Debt Obligations | Note 10 — Debt Obligations Credit Facilities and Repurchase Agreements Borrowings under our credit facilities and repurchase agreements are as follows ($ in thousands): March 31, 2019 December 31, 2018 Debt Collateral Wtd. Debt Collateral Wtd. Current Extended Carrying Carrying Avg. Note Carrying Carrying Avg. Note Structured Business Maturity Maturity Note Rate Value (1) Value Rate Value (1) Value Rate $400 million repurchase facility Mar. 2020 Mar. 2021 L+ 1.75 % to 3.50 % $ 366,582 $ 526,668 4.68 % $ 334,696 $ 467,680 4.75 % $150 million repurchase facility Mar. 2020 Mar. 2023 L+ 1.95 % 31,731 40,880 4.51 % — — — $100 million repurchase facility June 2019 June 2020 L+ 1.75 % to 2.00 % 94,686 132,517 4.33 % 70,837 98,597 4.31 % $75 million credit facility May 2019 N/A L+ 1.75 % to 2.50 % 13,896 21,789 4.30 % 10,237 16,889 4.31 % $75 million credit facility June 2019 N/A L+ 1.90 % 8,372 10,550 4.46 % — — — $50 million credit facility April 2020 April 2022 L+ 2.00 % 14,160 17,700 4.56 % 14,159 17,700 4.57 % $50 million credit facility Sept. 2019 Sept. 2021 L+ 2.50 % to 3.25 % 11,965 15,000 5.06 % — — — $35.9 million credit facility May 2020 Nov. 2020 L+ 2.30 % 30,761 44,248 4.86 % 30,512 44,100 4.87 % $25.5 million credit facility Oct. 2019 N/A L+ 2.50 % 22,090 34,000 5.06 % 18,552 34,000 5.07 % $25 million working capital facility June 2019 N/A L+ 2.25 % 25,000 — 4.81 % — — — $23.2 million credit facility Feb. 2020 Feb. 2021 L+ 2.30 % 23,105 30,900 4.86 % 23,175 30,900 4.87 % $20 million credit facility Mar. 2020 Mar. 2021 L+ 2.50 % 19,945 41,650 5.06 % 19,912 41,650 5.07 % $17.4 million credit facility June 2020 June 2021 L+ 2.40 % 13,023 16,595 4.96 % 12,462 15,844 4.97 % $8 million credit facility Aug. 2021 N/A L+ 2.50 % 7,951 10,000 5.06 % 7,946 10,000 5.07 % $3.3 million master security agreement Oct. 2020 N/A 2.96 % to 3.42 % 998 — 3.19 % 1,168 — 3.19 % $2.2 million master security agreement Mar. 2021 N/A 4.60 % 1,500 — 4.66 % 1,678 — 4.66 % Repurchase facilities - securities (2) N/A N/A L+ 1.75 % to 3.15 % 124,013 — 4.60 % 118,112 — 5.07 % Structured Business total 809,778 942,497 4.66 % 663,446 777,360 4.78 % Agency Business $750 million ASAP agreement (3) N/A N/A L+ 1.05 % 44,093 44,093 3.54 % 104,619 104,619 3.55 % $500 million repurchase facility (4) Aug. 2019 N/A L+ 1.275 % 17,455 17,462 3.77 % 130,906 130,917 3.78 % $150 million credit facility Jan. 2020 N/A L+ 1.20 % 66,743 66,899 3.69 % 113,666 113,685 3.80 % $150 million credit facility July 2019 N/A L+ 1.30 % 83,837 83,880 3.79 % 96,339 96,419 3.80 % $100 million credit facility (5) June 2019 N/A L+ 1.25 % 10,589 10,589 3.74 % 26,651 26,651 3.75 % Agency Business total 222,717 222,923 3.71 % 472,181 472,291 3.74 % Consolidated total $ 1,032,495 $ 1,165,420 4.45 % $ 1,135,627 $ 1,249,651 4.35 % (1) The debt carrying value for the Structured Business at March 31, 2019 and December 31, 2018 was net of unamortized deferred finance costs of $2.2 million and $2.4 million, respectively. The debt carrying value for the Agency Business at March 31, 2019 and December 31, 2018 was net of unamortized deferred finance costs of $0.2 million and $0.1 million, respectively. (2) As of March 31, 2019 and December 31, 2018, this facility was collateralized by CLO bonds retained by us with a principal balance for both periods of $114.2 million, B Piece bonds with a carrying value of $76.0 million and $76.4 million, respectively , and SFR bonds with a carrying value of $10.0 million at March 31, 2019. (3) The note rate under this agreement is subject to a LIBOR Floor of 35 basis points. (4) This facility includes an accordion feature to increase the committed amount to $750.0 million, which is available through the maturity date. (5) The committed amount under the facility was temporarily increased $150.0 million to $250.0 million, which expired in January 2019. Structured Business At March 31, 2019 and December 31, 2018, the weighted average interest rate for the credit facilities and repurchase agreements of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 4.95% and 5.07%, respectively. The leverage on our loan and investment portfolio financed through our credit facilities and repurchase agreements, excluding the securities repurchase facilities, working capital facility and the master security agreements used to finance leasehold and capital expenditure improvements at our corporate office, was 70% at both March 31, 2019 and December 31, 2018. In March 2019, we amended our $300.0 million repurchase agreement permanently increasing the committed amount by $100.0 million to $400.0 million. In March 2019, we entered into a $150.0 million repurchase agreement that bears interest at a rate of 195 basis points over LIBOR and matures in March 2020, with three one-year extension options, which is used to finance loans. In April 2019, we amended our $50.0 million credit facility extending the maturity date to April 2020, with two one-year extensions, subject to certain conditions. Agency