Quarterly report pursuant to Section 13 or 15(d)

DEBT OBLIGATIONS

v2.4.0.8
DEBT OBLIGATIONS
9 Months Ended
Sep. 30, 2014
Debt Disclosure [Abstract]  
DEBT OBLIGATIONS
DEBT OBLIGATIONS
 
The following table presents certain information regarding New Residential’s debt obligations:
September 30, 2014(A)
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
Carrying Value
Repurchase Agreements (B)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Agency
     RMBS (C)
 
Various

 
$
1,510,765

 
$
1,510,765

 
Oct-14
 
0.31
%
 
0.1

 
$
1,500,141

 
$
1,571,199

 
$
1,570,328

 
6.3

 
$
1,332,954

  Non-Agency
     RMBS (D)
 
Various

 
214,972

 
214,972

 
Oct-14
 
1.79
%
 
0.1

 
323,438

 
260,995

 
267,769

 
8.4

 
287,757

  Residential
     Mortgage
     Loans(E)
 
Various

 
871,659

 
871,659

 
Nov-14 to Aug-16
 
2.60
%
 
1.8

 
1,257,145

 
1,089,677

 
1,093,571

 
4.1

 

  Consumer
    Loans(F)
 
Jan-14

 
125,000

 
125,000

 
Jan-15
 
3.45
%
 
0.3

 
N/A

 
N/A

 
264,039

 
3.5

 

  Real Estate
    Owned(G)
 
Various

 
15,953

 
15,953

 
Nov-14 to Aug-16
 
2.89
%
 
0.4

 
N/A

 
N/A

 
38,840

 
N/A

 

Total
     Repurchase
     Agreements
 
 
 
2,738,349

 
2,738,349

 


 
1.31
%
 
0.6

 
 
 
 
 
 
 
 
 
1,620,711

Notes Payable
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 


 


Secured
  Corporate
  Loan
 

 

 

 

 
%
 

 

 

 

 

 
75,000

  Servicer
     Advances(H)
 
Various

 
2,824,007

 
2,824,007

 
Mar-15 to Mar-17
 
2.99
%
 
2.0

 
3,041,905

 
3,108,288

 
3,214,113

 
4.2

 
2,390,778

  Residential
     Mortgage
     Loans(I)
 
Dec-13

 
23,244

 
23,244

 
Oct-14
 
3.41
%
 
0.1

 
49,759

 
29,511

 
28,226

 
3.8

 
22,840

Total Notes
    Payable
 
 
 
2,847,251

 
2,847,251

 
 
 
2.99
%
 
2.0

 
 
 
 
 
 
 
 
 
2,488,618

Total/ Weighted
    Average
 
 
 
$
5,585,600

 
$
5,585,600

 
 
 
2.17
%
 
1.3

 
 
 
 
 
 
 
 
 
$
4,109,329

 
(A)
Excludes debt related to linked transactions (Note 10).
(B)
These repurchase agreements had approximately $1.0 million of associated accrued interest payable as of September 30, 2014.
(C)
The counterparties of these repurchase agreements are Mizuho ($288.1 million), Morgan Stanley ($78.0 million), Barclays ($644.7 million), Daiwa ($146.5 million) and Jefferies ($353.5 million) and were subject to customary margin call provisions.
(D)
The counterparties of these repurchase agreements are Barclays ($8.2 million), Credit Suisse ($49.6 million), Royal Bank of Scotland ($102.3 million), Royal Bank of Canada ($11.7 million), Bank of America ($1.9 million), Goldman Sachs ($27.2 million) and UBS ($14.0 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 Bank of America N.A. ($531.0 million), Nomura ($317.6 million), Citibank ($16.1 million) and Royal Bank of Scotland ($6.9 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 ($9.4 million), Credit Suisse ($3.3 million), Bank of America, N.A. ($2.0 million) and Nomura ($1.3 million).  All of these repurchase agreements have LIBOR-based floating interest rates.
(H)
$1.3 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 2.4%.
(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 $2.7 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 September 30, 2014, New Residential held TBA positions of $1.3 billion in a 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 (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.

Servicer Advances
In February 2014, the Buyer and special purpose subsidiaries of Buyer entered into an advance facility with Bank of America, N.A. (the “BANA Facility”). The notes issued pursuant to the BANA Facility had an advance rate of approximately 90%, an interest rate generally equal to the sum of one-month LIBOR plus a margin of approximately 2.5%, borrowing capacity of up to $1.0 billion, and a maturity date in September 2014.

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 July 18, 2014, the Buyer received $26.7 million in proceeds from the refinancing of the note issued under the Bank of America facility.  The Bank of America note was prepaid with proceeds of a new note issued to J.P. Morgan. The note issued to J.P. Morgan has a fixed interest rate equal to 2.45% with an expected repayment date of July 2016. As of September 30, 2014, the principal balance of this note was approximately $457.3 million.

On July 25, 2014, the Buyer received $12.1 million in proceeds from the refinancing of the Credit Suisse facility with notes issued to Morgan Stanley and J.P. Morgan.

Real Estate Securities

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.

Real Estate Loans

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 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.

On August 12, 2014, August 25, 2014 and September 8, 2014, New Residential entered into a repurchase agreement with Bank of America N.A. for $66.8 million, $467.3 million and $6.7 million, respectively, which matures on August 12, 2016. 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 2.25%. The agreement contains customary covenants and event of default provisions.

Other

On January 8, 2014, New Residential financed all of its ownership interest in each of the Consumer Loan Companies under a $150.0 million ($125.0 million outstanding as of September 30, 2014) 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.

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 September 30, 2014 had contractual maturities as follows:
Year
 
Nonrecourse
 
Recourse(A)
 
Total
October 1 through December 31, 2014
 
$
652,913

 
$
1,112,384

 
$
1,765,297

2015
 
614,507

 
144,396

 
758,903

2016
 
2,019,011

 
532,989

 
2,552,000

2017
 
509,400

 

 
509,400

 
 
$
3,795,831

 
$
1,789,769

 
$
5,585,600

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

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

 
 

 
 

Residential Mortgage Loans(A)
 
Real Estate Loans
 
$
1,503,992

 
$
933,511

 
$
570,481

Notes Payable
 
 
 


 


 


Servicer Advances(B)
 
Servicer Advances
 
4,305,200

 
2,824,007

 
1,481,193

 
 
 
 
$
5,809,192

 
$
3,757,518

 
$
2,051,674

  
(A)
Includes $300.0 million of borrowing capacity and $49.2 million of balance outstanding related to one of New Residential's 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 September 30, 2014.