Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

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DEBT OBLIGATIONS
3 Months Ended
Mar. 31, 2014
Debt Obligations  
DEBT OBLIGATIONS
11. DEBT OBLIGATIONS

 

The following table presents certain information regarding New Residential’s debt obligations:

  

March 31, 2014 (A)
                                      Collateral  
Debt Obligations/ Collateral   Month Issued     Outstanding Face Amount     Carrying Value     Final Stated Maturity   Weighted Average Funding Cost     Weighted Average Life (Years)     Outstanding Face     Amortized Cost Basis     Carrying Value     Weighted Average Life (Years)  
Repurchase Agreements (B)                                                          
 Agency ARM RMBS (C)     Various     $ 1,117,592     $ 1,117,592     Jun-14     0.34 %     0.3     $ 1,085,447     $ 1,153,504     $ 1,154,057       4.3  
 Non-Agency RMBS (D)     Various       883,002       883,002     Apr-14 to Oct-14     1.98 %     0.1       1,501,192       1,156,794       1,163,721       8.8  
 Consumer Loans (E)     Jan-14       142,500       142,500     Jun-14     4.16 %     0.3       N/A       N/A       231,422       3.2  
Total Repurchase Agreements             2,143,094       2,143,094           1.27 %     0.2                                  
Notes Payable                                                                            
 Secured Corporate Loan (F)     Dec-13       69,055       69,055     May-14     4.16 %     0.2       35,823,960       124,379       147,702       6.0  
 Servicer Advances (G)     Various       3,142,292       3,142,292     Sep-14 to Mar-17     3.01 %     1.2       3,430,473       3,457,385       3,457,385       3.2  
 Residential Mortgage Loans (H)     Dec-13       23,458       23,458     Sep-14     3.41 %     0.5       57,818       34,045       34,045       3.6  
Total Notes Payable             3,234,805       3,234,805           3.03 %     1.1                                  
Total           $ 5,377,899     $ 5,377,899           2.33 %     0.8                                  

 

(A) Excludes debt related to linked transactions (Note 10).
(B) These repurchase agreements had approximately $0.7 million of associated accrued interest payable as of March 31, 2014.
(C) The counterparties of these repurchase agreements are Mizuho ($160.8 million), Morgan Stanley ($160.5 million), Daiwa ($315.0 million) and Jefferies ($481.3 million) and were subject to customary margin call provisions.
(D) The counterparties of these repurchase agreements are Barclays ($34.7 million), Credit Suisse ($132.3 million), Royal Bank of Scotland ($42.5 million), Bank of America ($459.9 million), Goldman Sachs ($83.3 million), UBS ($74.6 million) and Royal Bank of Canada ($55.7 million) and were subject to customary margin call provisions. All of the Non-Agency repurchase agreements have LIBOR-based floating interest rates. Includes $103.2 million borrowed under a master repurchase agreement, which bears interest at one-month LIBOR plus 1.75%.

(E) The repurchase agreement is payable to Credit Suisse and bears interest equal to one-month LIBOR plus 4.0%.
(F) The loan bears interest equal to one-month LIBOR plus 4.0%. The outstanding face of the collateral represents the UPB of the residential mortgage loans underlying the Excess MSRs that secure this corporate loan, which is subject to monthly principal amortization payments.
(G) The 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 1.3% to 2.5%.
(H) The note is payable to Nationstar and bears interest equal to one-month LIBOR plus 3.25%.

 

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.

 

As of March 31, 2014, New Residential held TBA positions with $850.0 million in a long notional amount of Agency RMBS and $975.0 million in short notional amount of Agency RMBS, and any amounts or obligations owed by or to New Residential are subject to the right of set-off with the TBA counterparty. As part of executing these trades, New Residential has entered into agreements with its TBA counterparties that govern the transactions for the TBA purchases or sales made, including margin maintenance, payment and transfer, events of default, settlements, and various other provisions. New Residential has fulfilled all obligations and requirements entered into under these agreements.

 

On January 8, 2014, New Residential financed all of its ownership interest in each of the Consumer Loan Companies under a $150.0 million master repurchase agreement with Credit Suisse Securities (USA) LLC which matures on June 30, 2014. Borrowings under the facility bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 4.00%. The facility contains customary covenants, event of default provisions, and is subject to required monthly principal payments.

 

On March 31, 2014, New Residential obtained approximately $415 million in financing from Merrill Lynch, Pierce, Fenner & Smith Incorporated (a wholly-owned subsidiary of Bank of America) to settle its purchase of approximately $625 million face amount of Non-Agency RMBS for approximately $553 million, which represents 75% of the mezzanine and subordinate tranches of a securitization previously sponsored by an affiliate of Springleaf. The securitization is collateralized by residential mortgage loans with a face amount of approximately $0.9 billion. Merrill Lynch, Pierce, Fenner & Smith Incorporated purchased the remaining 25% of the mezzanine and subordinate tranches on the securitization on the same terms as New Residential’s purchase.

 

In March 2014, the Buyer prepaid all of the notes issued pursuant to one servicer advance facility and a portion of the notes issued pursuant to another servicer advance facility. The notes were prepaid with the proceeds of new notes issued pursuant to an advance receivables trust (the “NRART Master Trust”) that issued (i) variable funding notes (“VFNs”) with borrowing capacity of up to $1.1 billion and (ii) $1.0 billion of term notes (“Term Notes”) 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 1.375% to 2.5% depending on the class of the notes. The expected repayment date of the VFNs is March 2015. The Term Notes generally bear interest at approximately 2.0% and have expected repayment dates in March 2015 and March 2017. The VFNs and the Term Notes are secured by servicer advances, and the financing is nonrecourse to the Buyer, except for customary recourse provisions.

 

Maturities

 

New Residential’s debt obligations as of March 31, 2014 had contractual maturities as follows:

 

Year     Nonrecourse     Recourse (A)     Total  
April 1 through December 31, 2014     $ 1,633,561     $ 2,145,202   $ 3,778,763  
2015       1,101,336       —       1,101,236  
2016       —       —       —  
2017       497,800       —       497,800  
      $ 3,232,697     $ 2,145,202     $ 5,377,899  

 

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

 

Borrowing Capacity

 

The following table represents New Residential’s borrowing capacity as of March 31, 2014:

 

Debt Obligations/ Collateral   Collateral Type   Borrowing Capacity     Balance Outstanding     Available Financing  
Repurchase Agreements                      
Residential Mortgage Loans (A)   Real Estate Loans   $ 300,000     $ 59,190     $ 240,810  
Notes Payable                            
Secured Corporate Loan   Excess MSRs     75,000       69,055       5,945  
Servicer Advances (B)   Servicer Advances     4,647,900       3,142,292       1,505,608  
        $ 5,022,900     $ 3,270,537     $ 1,752,363  

  

(A) Financing related to linked transaction (Note 10).
(B) New Residential’s unused borrowing capacity is available if New Residential has additional eligible collateral to pledge and meets other borrowing conditions. New Residential pays a 0.5% fee on the unused borrowing capacity.

 

New Residential was in compliance with all of its debt covenants as of March 31, 2014.