Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

v3.2.0.727
DEBT OBLIGATIONS
6 Months Ended
Jun. 30, 2015
Debt Disclosure [Abstract]  
DEBT OBLIGATIONS
DEBT OBLIGATIONS
 
The following table presents certain information regarding New Residential’s debt obligations:

 
June 30, 2015
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateral
 
 
Debt Obligations/Collateral
 
Month Issued
 
Outstanding Face Amount
 
Carrying Value(A)
 
Final Stated Maturity
 
Weighted Average Funding Cost
 
Weighted Average Life (Years)
 
Outstanding Face
 
Amortized Cost Basis
 
Carrying Value
 
Weighted Average Life (Years)
 
Carrying Value(A)
Repurchase Agreements(B)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency RMBS(C)
 
Various
 
$
1,172,422

 
$
1,172,422

 
Jul-15 to Aug-15
 
0.40
%
 
0.1

 
$
1,167,997

 
$
1,206,770

 
$
1,204,179

 
1.0
 
$
1,707,602

Non-Agency RMBS (D)
 
Various
 
659,567

 
659,567

 
Jul-15 to Sep-15
 
1.87
%
 
0.1

 
2,281,029

 
901,082

 
910,802

 
7.4
 
539,049

Residential Mortgage Loans(E)
 
Various
 
447,940

 
447,012

 
Aug-15 to Aug-16
 
2.95
%
 
0.6

 
618,216

 
543,131

 
540,415

 
2.7
 
867,334

Real Estate Owned(F)(G)
 
Various
 
82,946

 
82,784

 
Aug-15 to Aug-16
 
3.15
%
 
0.6

 
N/A

 
N/A

 
89,168

 
N/A
 
35,105

Consumer Loan Investment(H)
 
Apr-15
 
42,976

 
42,832

 
Oct-15
 
3.77
%
 
0.3

 
N/A

 
N/A

 

 
3.5
 

Total Repurchase Agreements
 
 
 
2,405,851

 
2,404,617

 

 
1.44
%
 
0.2

 
 
 
 
 
 
 
 
 
3,149,090

Notes Payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured Corporate Note(I)
 
May-15
 
195,590

 
193,561

 
Apr-17
 
5.43
%
 
1.8

 
101,243,511

 
230,282

 
268,951

 
4.8
 

Servicer Advances(J)
 
Various
 
7,687,572

 
7,667,067

 
Oct-15 to Jun-18
 
2.88
%
 
1.1

 
8,278,685

 
8,081,258

 
8,182,400

 
4.3
 
2,885,784

Residential Mortgage Loans(K)
 
Oct-14
 
22,433

 
22,433

 
Oct-15
 
3.07
%
 
0.3

 
39,475

 
23,305

 
21,601

 
4.1
 
22,194

Real Estate Owned
 
N/A
 

 

 
 
 
%
 

 
N/A

 
N/A

 

 
N/A
 
785

Total Notes Payable
 
 
 
7,905,595

 
7,883,061

 
 
 
2.94
%
 
1.1

 
 
 
 
 
 
 
 
 
2,908,763

Total/ Weighted Average
 
 
 
$
10,311,446

 
$
10,287,678

 
 
 
2.59
%
 
0.9

 
 
 
 
 
 
 
 
 
$
6,057,853

 
(A)
Net of deferred financing costs associated with the adoption of ASU No. 2015-03.
(B)
These repurchase agreements had approximately $2.5 million of associated accrued interest payable as of June 30, 2015.
(C)
The counterparties of these repurchase agreements are Citibank ($232.2 million), Morgan Stanley ($77.0 million), Barclays ($96.8 million), Daiwa ($377.2 million) and Jefferies ($389.2 million) and were subject to customary margin call provisions. All of the Agency RMBS repurchase agreements have a fixed rate. Collateral amounts include related trade and other receivables.
(D)
The counterparties of these repurchase agreements are Barclays ($5.4 million), Credit Suisse ($263.7 million), Royal Bank of Canada ($10.2 million), Bank of America, N.A. ($88.7 million), Citibank ($60.6 million), Goldman Sachs ($70.1 million) and UBS ($160.8 million) and were subject to customary margin call provisions. All of the Non-Agency repurchase agreements have LIBOR-based floating interest rates.
(E)
The counterparties on these repurchase agreements are Barclays ($263.4 million maturing in January 2016), Bank of America N.A. ($61.4 million maturing in August 2016), Nomura ($60.5 million maturing in May 2016), Citibank ($2.7 million maturing in August 2015) and Credit Suisse ($60.0 million maturing in November 2015). All of these repurchase agreements have LIBOR-based floating interest rates.
(F)
The counterparties of these repurchase agreements are Barclays ($68.2 million), Credit Suisse ($0.9 million), Bank of America, N.A. ($3.5 million), Citibank ($0.6 million) and Nomura ($9.8 million). All of these repurchase agreements have LIBOR-based floating interest rates.
(G)
Includes financing collateralized by receivables including claims from FHA on GNMA EBO loans for which foreclosure has been completed and for which New Residential has made or intends to make a claim on the FHA guarantee.
(H)
The repurchase agreement is payable to Bank of America, N.A. and bears interest equal to three-month LIBOR plus 3.50% and is collateralized by New Residential’s interest in consumer loans (Note 9).
(I)
The loan bears interest equal to the sum of (i) a floating rate index equal to one-month LIBOR and (ii) a margin of 5.25%. The outstanding face of the collateral represents the UPB of the residential mortgage loans underlying the Excess MSRs that secure this corporate loan.
(J)
$3.1 billion face amount of the notes have a fixed rate while the remaining notes bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR or a cost of funds rate, as applicable, and (ii) a margin ranging from 1.0% to 2.0%.
(K)
The note is payable to Nationstar and bears interest equal to one-month LIBOR plus 2.875%.
 
Certain of the debt obligations included above are obligations of New Residential’s consolidated subsidiaries, which own the related collateral. In some cases, including the servicer advances, such collateral is not available to other creditors of New Residential.

New Residential has margin exposure on $2.4 billion of repurchase agreements. To the extent that the value of the collateral underlying these repurchase agreements declines, New Residential may be required to post margin, which could significantly impact its liquidity.
 
Activities related to the carrying value of New Residential’s debt obligations were as follows:
 
 
Servicer Advances
 
Real Estate Securities
 
Real Estate Loans
 
Consumer Loan Investment
 
Other
 
Total
Balance at December 31, 2014(A)
 
$
2,890,230

 
$
2,246,651

 
$
925,418

 
$

 
$

 
$
6,062,299

Repurchase Agreements:
 
 
 
 
 
 
 
 
 
 
 
 
Borrowings
 

 
2,222,172

 
386,439

 
42,976

 

 
2,651,587

Modified retrospective adjustment for the adoption of ASU No. 2014-11
 

 
84,649

 
1,306

 

 

 
85,955

Repayments
 

 
(2,721,483
)
 
(759,298
)
 

 

 
(3,480,781
)
Adoption of ASU No. 2015-03
 

 

 
(1,090
)
 
(144
)
 

 
(1,234
)
Notes Payable:
 
 
 
 
 
 
 
 
 
 
 

Retrospective adjustment for the adoption of ASU No. 2015-03
 
(4,446
)
 

 

 

 

 
(4,446
)
Borrowings
 
7,210,317

 

 
1,632

 

 
852,419

 
8,064,368

Repayments
 
(2,412,975
)
 

 
(2,178
)
 

 
(658,810
)
 
(3,073,963
)
Adoption of ASU No. 2015-03
 
(16,059
)
 

 

 

 
(48
)
 
(16,107
)
Balance at June 30, 2015
 
$
7,667,067

 
$
1,831,989

 
$
552,229

 
$
42,832

 
$
193,561

 
$
10,287,678


(A)    Excludes debt related to linked transactions (Note 10).

Servicer Advances

During the six months ended June 30, 2015, the Buyer entered into agreements to increase financing pursuant to one servicer advance facility and one of the notes, which settled in March 2015. The facility increased capacity from $500.0 million to $1.0 billion, and the note increased from $650.0 million to $800.0 million with a fixed interest rate equal to 2.50% and an expected repayment date of March 2017.

In connection with the HLSS Acquisition, New Residential funded the purchase of servicer advances with notes issued under the HSART and HSART II facilities with a number of financial institutions consisting of (i) variable funding notes (“VFNs”) with a borrowing capacity of up to $5.0 billion and (ii) $2.5 billion of term notes (“Term Notes”) issued to institutional investors. The VFNs generally bear interest at a rate equal to the sum of (i) LIBOR or a cost of funds rate plus (ii) a spread of 1.0% to 1.6% depending on the class of the notes. The VFNs in the HSART II facility have expected repayment dates in December 2015 and the VFNs in the HSART facility have expected repayment dates in April 2016. The Term Notes generally bear interest at approximately 2.0% and have and expected repayment dates from October 2015 through June 2018. The VFN and the Term Notes are secured by servicer advances, and the financing is nonrecourse, except for customary recourse provisions.

During the second quarter of 2015, New Residential repaid a portion of the VFNs pursuant to the HSART facility with proceeds of new notes issued under a new servicer advance facility. This facility issued a VFN with a borrowing capacity of $0.4 billion. The VFN has an expected repayment date of April 2017. The VFN bears interest at a rate equal to the sum of (i) LIBOR or a cost of funds rate plus (ii) a spread of 1.95%. The VFN is secured by servicer advances, and the financing is nonrecourse, except for customary recourse provisions.

Residential Mortgage Loans

During the second quarter of 2015, as a part of the HLSS Acquisition, New Residential acquired a portfolio of non-performing GNMA EBO residential mortgage loans with a UPB of $424.3 million for approximately $418.8 million, financed with a $393.0 million repurchase agreement with Barclays. Borrowings on this facility bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 2.77% and have an expected repayment date in January 2016. This facility contains customary covenants and event of default provisions.

Consumer Loan Investment

During the second quarter of 2015, New Residential entered into a $43.0 million repurchase agreement with Bank of America, N.A. Borrowings on this facility bear interest equal to the sum of (i) a floating rate index rate equal to three-month LIBOR and (ii) a margin of 3.50%. This facility contains customary covenants and event of default provisions.

Other

During the second quarter of 2015, New Residential entered into an agreement to increase financing on a $100.0 million secured corporate loan with Credit Suisse First Boston Mortgage Capital LLC, an affiliate of Credit Suisse Securities (USA) LLC. The agreement increased capacity from $100.0 million to $205.0 million. The loan bore interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 3.75%. The loan agreement contained customary covenants and event of default provisions. The loan was repaid in May 2015.

During the second quarter of 2015, New Residential entered into a $165.0 million secured corporate loan with Barclays maturing in April 2016. The loan agreement contained customary covenants and event of default provisions. The loan was repaid in May 2015.

During the second quarter of 2015, New Residential entered into $265.0 million of secured corporate debt with Credit Suisse maturing in July 2015. The loan contained customary covenants and event of default provisions. The loan was repaid in June 2015.

During the second quarter of 2015, New Residential issued a $219.4 million secured corporate note maturing in April 2017. The loan bears interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 5.25% until May 2016, after which the loan bears interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 7.25%. The loan agreement contains customary covenants and event of default provisions.

Maturities
 
New Residential’s debt obligations as of June 30, 2015 had contractual maturities as follows:
Year
 
Nonrecourse
 
Recourse
 
Total
July 1 through December 31, 2015
 
$
1,203,382

 
$
1,961,575

 
$
3,164,957

2016
 
4,386,775

 
396,462

 
4,783,237

2017
 
1,654,662

 
195,590

 
1,850,252

2018
 
513,000

 

 
513,000

 
 
$
7,757,819

 
$
2,553,627

 
$
10,311,446



Borrowing Capacity

The following table represents New Residential’s borrowing capacity as of June 30, 2015:
Debt Obligations/ Collateral
 
Collateral Type
 
Borrowing Capacity
 
Balance Outstanding
 
Available Financing
Repurchase Agreements
 
 
 
 
 
 
 
 
Residential Mortgage Loans
 
Real Estate Loans
 
$
2,275,000

 
$
465,992

 
$
1,809,008

Notes Payable
 
 
 
 
 
 
 
 
Servicer Advances(A)
 
Servicer Advances
 
11,163,000

 
7,687,572

 
3,475,428

 
 
 
 
$
13,438,000

 
$
8,153,564

 
$
5,284,436



(A)
New Residential’s unused borrowing capacity is available if New Residential has additional eligible collateral to pledge and meets other borrowing conditions as set forth in the applicable agreements, including any applicable advance rate. New Residential pays a 0.4% fee on the unused borrowing capacity.

Certain of the debt obligations are subject to customary loan covenants and event of default provisions, including event of default provisions triggered by a 50% equity decline over any 12-month period or a 35% decline over any 3-month period and a 4:1 indebtedness to tangible net worth provision. New Residential was in compliance with all of its debt covenants as of June 30, 2015.