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Debt | 3 Months Ended
--- | ---
Mar. 31, 2024
Debt Disclosure [Abstract] |
Debt | Note 9. Debt
The following table summarizes the components of our debt:
|  | March 31, 2024 |  | December 31, 2023
Borrowing Description |  | Total Collateral(1) |  | Stated Interest Rate(2) |  | Termination/Maturity(3) |  | Total Capacity |  | Total Outstanding(4) |  | Total Outstanding
Debt Facilities |  |  |  |  |  |  |  |  |  |  |  |
Personal loan warehouse facilities |  | $ | 354,851 |  |  | 5.47% – 7.23% |  | June 2024 – October 2026 |  | $ | 4,625,000 |  |  | $ | 296,921 |  |  | $ | 1,077,444 |
Student loan warehouse facilities |  | 517,928 |  |  | 6.09% – 7.48% |  | April 2024 – January 2027 |  | 3,945,000 |  |  | 455,328 |  |  | 2,095,046 |
Risk retention warehouse facilities(5) |  | 60,787 |  |  | 6.84% – 8.69% |  | November 2024 – October 2027 |  | 100,000 |  |  | 59,941 |  |  | 67,038 |
Revolving credit facility(6) |  |  |  | 6.93% |  | April 2028 |  | 645,000 |  |  | 486,000 |  |  | 486,000 |
Other Debt |  |  |  |  |  |  |  |  |  |  |  |
Convertible senior notes, due 2026(7) |  |  |  | —% |  | October 2026 |  |  |  | 511,972 |  |  | 1,111,972 |
Convertible senior notes, due 2029(8) |  |  |  | 1.25% |  | March 2029 |  |  |  | 862,500 |  |  | — |
Other financing(9) |  | 169,929 |  |  |  |  |  |  | 201,032 |  |  | — |  |  | — |
Securitizations |  |  |  |  |  |  |  |  |  |  |  |
Personal loan securitizations |  | 384,246 |  |  | 1.30% – 6.21% |  | September 2030 – May 2031 |  |  |  | 125,990 |  |  | 239,340 |
Student loan securitizations |  | 152,387 |  |  | 3.09% – 4.21% |  | July 2040 – August 2048 |  |  |  | 130,413 |  |  | 182,744 |
Total, before unamortized debt issuance costs, premiums and discounts |  |  |  |  |  |  |  |  |  | $ | 2,929,065 |  |  | $ | 5,259,584 |
Less: unamortized debt issuance costs, premiums and discounts |  |  |  |  |  |  |  |  |  | (37,748) |  |  | (26,168) |
Total debt |  |  |  |  |  |  |  |  |  | $ | 2,891,317 |  |  | $ | 5,233,416 |
_________________ (1)As of March 31, 2024, represents the total of the unpaid principal balances within each debt category, with the exception of the risk retention warehouse facilities, which include securitization-related investments carried at fair value. In addition, certain securitization interests that eliminate in consolidation are pledged to risk retention warehouse facilities. Collateral balances relative to debt balances may vary period to period due to the timing of the next scheduled payment to the warehouse facility. (2)For variable-rate debt, the ranges of stated interest rates are based on the interest rates in effect as of March 31, 2024. The interest on our variable-rate debt is typically designed as a reference rate plus a spread. Reference rates as of March 31, 2024 included overnight SOFR, one-month SOFR and commercial paper rates determined by the facility lenders. As debt arrangements are renewed, the reference rate and/or spread are subject to change. Unused commitment fees ranging from 0 to 65 bps on our various warehouse facilities are recognized within noninterest expense—general and administrative in our condensed consolidated statements of operations and comprehensive income (loss). (3)For securitization debt, the maturity of the notes issued by the various trusts occurs upon either the maturity of the loan collateral or full payment of the loan collateral held in the trusts. Our maturity date represents the legal maturity of the last class of maturing notes. Securitization debt matures as loan collateral payments are made. (4)There were $17.3 million of debt discounts issued during the three months ended March 31, 2024. (5)For risk retention warehouse facilities, we only state capacity amounts for facilities wherein we can pledge additional asset-backed bonds and residual investments as of the balance sheet date. (6)As of March 31, 2024, $13.1 million of the revolving credit facility total capacity was not available for general borrowing purposes because it was utilized to secure letters of credit. Refer to our letter of credit disclosures in Note 15. Commitments, Guarantees, Concentrations and Contingencies for more details. Additionally, the interest rate presented is the interest rate on standard withdrawals on our revolving credit facility, while same-day withdrawals incur interest based on the prime rate. (7)The original issue discount and debt issuance costs related to the convertible senior notes due 2026 are amortized into interest expense—corporate borrowings in the condensed consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the notes. For the three months ended March 31, 2024 and March 31, 2023, total interest expense on the convertible notes was $1.2 million and $1.3 million, respectively. For the three months ended March 31, 2024 and March 31, 2023, interest expense was related to amortization of debt discount and issuance costs, and the effective interest rate was 0.92% and 0.42%, respectively. As of March 31, 2024 and December 31, 2023, unamortized debt discount and issuance costs were $5.7 million and $13.3 million, respectively, and the net carrying amount was $506.3 million and $1.1 billion, respectively. (8)The original issue discount and debt issuance costs related to the convertible senior notes due 2029 are amortized into interest expense—corporate borrowings in the condensed consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the notes. For the three months ended March 31, 2024, total interest expense on the convertible notes was $1.0 million and the effective interest rate was 1.37%. As of March 31, 2024, unamortized debt discount and issuance costs were $21.5 million, and the net carrying amount was $841.0 million. (9)Includes $54.3 million of loans and $115.7 million of investment securities pledged as collateral to secure $151.0 million of available borrowing capacity with the FHLB, of which $27.2 million was not available as it was utilized to secure letters of credit. Refer to our letter of credit disclosures in Note 15. Commitments, Guarantees, Concentrations and Contingencies for more details. Also includes unsecured available borrowing capacity of $50.0 million with correspondent banks. Convertible Senior Notes Convertible Senior Notes, Due 2026 In October 2021, we issued $1.2 billion aggregate principal amount of convertible notes, pursuant to an indenture, dated October 4, 2021, between the Company and U.S. Bank National Association, as trustee (“2026 convertible notes”). The 2026 convertible notes are unsecured, unsubordinated obligations. The 2026 convertible notes do not bear regular interest. The 2026 convertible notes will mature on October 15, 2026, unless earlier repurchased, redeemed or converted. In December 2023, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 convertible notes to repurchase $88.0 million aggregate principal amount of the 2026 convertible notes, which were settled through the issuance of 9,490,000 shares of common stock. In March 2024, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 convertible notes to repurchase $600.0 million aggregate principal amount of the 2026 convertible notes, which were settled through the issuance of 72,621,879 shares of common stock. Following these repurchases, $512.0 million aggregate principal amount of the 2026 convertible notes remain outstanding. These transactions were determined to be an extinguishment of debt. The difference between the consideration used to repurchase the convertible notes and the carrying value of the convertible notes, less retirement of discount and issuance costs, resulted in a gain on extinguishment of $59.2 million recorded within noninterest income—other in the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2024. We used a portion of the net proceeds from the October 2021 offering to fund the cost of entering into the 2026 capped call transactions. In connection with the March 2024 repurchase agreements, the Company entered into unwind agreements to terminate a portion of the 2026 capped call transactions. Refer to Note 10. Equity for additional detail. As of March 31, 2024, the 2026 convertible notes are potentially convertible into 22,841,631 shares of common stock. Convertible Senior Notes, Due 2029 In March 2024, we issued $862.5 million aggregate principal amount of convertible notes, pursuant to an indenture, dated March 8, 2024, between the Company and U.S. Bank National Association, as trustee (“2029 convertible notes”). The 2029 convertible notes are unsecured, unsubordinated obligations. The 2029 convertible notes will pay interest at a rate of 1.25%, payable semi-annually beginning in September 2024. The 2029 convertible notes will mature on March 15, 2029, unless earlier repurchased, redeemed or converted. The net proceeds from the offering were $845.3 million, after deducting the 2% initial purchasers’ discount of $17.3 million, and before the cost of the 2029 capped call transactions, as described below, and offering expenses payable by the Company. The debt issuance costs of $4.6 million included third-party legal and accounting fees. The