Business In January 2019, we amended our $150.0 million credit facility reducing the interest rate 10 basis points to 120 basis points over LIBOR and extending the maturity to January 2020. Collateralized Loan Obligations (“CLOs”) We account for CLO transactions on our consolidated balance sheet as financing facilities. Our CLOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings, and are non-recourse to us. Borrowings and the corresponding collateral under our CLOs are as follows ($ in thousands): Debt Collateral (3) Loans Cash Face Carrying Wtd. Avg. Carrying Restricted March 31, 2019 Value Value (1) Rate (2) UPB Value Cash (4) CLO X $ 441,000 $ 436,631 4.00 % $ 472,235 $ 470,506 $ 81,825 CLO IX 356,400 352,551 3.91 % 456,385 455,209 3,186 CLO VIII 282,874 280,161 3.86 % 324,434 323,360 40,566 CLO VII 279,000 276,822 4.55 % 304,071 303,334 53,448 CLO VI 250,250 248,805 5.04 % 265,603 264,747 54,940 Total CLOs $ 1,609,524 $ 1,594,970 4.21 % $ 1,822,728 $ 1,817,156 $ 233,965 December 31, 2018 CLO X $ 441,000 $ 436,384 4.01 % $ 539,007 $ 536,869 $ 20,993 CLO IX 356,400 352,244 3.92 % 440,906 439,691 20,094 CLO VIII 282,874 279,857 3.87 % 354,713 353,574 10,287 CLO VII 279,000 276,527 4.56 % 325,057 324,195 30,725 CLO VI 250,250 248,536 5.05 % 279,348 278,364 41,404 Total CLOs $ 1,609,524 $ 1,593,548 4.22 % $ 1,939,031 $ 1,932,693 $ 123,503 (1) Debt carrying value is net of $14.6 million and $16.0 million of deferred financing fees at March 31, 2019 and December 31, 2018, respectively. (2) At both March 31, 2019 and December 31, 2018, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 4.73%. (3) As of March 31, 2019 and December 31, 2018, there was no collateral at risk of default or deemed to be a “credit risk” as defined by the CLO indenture. (4) Represents restricted cash held for principal repayments as well as for reinvestment in the CLOs. Does not include restricted cash related to interest payments, delayed fundings and expenses. Luxembourg Debt Fund In 2017, we formed a $100.0 million Luxembourg commercial real estate debt fund ("Debt Fund") and issued $70.0 million of floating rate notes to third-party investors which bear an initial interest rate of 4.15% over LIBOR. The notes mature in 2025 and we retained a $30.0 million equity interest in the Debt Fund. The Debt Fund is a VIE for which we are the primary beneficiary and is consolidated in our financial statements. The Debt Fund is secured by a portfolio of loan obligations and cash with a face value of $100.0 million, which includes first mortgage bridge loans, senior and subordinate participation interests in first mortgage bridge loans and participation interests in mezzanine loans. The Debt Fund allows, for a period of three years, principal proceeds from portfolio assets to be reinvested in qualifying replacement assets, subject to certain conditions. Borrowings and the corresponding collateral under our Debt Fund are as follows ($ in thousands): Debt Collateral (3) Loans Cash Face Carrying Wtd. Avg. Carrying Restricted Period Value Value (1) Rate (2) UPB Value Cash (4) March 31, 2019 $ 70,000 $ 68,304 6.74 % $ 76,681 $ 76,429 $ 23,319 December 31, 2018 $ 70,000 $ 68,183 6.75 % $ 69,186 $ 68,924 $ 30,814 (1) Debt carrying value is net of $1.7 million and $1.8 million of deferred financing fees at March 31, 2019 and December 31, 2018 , respectively. (2) At March 31, 2019 and December 31, 2018, the aggregate weighted average note rate, including certain fees and costs, was 7.54% and 7.49%, respectively. (3) At both March 31, 2019 and December 31, 2018, there was no collateral at risk of default or deemed to be a “credit risk.” (4) Represents restricted cash held for reinvestment. Excludes restricted cash related to interest payments, delayed fundings and expenses. Senior Unsecured Notes In March 2019, we issued $90.0 million aggregate principal amount of 5.75% senior unsecured notes due in April 2024 (the "5.75% Notes") in a private placement. We received proceeds of $88.2 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds to make investments and for general corporate purposes. The 5.75% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus a "make-whole" premium and accrued and unpaid interest. We have the right to redeem the 5.75% Notes on or after April 1, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in April and October starting in October 2019. At March 31, 2019, the debt carrying value of the 5.75% Notes was $88.4 million, which was net of $1.6 million of deferred financing fees. At March 31, 2019, the weighted average note rate was 6.11%, including certain fees and costs. In March 2018, we issued $100.0 million aggregate principal amount of 5.625% senior unsecured notes due in May 2023 (the "Initial Notes") in a private placement, and, in May 2018, we issued an additional $25.0 million (the "Reopened Notes" and, together with the Initial Notes, the "5.625% Notes,") which brought the aggregate outstanding principal amount to $125.0 million. The Reopened Notes