       1,604,847       1,634,243       4.7       1,640,726       —  
Mortgage Notes Payable
                                                                                                        
BPM Senior Living Facilities
  
Jul 2012
     88,400       88,400  
Aug 2019
     3.44 %       3.44 %     6.0       23,400       N/A       135,251       135,251       N/A       —       23,400  
Utah Senior Living Facilities
  
Nov 2012
     16,000       16,000  
Oct 2017
  
LIBOR+3.75%
(J)
 
     4.75 %     4.5       16,000       N/A       21,706       21,706       N/A       —       —  
Courtyards Senior living facilities
  
Dec 2012
     16,125       16,125  
Oct 2017
  
LIBOR+3.75%
(J)
 
     4.75 %     4.5       16,125       N/A       21,036       21,036       N/A       —       —  
          120,525       120,525                   3.79 %     5.6       55,525       N/A       177,993       177,993       N/A       —       23,400  
Corporate
                                                                                                        
Junior subordinated notes payable
  
Mar 2006
     51,004       51,242  
Apr 2035
     7.574 % (L)       7.40 %     22.1       —       —       —       —       —       —       —  
          51,004       51,242                   7.40 %     22.1       —       —       —       —       —       —       —  
Subtotal debt obligations
         2,838,149       2,834,636                   1.71 %     1.6     $ 2,522,570     $ 3,519,282     $ 3,237,848     $ 3,339,106       3.7     $ 2,405,730     $ 326,858  
Financing on subprime mortgage loans subject to call option
  
(K)
     406,217       406,115                                                                                      
Total debt obligations
       $ 3,244,366     $ 3,240,751                                                                                      
 
(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)
Excluding (i) restricted cash held in CDOs to be used for principal and interest payments of CDO debt, and (ii) operating cash in senior living entities.
(D)
Including a $23.4 million notional amount of interest rate cap agreement for the mortgage notes payable and a $60.8 million and $88.6 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 its applicable over collateralization tests as of March 31, 2013. 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 $20.5 million face amount of other bonds payable relating to MH loans Portfolio I sold to certain Newcastle CDOs, which were eliminated in consolidation.
(G)
These repurchase agreements had $0.1 million of associated accrued interest payable at March 31, 2013. $1.5 billion face amount of these repurchase agreements were renewed subsequent to March 31, 2013.
(H)
The counterparty of these repurchase agreements is Credit Suisse.
(I)
The counterparties on these repurchase agreements are Bank of America ($291.4 million), Barclays ($267.2 million), Citi ($118.8 million), Goldman Sachs ($343.8 million), Morgan Stanley ($56.2 million) and Nomura ($238.2 million). Interest rates on these repurchase agreements are fixed, but will be reset on a short-term basis.
(J)
These financings have a LIBOR floor of 1%.
(K)
Issued in April 2006 and July 2007.  See Note 4 regarding the securitizations of Subprime Portfolios I and II.
(L)
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, 2013, CDOs IV and VI were not in compliance with their over collateralization tests.
 
In the first three months of 2013, Newcastle repurchased $10.9 million face amount of CDO bonds payable for $9.7 million. As a result, Newcastle extinguished $10.9 million face amount of CDO bonds payable and recorded a gain on extinguishment of debt of $1.2 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, 2013.