| DEBT OBLIGATIONS |
10. DEBT
OBLIGATIONS
The following table presents certain information regarding Newcastle’s debt obligations at June 30, 2015:
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June 30, 2015
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Collateral
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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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CDO Bonds Payable
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CDO VI (D)
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Apr 2005
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$
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92,693
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$
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92,693
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Apr 2040
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0.88%
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0.88
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%
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3.5
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$
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89,064
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$
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75,088
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$
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28,886
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$
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52,140
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3.4
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$
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13,032
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92,693
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92,693
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0.88
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%
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3.5
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89,064
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75,088
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28,886
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52,140
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3.4
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13,032
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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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11,014
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9,871
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Apr 2040
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LIBOR+0.25%
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5.92
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%
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0.7
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11,014
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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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11,014
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9,871
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5.92
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%
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0.7
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11,014
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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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Repurchase Agreements (F)
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FNMA/FHLMC Securities
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Jun 2015
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375,704
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375,704
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Jul 2015
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0.41%
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0.41
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%
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0.1
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—
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380,399
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392,289
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392,289
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7.0
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—
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375,704
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375,704
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0.41
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%
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0.1
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—
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380,399
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392,289
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392,289
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7.0
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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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51,318
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Dec 2017
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LIBOR+4.00%
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(H)
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4.59
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%
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2.5
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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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Second Lien Loan
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Dec 2013
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105,575
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105,360
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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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2.5
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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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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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28.5
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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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Capital Leases (Equipment)
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May 2014 - Jun 2015
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8,128
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8,128
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Sep 2020
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3.53% to 7.83%
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6.69
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%
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4.8
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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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165,326
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165,006
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5.32
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%
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2.6
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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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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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51,228
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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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19.8
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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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51,004
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51,228
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7.36
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%
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19.8
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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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Subtotal debt obligations
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695,741
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694,502
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2.23
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%
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2.6
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$
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151,701
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$
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455,487
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$
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421,175
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$
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444,429
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6.0
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$
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13,032
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Financing on subprime mortgage loans subject to call option (J)
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404,149
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404,149
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Total debt obligations
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$
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1,099,890
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$
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1,098,651
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See notes on next page.
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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 six months ended June 30, 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 June 30, 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 June 30, 2015. The counterparty on these repurchase agreements is Nomura. Newcastle has margin exposures on a total of $375.7 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. The $375.7 million repurchase agreements were repaid in July 2015 as part of the sale of the FNMA/FHLMC securities.
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(G)
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The golf credit facilities are collateralized by assets of the Golf business. The carrying value of the golf credit facilities are reported net of deferred financing costs of $0.3 million as of June 30, 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 June 30, 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.
During the second quarter of 2015, approximately $60.3 million of Newcastle CDO VIII notes were repaid primarily due to the sale of securities and loans. See Notes 5 and 6. As a result of the repayment of the Newcastle CDO VIII notes, Newcastle also repaid $13.3 million of repurchase agreements associated with Newcastle CDO VIII.
During the second quarter of 2015, approximately $51.4 million of Newcastle CDO IX notes were repaid primarily due to the sales and paydown of securities and loans. See Notes 5 and 6. As a result of the repayment of the Newcastle CDO IX notes, Newcastle also repaid $22.3 million of repurchase agreements associated with Newcastle CDO IX.
In June 2015, Newcastle repurchased $11.5 million face amount of CDO bonds payable issued by Newcastle CDO VIII at a price of 95.50% of par for total proceeds of $11.0 million. As a result, Newcastle extinguished $11.5 million face amount of CDO bonds payable and recorded a gain on extinguishment of debt of $0.5 million.
In June 2015, Newcastle entered into a trade to sell $380.4 million face amount of agency RMBS at an average price of 103.13% for total proceeds of approximately $392.3 million and recognized a loss of approximately $5.9 million. This transaction settled in July 2015 and Newcastle repaid $375.7 million of outstanding repurchase agreement liabilities in connection with this sale.
As of June 30, 2015, Newcastle has unused borrowing capacity of $3.1 million on the golf credit facilities.
The Golf business leases certain golf carts and other equipment under capital leases. The agreements typically provide for minimum rentals plus executory costs. Lease terms range from 48 to 66 months with a purchase price option at the termination of the lease.
The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of June 30, 2015 are as follows:
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July 1, 2015 - December 31, 2015
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$
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887
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2016
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1,829
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2017
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1,829
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2018
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1,829
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2019
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1,883
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2020 and thereafter
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1,420
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Total minimum lease payments
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9,677
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Less: imputed interest
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1,549
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Present value of net minimum lease payments
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$
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8,128
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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 June 30, 2015.
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