Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

v2.4.0.8
DEBT OBLIGATIONS
6 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
DEBT OBLIGATIONS
DEBT OBLIGATIONS
 
The following table presents certain information regarding New Residential’s debt obligations:

June 30, 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
 
$
1,182,244

 
$
1,182,244

 
Jul-14
 
0.33
%
 
0.1
 
$
1,159,363

 
$
1,232,414

 
$
1,234,562

 
4.7
  Non-Agency
     RMBS (D)
 
            Various
 
149,110

 
149,110

 
Jul-14 to Oct-14
 
1.86
%
 
0.1
 
237,191

 
186,567

 
192,413

 
9.7
  Residential
     Mortgage
     Loans(E)
 
Various
 
348,033

 
348,033

 
Nov-14 to May-16
 
2.90
%
 
1.7
 
648,833

 
486,660

 
486,630

 
2.4
  Consumer
    Loans(F)
 
Jan-14
 
125,000

 
125,000

 
Jan-15
 
4.16
%
 
0.6
 
N/A

 
N/A

 
250,048

 
3.5
  Real Estate
    Owned(G)
 
Various
 
10,795

 
10,795

 
Nov-14 to Jun-15
 
2.96
%
 
0.5
 
N/A

 
N/A

 
27,830

 
N/A
Total Repurchase
     Agreements
 
 
 
1,815,182

 
1,815,182

 

 
1.23
%
 
0.4
 


 


 


 

Notes Payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Servicer Advances(H)
 
            Various
 
3,265,530

 
3,265,530

 
Sep-14 to Mar-17
 
3.26
%
 
1.4
 
3,551,464

 
3,596,228

 
3,679,105

 
3.8
  Residential
     Mortgage
     Loans(I)
 
Dec-13
 
23,915

 
23,915

 
Sep-14
 
3.41
%
 
0.2
 
53,085

 
31,682

 
30,794

 
3.7
Total Notes
    Payable
 
 
 
3,289,445

 
3,289,445

 
 
 
3.26
%
 
1.4
 
 
 
 
 
 
 
 
Total/ Weighted
    Average
 
 
 
$
5,104,627

 
$
5,104,627

 
 
 
2.54
%
 
1.1
 
 
 
 
 
 
 
 
 
(A)
Excludes debt related to linked transactions (Note 10).
(B)
These repurchase agreements had approximately $0.1 million of associated accrued interest payable as of June 30, 2014.
(C)
The counterparties of these repurchase agreements are Mizuho ($145.1 million), Morgan Stanley ($218.5 million), Daiwa ($296.5 million) and Jefferies ($522.2 million) and were subject to customary margin call provisions.
(D)
The counterparties of these repurchase agreements are Barclays ($21.6 million), Credit Suisse ($50.7 million), Royal Bank of Scotland ($33.9 million), Bank of America ($1.9 million), Goldman Sachs ($27.6 million) and UBS ($13.5 million) and were subject to customary margin call provisions. All of the Non-Agency repurchase agreements have LIBOR-based floating interest rates. Includes $48.6 million borrowed under a master repurchase agreement, which bears interest at one-month LIBOR plus 1.75%.
(E)
The counterparties on these repurchase agreements are Nomura ($324.5 million), Citibank ($17.1 million) and Royal Bank of Scotland ($6.4 million). All of these repurchase agreements have LIBOR-based floating interest rates.
(F)
The repurchase agreement is payable to Credit Suisse and bears interest equal to one-month LIBOR plus 2.0%.
(G)
The counterparties of these repurchase agreements are Royal Bank of Scotland ($7.0 million), Credit Suisse ($2.5 million) and Nomura ($1.3 million).  All of these repurchase agreements have LIBOR-based floating interest rates.
(H)
$1.1 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 1.3% to 2.5%.
(I)
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.

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.

Maturities
 
New Residential’s debt obligations as of June 30, 2014 had contractual maturities as follows:
Year
 
Nonrecourse
 
Recourse(A)
 
Total
July 1 through December 31, 2014
 
$
1,254,661

 
$
1,325,641

 
$
2,580,302

2015
 
818,146

 
166,034

 
984,180

2016
 
1,028,545

 

 
1,028,545

2017
 
511,600

 

 
511,600

 
 
$
3,612,952

 
$
1,491,675

 
$
5,104,627

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

Borrowing Capacity
 
The following table represents New Residential’s borrowing capacity as of June 30, 2014 :
Debt Obligations/ Collateral
 
Collateral Type
 
Borrowing Capacity
 
Balance Outstanding
 
Available Financing
Repurchase Agreements
 
 
 
 

 
 

 
 

Residential Mortgage Loans(A)
 
Real Estate Loans
 
$
600,000

 
$
82,151

 
$
517,849

Notes Payable
 
 
 


 


 


Servicer Advances(B)
 
Servicer Advances
 
5,661,700

 
3,265,530

 
2,396,170

 
 
 
 
$
6,261,700

 
$
3,347,681

 
$
2,914,019

  
(A)
Includes $300.0 million of borrowing capacity and $65.1 million of balance outstanding related to linked transactions (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 June 30, 2014.