| DEBT OBLIGATIONS |
10. DEBT
OBLIGATIONS
The following table presents certain information regarding Newcastle’s debt obligations and related hedges at March 31, 2015:
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March 31, 2015
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Collateral
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Aggregate
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Debt Obligation/Collateral
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Month Issued
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Outstanding
Face
Amount
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Carrying
Value
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Final Stated Maturity
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Weighted
Average
Coupon (A)
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Weighted Average
Funding
Cost (B)
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Weighted Average Life(Years)
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Face Amount of
Floating Rate Debt
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Outstanding Face Amount (C)
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Amortized
Cost Basis (C)
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Carrying
Value (C)
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Weighted Average Life
(Years)
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Floating Rate Face Amount (C)
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Notional
Amount of Current Hedges
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CDO Bonds Payable
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CDO VI (D)
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Apr 2005
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$
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92,576
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$
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92,576
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Apr 2040
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0.87%
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0.87
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%
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4.8
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$
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89,005
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$
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96,288
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$
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35,093
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$
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67,432
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4.8
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$
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28,869
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$
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—
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CDO VIII
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Nov 2006
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71,813
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71,727
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Nov 2052
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2.13%
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6.56
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%
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1.7
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64,213
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192,392
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134,997
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144,945
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1.8
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52,220
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57,903
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CDO IX
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May 2007
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51,371
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52,161
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May 2052
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0.77%
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0.21
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%
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1.5
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51,371
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273,680
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217,877
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228,059
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2.3
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35,946
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—
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215,760
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216,464
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2.59
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%
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3.0
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204,589
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562,360
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387,967
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440,436
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2.5
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117,035
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57,903
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Other Bonds and Notes Payable
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NCT 2013-VI IMM-1 (E)
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Nov 2013
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28,563
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25,317
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Apr 2040
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LIBOR+0.25%
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6.87
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%
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2.2
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28,563
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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28,563
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25,317
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6.87
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%
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2.2
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28,563
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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Repurchase Agreements (F)
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CDO securities (E)
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Mar 2015
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35,683
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35,683
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Apr 2015
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LIBOR+1.65%
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1.83
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%
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0.1
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35,683
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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FNMA/FHLMC Securities
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Mar 2015
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386,120
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386,120
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Apr 2015
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0.37%
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0.37
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%
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0.1
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—
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389,056
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407,494
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409,037
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7.1
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—
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—
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421,803
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421,803
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0.49
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%
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0.1
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35,683
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389,056
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407,494
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409,037
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7.1
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—
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—
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Golf Credit Facilities (G)
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First Lien Loan
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Dec 2013
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51,423
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51,308
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Dec 2017
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LIBOR+4.00%
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(H)
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4.58
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%
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2.8
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51,423
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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Second Lien Loan
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Dec 2013
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105,575
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105,339
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Dec 2017
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5.50%
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5.58
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%
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2.8
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—
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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Vineyard II
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Dec 1993
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200
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200
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Dec 2043
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2.11%
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2.11
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%
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28.7
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200
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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Capital Leases (Equipment)
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May 2014 - Mar 2015
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5,959
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5,959
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Sep 2020
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4.80% to 7.15%
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6.77
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%
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5.5
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—
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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163,157
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162,806
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5.30
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%
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2.9
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51,623
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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Corporate
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Junior subordinated notes payable
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Mar 2006
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51,004
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51,230
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Apr 2035
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7.57%
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(I)
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7.36
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%
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20.1
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—
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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51,004
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51,230
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7.36
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%
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20.1
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—
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N/A
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N/A
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N/A
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N/A
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N/A
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—
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Subtotal debt obligations
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880,287
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877,620
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2.49
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%
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2.6
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$
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320,458
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$
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951,416
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$
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795,461
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$
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849,473
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4.4
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$
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117,035
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$
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57,903
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Financing on subprime mortgage loans subject to call option (J)
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406,217
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406,217
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Total debt obligations
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$
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1,286,504
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$
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1,283,837
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(A)
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Weighted average, including floating and fixed rate classes.
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(B)
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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 three months ended March 31, 2015.
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(C)
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Excluding restricted cash held in CDOs to be used for principal and interest payments of CDO debt.
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(D)
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This CDO was not in compliance with its applicable over collateralization tests as of March 31, 2015. 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.
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(E)
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Represents financings of previously repurchased Newcastle CDO bonds for which the collateral is eliminated in consolidation.
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(F)
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These repurchase agreements had $0.1 million of accrued interest payable at March 31, 2015. Approximately $386.3 million face amount of these repurchase agreements were renewed subsequent to March 31, 2015. The counterparties on these repurchase agreements are Bank of America ($35.7 million) and Nomura ($386.1 million). Newcastle has margin exposures on a total of $421.8 million repurchase agreement related to the financing of certain Newcastle CDO VIII, CDO IX notes and 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.
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(G)
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The golf credit facilities are collateralized by all of the assets of the Golf business. The carrying value of the golf credit facilities are reported net of deferred financing costs of $0.4 million as of March 31, 2015.
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(H)
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Interest rate based on 3 month LIBOR with a LIBOR floor of 0.5%.
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(I)
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LIBOR +2.25% after April 2016.
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(J)
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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.
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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 cashflows 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 of March 31, 2015, CDO VI was not in compliance with its over collateralization tests and as a result, Newcastle’s cashflows and liquidity were negatively impacted due to the failure. Based upon Newcastle's current calculations, Newcastle expects this CDO to remain out of compliance for the foreseeable future.
In March 2015, Newcastle sold Agency RMBS with a face amount of approximately $380.4 million at an average price of 104.72% for a gain of $5.9 million and repaid associated repurchase agreements. Also in March 2015, Newcastle financed $389.1 million face amount of purchased FNMA/FHLMC securities with repurchase agreements with carrying value of $386.1 million as of March 31, 2015. These repurchase agreements bear interest at 0.37%, mature in April 2015 and are subject to customary margin provisions.
As of March 31, 2015, Newcastle has unused borrowing capacity of $3.1 million on the golf credit facilities.
The Golf business leases certain golf carts and other equipment under capital leases. The agreements typically provide for minimum rentals plus executory costs. Lease terms range from 60 to 66 months with a purchase price option at the termination of the lease.
The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of March 31, 2015 are as follows:
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April 1, 2015 - December 31, 2015
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$
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1,005
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2016
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1,340
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2017
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1,340
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2018
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1,340
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2019
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1,437
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2020 and thereafter
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671
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Total minimum lease payments
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7,133
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Less: imputed interest
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1,174
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Present value of net minimum lease payments
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$
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5,959
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Newcastle’s non-CDO financings and golf credit facilities contain various customary loan covenants. Newcastle was in compliance with all of these covenants as of March 31, 2015.
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