|6 Months Ended|
Jun. 30, 2014
|Debt Disclosure [Abstract]|
The following table presents certain information regarding New Residential’s debt obligations:
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 $1.8 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.
As of June 30, 2014, New Residential held TBA positions of $10.0 million in a short notional amount of Agency ARM RMBS and any amounts or obligations owed by or to New Residential are subject to the right of set-off with the TBA counterparty (Note 10). 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 maturing on June 30, 2014. On June 30, 2014, New Residential extended this agreement to mature on January 30, 2015. Borrowings on this extension bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR and (ii) a spread of 2.00% (reduced from a spread of 4.00%). This facility contains customary covenants, event of default provisions, and is subject to required monthly principal payments.
On January 15, 2014, New Residential entered into a $25.3 million repurchase agreement with Credit Suisse Securities (USA) LLC which matures on January 14, 2015. Borrowings under the agreement bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 3.00%. The agreement contains customary covenants and event of default provisions, including event of default provisions triggered by a 50% equity decline as of the end of the corresponding period in the prior fiscal year, or a 35% equity decline as of the end of the quarter immediately preceding the most recently completed fiscal quarter and a four-to-one indebtedness to tangible net worth provision.
On March 6, 2014, Merrill Lynch, Pierce, Fenner & Smith Incorporated and New Residential entered into an agreement pursuant to which it agreed to purchase approximately $625 million face amount of Non-Agency residential mortgage securities for approximately $553 million. The purchased securities were issued by the American General Mortgage Loan Trust 2009-1 and represent 75% of the mezzanine and subordinate tranches (the 2009-1 Retained Certificates) of a securitization sponsored by Third Street Funding LLC, an affiliate of Springleaf. The securitization, including the 2009-1 Retained Certificates, is collateralized by residential mortgage loans with a face amount of approximately $0.9 billion. On March 31, 2014, New Residential obtained approximately $415 million in financing from Merrill Lynch, Pierce, Fenner & Smith Incorporated to settle its purchase of the 2009-1 Retained Certificates (Note 7). On May 30, 2014, New Residential sold the 2009-1 Retained Certificates for approximately $598.5 million and recorded a gain of approximately $39.7 million. At the time of sale, the 2009-1 Retained Certificates had an amortized cost basis of approximately $558.8 million. New Residential used a portion of the proceeds from the sale of the 2009-1 Retained Certificates to pay off the outstanding balance of this facility.
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.
On May 2, 2014, New Residential obtained financing from Morgan Stanley to settle its purchase of $617.5 million of additional servicer advances. Borrowings under the facility bear an interest rate equal to 2.1% and have an expected repayment date in May 2016. This financing is nonrecourse to the Buyer, except for customary recourse provisions.
On May 15, 2014, New Residential obtained financing from Citibank to settle its purchase of $48.4 million of residential loans. Borrowings under this facility bear an interest rate equal to the sum of (i) LIBOR and (ii) 2.75% with a maturity date of May 14, 2015. The facility contains customary covenants, event of default provisions, and is subject to required monthly principal payments.
On May 28, 2014 and May 30, 2014 New Residential obtained financing from Nomura Corporate Funding Americas, LLC to settle its purchase of $478.7 million and $21.6 million of residential mortgage loans, respectively. Borrowings under the agreement bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 2.75% and have an expected repayment date of May 28, 2016. The agreement contains customary covenants and event of default provisions.
On June 24, 2014, New Residential obtained financing from Nomura to settle its purchase of $85.3 million of residential loans. Borrowings under this facility bear an interest rate equal to the sum of (i) LIBOR and (ii) 2.75% with a maturity date of June 24, 2015. This financing is nonrecourse to the buyer, except for customary recourse provisions
In June 2014, New Residential paid off the outstanding secured corporate loan with Credit Suisse First Boston Mortgage LLC for approximately $69.1 million.
See Note 18 for recent activities related to New Residential's debt obligations.
New Residential’s debt obligations as of June 30, 2014 had contractual maturities as follows:
The following table represents New Residential’s borrowing capacity as of June 30, 2014 :
New Residential was in compliance with all of its debt covenants as of June 30, 2014.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef