Debt | Debt Repurchase Agreement The Company has entered into two repurchase facilities whereby the Company, through two wholly-owned Delaware trusts (the “Trusts”), acquires pools of mortgage loans which are then sold by the Trusts, as “Seller” to two separate counterparties, the “buyer” or “buyers.” One facility has a ceiling of $250.0 million and the other $200.0 million at any one time. Upon the time of the initial sale to the buyer, the Trust, with a simultaneous agreement, also agrees to repurchase the pools of mortgage loans from the buyer. Mortgage loans sold under these facilities carry interest calculated based on a spread to one-month LIBOR , which are fixed for the term of the borrowing. The purchase price that the Trust realizes upon the initial sale of the mortgage loans to the buyer can vary between 70% and 85% of the asset’s acquisition price, depending upon the facility being utilized and/or the quality of the underlying collateral. The obligations of a Trust to repurchase these mortgage loans at a future date are guaranteed by the Operating Partnership. The difference between the market value of the asset and the amount of the repurchase agreement is generally the amount of equity the Company has in the position and is intended to provide the buyer with some protection against fluctuations in the value of the collateral, and/or a failure by the Company to repurchase the asset and repay the borrowing at maturity. The Company has effective control over the assets subject to these transactions; therefore, the Company’s repurchase transactions are accounted for as financing arrangements. The Servicer services these mortgage loans pursuant to the terms of a Servicing Agreement by and among the Servicer and each Buyer which Servicing Agreement has the same fees and expenses terms as the Company’s Servicing Agreement described under Note 9 — Related party transactions. The Operating Partnership, as guarantor, will provide to the buyers a limited guaranty of certain losses incurred by the buyers in connection with certain events and/or the Seller’s obligations under the mortgage loan purchase agreement, following the breach of certain covenants by the Seller, the occurrence of certain bad acts by the Seller, the occurrence of certain insolvency events of the Seller or other events specified in the Guaranty. As security for its obligations under the Guaranty, the guarantor will pledge the Trust Certificate representing the Guarantor’s 100% beneficial interest in the Seller. Additionally, the Company has sold subordinate securities from its mortgage securitizations in repurchase transactions. The following table sets forth the details of the Company’s repurchase transactions and facilities ($ in thousands): March 31, 2018 Maturity Date Origination date Maximum Amount Amount of Percentage of Collateral Coverage Interest Rate April 30, 2018 October 31, 2017 $ 10,601 $ 10,601 $ 15,145 143 % 3.66 % May 8, 2018 November 8, 2017 15,227 15,227 21,754 143 % 3.69 % June 7, 2018 February 8, 2018 58,586 58,586 77,065 132 % 3.69 % November 21, 2018 November 22, 2017 200,000 1,222 7,812 639 % 5.09 % July 12, 2019 July 15, 2016 250,000 187,563 244,791 131 % 4.36 % Totals $ 534,414 $ 273,199 $ 366,567 134 % 4.16 % December 31, 2017 Maturity Date Origination date Maximum Amount Amount of Percentage of Collateral Coverage Interest Rate April 30, 2018 October 31, 2017 $ 10,601 $ 10,601 $ 15,145 143 % 3.66 % May 8, 2018 November 8, 2017 15,227 15,227 21,754 143 % 3.69 % June 7, 2018 December 7, 2017 66,678 66,678 88,904 133 % 3.59 % November 21, 2018 November 22, 2017 200,000 3,775 8,215 218 % 4.79 % July 12, 2019 July 15, 2016 250,000 180,104 234,724 130 % 4.03 % Totals $ 542,506 $ 276,385 $ 368,742 133 % 3.91 % The guaranty establishes a master netting arrangement; however, the arrangement does not meet the criteria for offsetting within the Company’s consolidated Balance Sheets. A master netting arrangement derives from contractual agreements entered into by two parties to multiple contracts that provides for the net settlement of all contracts covered by the agreements in the event of default under any one contract. The amount outstanding on the Company’s repurchase facilities and the carrying value of the Company’s loans pledged as collateral are presented as gross amounts