are fully fungible with, and rank equally in right of payment with the Initial Notes. We received total proceeds of $122.3 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds from the Initial Notes to fully redeem our 7.375% senior unsecured notes due in 2021 (the “7.375% Notes") totaling $97.9 million and the net proceeds from the Reopened Notes to make investments and for general corporate purposes. The 5.625% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2023, at a redemption price equal to 100% of the aggregate principal amount, plus a "make-whole" premium and accrued and unpaid interest. We have the right to redeem the 5.625% Notes on or after April 1, 2023, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in May and November. At March 31, 2019 and December 31, 2018, the debt carrying value of the 5.625% Notes was $122.6 million and $122.5 million, respectively, which was net of $2.4 million and $2.5 million, respectively, of deferred financing fees. At both March 31, 2019 and December 31, 2018, the weighted average note rate was 6.08 %, including certain fees and costs. Convertible Senior Unsecured Notes In July 2018, we issued $264.5 million in aggregate principal amount of 5.25% convertible senior notes (the "5.25% Convertible Notes”) through two separate private placement offerings, which included the exercised purchaser’s total over-allotment option of $34.5 million. The 5.25% Convertible Notes pay interest semiannually in arrears and are scheduled to mature in July 2021, unless earlier converted or repurchased by the holders pursuant to their terms. The initial conversion rates of the two offerings ($115.0 million issued on July 3, 2018 and $149.5 million issued on July 20, 2018) were 86.9943 shares and 77.8331 shares of common stock per $1,000 of principal, respectively, representing a conversion price of $11.50 per share and $12.85 per share of common stock, respectively. At March 31, 2019, the conversion rates of the two offerings ($115.0 million and $149.5 million) were 88.5037 shares and 79.1835 shares of common stock per $1,000 of principal, respectively, representing a conversion price of $11.30 per share and $12.63 per share of common stock, respectively. We received proceeds totaling $256.1 million from the offerings of our 5.25% Convertible Notes, net of the underwriter’s discount and fees, which is being amortized through interest expense over the life of such notes. We used the net proceeds from the issuance primarily for the initial exchange of $127.6 million of our 5.375% convertible senior unsecured notes (the “5.375% Convertible Notes”) and $99.8 million of our 6.50% convertible senior unsecured notes (the “6.50% Convertible Notes”) for a combination of $219.8 million in cash (which includes accrued interest) and 6,820,196 shares of our common stock. The remaining net proceeds were used for general corporate purposes. At March 31, 2019, there were $1.2 million and $0.1 million aggregate principal amounts remaining of our 5.375% Convertible Notes and 6.50% Convertible Notes, respectively. The initial conversion rates of the 5.375% Convertible Notes and 6.50% Convertible Notes were 107.7122 shares and 119.3033 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $9.28 per share and $8.38 per share of common stock, respectively. At March 31, 2019, the 5.375% Convertible Notes and 6.50% Convertible Notes had conversion rates of 112.1621 shares and 127.2095 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $8.92 per share and $7.86 per share of common stock, respectively. The 5.375% Convertible Notes and 6.50% Convertible Notes pay interest semiannually in arrears and have scheduled maturity dates in November 2020 and October 2019, respectively, unless earlier converted or repurchased by the holders pursuant to their terms. Since the closing stock price of our common stock on March 31, 2019 exceeded the conversion prices of our convertible notes, the if-converted value of the convertible notes exceeded their principal amounts by $21.7 million at March 31, 2019. Our convertible senior unsecured notes are not redeemable by us prior to their maturities and are convertible by the holder into, at our election, cash, shares of our common stock or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The conversion rates are subject to adjustment upon the occurrence of certain specified events and the holders may require us to repurchase all, or any portion, of their notes for cash equal to 100% of the principal amount, plus accrued and unpaid interest, if we undergo a fundamental change specified in the agreements. We intend to settle the principal balance of our convertible debt in cash and have not assumed share settlement of the principal balance for purposes of computing EPS. At the time of issuance, there was no precedent or policy that would indicate that we would settle the principal in shares or the conversion spread in cash. Accounting guidance requires that convertible debt instruments with cash settlement