original issue discount and debt issuance costs are amortized into interest expense—corporate borrowings in the condensed consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the 2029 convertible notes. We used a portion of the net proceeds from the March 2024 offering to fund the cost of entering into 2029 capped call transactions, as described in Note 10. Equity. The remainder of the net proceeds from the offering, together with cash on hand, were used (i) to pay expenses relating to this offering, (ii) to redeem Series 1 Preferred Stock and (iii) for general corporate purposes. Conversion The 2029 convertible notes are convertible by the noteholders prior to the close of business on the business day immediately preceding September 15, 2028 if certain conditions related to the Company’s share price are met, upon the occurrence of certain corporate events or distributions of the Company’s stock, or the Company calls the notes for redemption, each as set forth in the indenture. On and after September 15, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2029 convertible notes are freely convertible by the noteholders. The conversion rate is 105.8089 shares of our common stock per $1,000 principal amount of 2029 convertible notes, which represents an initial conversion price of approximately $9.45 per share of our common stock. Settlement We will settle conversions of the 2029 convertible notes by paying or delivering, cash, and if applicable, shares of our common stock for the amount in excess of the cash redemption price, based on the applicable conversion rate. Consideration due upon conversion will be determined over an observation period consisting of 30 “VWAP Trading Days” (as defined in the indenture). The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. Redemption The 2029 convertible notes will also be redeemable, in whole or in part, at our option at any time, and from time to time, on or after March 15, 2027 through the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2029 convertible notes to be redeemed, plus accrued and unpaid interest, if any, thereon to, but excluding, the redemption date, but only if certain liquidity conditions described in the indenture are satisfied and certain conditions are met with respect to the last reported sale price per share of our common stock prior to conversion. In addition, calling any note for redemption will also constitute a Make-Whole Fundamental Change with respect to that 2029 convertible note, in which case the conversion rate applicable to the conversion of that 2029 convertible note will be increased in certain circumstances if it is converted after it is called for redemption. See Note 1. Organization, Summary of Significant Accounting Policies and New Accounting Standards for our accounting policy as it relates to the convertible notes. Material Changes to Debt Arrangements During the three months ended March 31, 2024, we closed two warehouse facilities which had an aggregate maximum available capacity of $400.0 million, and closed one risk retention warehouse facility. We did not open any warehouse facilities. Our warehouse and securitization debt is secured by a continuing lien and security interest in the loans financed by the proceeds. Within each of our debt facilities, we must comply with certain operating and financial covenants. These financial covenants include, but are not limited to, maintaining: (i) a certain minimum tangible net worth, (ii) minimum unrestricted cash and cash equivalents, (iii) a maximum leverage ratio of total debt to tangible net worth, and (iv) minimum risk-based capital and leverage ratios. Our debt covenants can lead to restricted cash classifications in our condensed consolidated balance sheets. Our subsidiaries are restricted in the amount that can be distributed to the parent company only to the extent that such distributions would cause the financial covenants to not be met. We were in compliance with all financial covenants. We act as a guarantor for our wholly-owned subsidiaries in several arrangements in the case of default. As of March 31, 2024, we have not identified any risks of nonpayment by our wholly-owned subsidiaries. Maturities of Borrowings Future maturities of our outstanding debt with scheduled payments, which included our revolving credit facility and convertible notes, were as follows:
| March 31, 2024
Remainder of 2024 | $ | — |
2025 | — |
2026 | 511,972 |
2027 | — |
2028 | 486,000 |
Thereafter | 862,500 |
Total | $ | 1,860,472 |

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