in the Company’s consolidated balance sheets at March 31, 2018 and December 31, 2017 in the table below ($ in thousands): Gross amounts not offset in balance sheet March 31, 2018 December 31, 2017 Gross amount of recognized liabilities $ 273,199 $ 276,385 Gross amount pledged as collateral 366,567 368,742 Net amount $ 93,368 $ 92,357 Secured Borrowings From inception (January 30, 2014) to March 31, 2018 , the Company has completed 12 secured borrowings pursuant to Rule 144A under the Securities Act, seven of which were outstanding at March 31, 2018 . The secured borrowings are structured as debt financings and not sales through a real estate investment conduit (“REMIC”), and the loans included in the secured borrowings remain on the Company’s consolidated balance sheet as the Company is the primary beneficiary of the securitization trusts, which are VIEs. The securitization VIEs are structured as pass through entities that receive principal and interest on the underlying mortgages and distribute those payments to the holders of the notes. The Company’s exposure to the obligations of the VIEs is generally limited to its investments in the entities. The notes that are issued by the securitization trusts are secured solely by the mortgages held by the applicable trusts and not by any of the Company’s other assets. The mortgage loans of the applicable trusts are the only source of repayment and interest on the notes issued by such trusts. The Company does not guarantee any of the obligations of the trusts under the terms of the agreement governing the notes or otherwise. The Company’s secured borrowings are structured with Class A notes, subordinate notes, and trust certificates, which have rights to the residual interests in the mortgages once the notes are repaid. With the exception of the Company’s 2017-D securitization, from which the Company sold a 50% interest in the trust certificate to a third party, the Company has retained the subordinate notes and the trust certificates from the seven secured borrowings outstanding at March 31, 2018 . The Class A notes for the 2017-D securitization are the only debt securities issued in this securitization, with the Class B certificates representing the residual interests in the mortgages subsequent to repayment of the Class A debt. The 2017-D class A notes carry no step-up in the interest rate. The Company has retained 50% of both the Class A notes and Class B certificates from 2017-D. The Company's 2017-B securitization carries no provision for a step-up in interest rate on any of the Class A, Class B or Class M notes. For all of the Company's securitizations the Class A notes are senior, sequential pay, fixed rate notes, and with the exception of 2017-D as noted above, the Class B notes notes are subordinate, sequential pay, fixed rate notes. The Class M notes issued under 2017-B are mezzanine, sequential pay, fixed rate notes. For all of the Company's securitizations, except 2017-B and 2017-D which contain no interest rate step-up, if the Class A notes have not been redeemed by the payment date or otherwise paid in full 36 months after issue, or in the case of 2017-C, 48 months after issue, an amount equal to the aggregate interest payment amount that accrued and would otherwise be paid to the subordinate notes will be paid as principal to the Class A notes on that date and each subsequent payment date until the Class A notes are paid in full. After the Class A notes are paid in full, the subordinate notes will resume receiving their respective interest payment amounts and any interest that accrued but was not paid while the Class A notes were outstanding. As the holder of the trust certificates, the Company is entitled to receive any remaining amounts in the trusts after the Class A notes and subordinate notes have been paid in full. The following table sets forth the original terms of all securitization notes outstanding at March 31, 2018 at their respective cutoff dates: Issuing Trust/Issue Date Security Original Principal Interest Rate Ajax Mortgage Loan Trust 2016-A/ April 2016 Class A notes due 2064 $101.4 million 4.25 % Class B-1 notes due 2064(1,4) $7.9 million 5.25 % Class B-2 notes due 2064(1,4) $7.9 million 5.25 % Trust certificates(2) $41.3 million — % Deferred issuance costs $(2.7) million — % Ajax Mortgage