features, including partial cash settlement, account for the liability component and equity component (conversion feature) of the instrument separately. The initial value of the liability component reflects the present value of the discounted cash flows using the nonconvertible debt borrowing rate at the time of the issuance. The debt discount represents the difference between the proceeds received from the issuance and the initial carrying value of the liability component, which is accreted back to the notes principal amount through interest expense over the term of the notes, which was 2.25 years and 2.49 years at March 31, 2019 and December 31, 2018, respectively, on a weighted average basis. The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes were as follows (in thousands): Liability Equity Component Component Unamortized Debt Unamortized Deferred Net Carrying Net Carrying Period UPB Discount Financing Fees Value Value March 31, 2019 $ 265,829 $ 7,328 $ 6,272 $ 252,229 $ 9,436 December 31, 2018 $ 270,057 $ 8,229 $ 7,060 $ 254,768 $ 9,436 During the three months ended March 31, 2019, we incurred interest expense on the notes totaling $5.2 million, of which $3.5 million, $0.8 million and $0.9 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively. During the three months ended March 31, 2018, we incurred total interest expense on the notes of $4.9 million, of which $3.6 million, $0.7 million and $0.6 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively. Including the amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes was 7.45% per annum at both March 31, 2019 and December 31, 2018. Junior Subordinated Notes The carrying value of borrowings under our junior subordinated notes were $140.4 million and $140.3 million at March 31, 2019 and December 31, 2018, respectively, which is net of a deferred amount of $11.9 million and $12.0 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $2.0 million and $2.1 million, respectively. These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a fixed or floating rate of interest based on LIBOR. The current weighted average note rate was 5.45% and 5.66% at March 31, 2019 and December 31, 2018, respectively. Including certain fees and costs, the weighted average note rate was 5.54% and 5.75% at March 31, 2019 and December 31, 2018, respectively. Debt Covenants Credit Facilities and Repurchase Agreements. The credit facilities and repurchase agreements contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests. We were in compliance with all financial covenants and restrictions at March 31, 2019. CLOs. Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date in order for us to receive such payments. If we fail these covenants in any of our CLOs, all cash flows from the applicable CLO would be diverted to repay principal and interest on the outstanding CLO bonds and we would not receive any residual payments until that CLO regained compliance with such tests. Our CLOs were in compliance with all such covenants as of March 31, 2019, as well as on the most recent determination dates in April 2019. In the event of a breach of the CLO covenants that could not be cured in the near-term, we would be required to fund our non-CLO expenses, including employee costs, distributions required to maintain our REIT status, debt costs, and other expenses with (i) cash on hand, (ii) income from any CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, or (v) accessing the equity or debt capital markets, if available. We have the right to cure covenant breaches which would resume normal residual payments to us by purchasing non-performing loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time. A summary of our CLO compliance tests as of the most recent determination dates in April 2019 is as follows: Cash Flow Triggers CLO VI CLO VII CLO VIII CLO IX CLO X Overcollateralization (1) Current 129.87 % 129.03 % 129.03 % 134.68 % 126.98 % Limit 128.87 % 128.03 % 128.03 % 133.68 % 125.98 % Pass / Fail Pass Pass Pass Pass Pass Interest Coverage (2) Current 169.56 % 197.42 % 246.73 % 243.99 % 196.57 % Limit 120.00 % 120.00 % 120.00 % 120.00 % 120.00 % Pass / Fail Pass Pass Pass Pass Pass (1) The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC-) as defined in each CLO vehicle. (2) The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us. Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows: Determination (1) CLO VI CLO VII CLO VIII CLO IX CLO X April 2019 129.87 % 129.03 % 129.03 % 134.68 % 126.98 % January 2019 129.87 % 129.03 % 129.03 % 134.68 % 126.98 % October 2018 129.87 % 129.03 % 129.03 % 134.68 % 126.98 % July 2018 129.87 % 129.03 % 129.03 % 134.68 % 126.98 % April 2018 129.87 % 129.03 % 129.03 % 134.69 % — (1) The table above represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods presented. The ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs. No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee. The junior subordinated indentures are also cross-defaulted with each other. |