Loan Trust 2016-B/ August 2016 Class A notes due 2065 $84.4 million 4.00 % Class B-1 notes due 2065(1,4) $6.6 million 5.25 % Class B-2 notes due 2065(1,4) $6.6 million 5.25 % Trust certificates(2) $34.1 million — % Deferred issuance costs $(1.6) million — % Ajax Mortgage Loan Trust 2016-C/ October 2016 Class A notes due 2057 $102.6 million 4.00 % Class B-1 notes due 2057(1,4) $7.9 million 5.25 % Class B-2 notes due 2057(1,4) $7.9 million 5.25 % Trust certificates(2) $39.4 million — % Deferred issuance costs $(1.6) million — % Ajax Mortgage Loan Trust 2017-A/ May 2017 Class A notes due 2057 $140.7 million 3.47 % Class B-1 notes due 2057(1) $15.1 million 5.25 % Class B-2 notes due 2057(1) $10.8 million 5.25 % Trust certificates(2) $49.8 million — % Deferred issuance costs $(2.0) million — % Ajax Mortgage Loan Trust 2017-B/ December 2017 Class A notes due 2056 $115.8 million 3.16 % Class M-1 notes due 2056(3) $9.7 million 3.50 % Class M-2 notes due 2056(3) $9.5 million 3.50 % Class B-1 notes due 2056(1) $9.0 million 3.75 % Class B-2 notes due 2056(1) $7.5 million 3.75 % Trust certificates(2) $14.3 million — % Deferred issuance costs $(1.8) million — % Ajax Mortgage Loan Trust 2017-C/ November 2017 Class A notes due 2060 $130.2 million 3.75 % Class B-1 notes due 2060(1) $13.0 million 5.25 % Trust certificates(2) $42.8 million — % Deferred issuance costs $(1.7) million — % Ajax Mortgage Loan Trust 2017-D/ December 2017 Class A notes due 2057(5) $177.8 million 3.75 % Class B certificates (5) $44.5 million — % Deferred issuance costs $(1.1) million — % (1) The Class B notes are subordinate, sequential pay, fixed rate notes with Class B-2 notes subordinate to the Class B-1 notes. The Company has retained the Class B notes. (2) The trust certificates issued by the trusts and the beneficial ownership of the trusts are retained by Great Ajax Funding LLC as the depositor. As the holder of the trust certificates, we are entitled to receive any remaining amounts in the trusts after the Class A notes, Class M notes, where present, and Class B notes have been paid in full. (3) The Class M notes are subordinate, sequential pay, fixed rate notes with Class M-2 notes subordinate to the Class M-1 notes. We have retained the Class M notes. (4) These securities are encumbered under a repurchase agreement. (5) Ajax Mortgage Loan Trust ("AJAXM") 2017-D is a joint venture in which a third party owns 50% of the Class A notes and 50% of the Class B certificates. We are required to consolidate 2017-D under GAAP and are reflecting 100% of the mortgage loans, in Mortgage loans, net. 50% of the Class A notes, which are held by the third party, are included in Secured borrowings, net. The 50% portion of the Class A notes retained by the Company have been encumbered under a repurchase agreement. 50% of the Class B certificates are recognized as Non-controlling interest. Servicing for the mortgage loans in the Company’s securitizations is provided by the Servicer at a servicing fee rate of an annual servicing fee rate of 0.65% of outstanding UPB for RPLs at acquisition and 1.25% of outstanding UPB for loans that are non-performing at acquisition, and is paid monthly. For certain of the Company’s joint ventures, the Servicing fee rate for RPLs is reduced to an annual servicing fee rate of 0.42% annually on a loan-by-loan basis for any loan that makes seven consecutive payments. The determination of RPL or NPL status is based on the status of the loan at acquisition and does not change regardless of the loan’s subsequent performance. The following table sets forth the status of the notes held by others at March 31, 2018 and December 31, 2017 , and the securitization cutoff date: Balances at March 31, 2018 Balances at December 31, 2017 Original balances at Class of Notes Carrying value of mortgages Bond principal balance Percentage of collateral coverage Carrying value of mortgages Bond principal balance Percentage of collateral coverage Mortgage UPB Bond principal balance 2016-A 109,513 79,698 137 % 110,585 82,556 134 % 158,485 101,431 2016-B 92,656 69,977 132 % 93,772 71,361 131 % 131,746 (1) 84,430 2016-C 112,814 83,626 135 % 116,357 88,400 132 % 157,808 102,575 2017-A 169,048 123,087 137 % 170,805 126,507 135 % 216,413 140,669 2017-B 141,006 112,232 126 % 143,799 115,846 124 % 165,850 115,846 2017-C 154,612 125,378 123 % 157,015 129,191 122 % 185,942 130,159 2017-D 174,633 76,335 (3) 229 % 203,870 88,903 (3) 229 % 203,870 (2) 88,903 $ 954,282 $ 670,333 (4) 142 % $ 996,203 $ 702,764 (4) 142 % $ 1,584,577 $ 968,812 (1) Includes $1.9 million of cash collateral. (2) Includes $26.7 million of cash collateral intended for use in the acquisition of additional mortgage loans. (3) The gross amount of senior bonds at March 31, 2018 and December 31, 2017 were $152.7 million and $177.8 million however, only $76.3 million and $88.9 million are reflected in Secured borrowings, net as the remainder is owned by the Company, respectively. (4) This represents the gross amount of Secured borrowings and excludes the impact of deferred issuance costs of $7.8 million and $8.8 million as of March 31, 2018 and December 31, 2017 , respectively. The Company’s obligations under its secured borrowings are not fixed, and the payments on these borrowings are predicated upon cash flows received on the underlying mortgage loans. Convertible Senior Notes On April 25, 2017, the Company completed the issuance and sale of $87.5 million aggregate principal amount of its 7.25% convertible senior notes due 2024 in an underwritten public offering. The net proceeds to the Company from the sale of the notes, after deducting the underwriter's discounts, commissions and offering expenses, were approximately $84.9 million . The carrying amount of the equity component of the transaction was $2.5 million representing the fair value to the notes' owners of the right to convert the notes into shares of the Company's common stock. The notes were issued at a 17.5% conversion premium and bear interest at a rate of 7.25% per year, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, beginning on July 15, 2017. On August 18, 2017, the Company completed the public offer and sale of an additional $20.5 million in aggregate principal amount of its 7.25% Convertible senior notes due 2024 , which combined with the $87.5 million aggregate principal amount from its April offering, form a single series of notes. The net proceeds to the Company from the August 18, 2017 sale of the notes, after deducting the underwriter's discounts, commissions and offering expenses, were approximately $20.5 million . The carrying amount of the equity component of the August transaction was $0.2 million representing the fair value to the notes' owners of the right to convert the notes into shares of the Company's common stock. The notes in the August transaction were issued at a 6.0% conversion premium and bear interest at a rate of 7.25% per year, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, beginning on July 15, 2017. The notes will mature on April 30, 2024 , unless earlier repurchased, redeemed or converted. Holders may convert their notes at their option prior to April 30, 2023 only under certain circumstances. In addition, the notes will be convertible irrespective of those circumstances from, and including, April 30, 2023 to, and including, the business day immediately preceding the maturity date. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company's election. The conversion rate currently equals 1.6315 shares of the Company's common stock per $25.00 principal amount of notes which is equivalent to a conversion price of approximately $15.32 per share of common stock. The conversion rate, and thus the conversion price, may be subject to adjustment under certain circumstances. As of March 31, 2018 , the amount by which the if-converted value falls short of the principal value for the entire series is $12.5 million . The Company may not redeem the notes prior to April 30, 2022 , and may redeem for cash all or any portion of the notes, at its option, on or after April 30, 2022 if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No "sinking fund" will be provided for the notes. At March 31, 2018 , the notes' UPB was $108.0 million , and discount and deferred expenses were $5.2 million . Interest expense of $2.2 million was recognized during the quarter ended March 31, 2018 which includes $0.2 million of amortization of discount and deferred expenses. The discount will be amortized through April 30, 2023 , the date at which the notes can be converted. The effective interest rate of the notes at March 31, 2018 was 8.65% . |