Note 10 — Debt Obligations

Credit Facilities and Repurchase Agreements

The following table outlines borrowings under our credit facilities and repurchase agreements ($ in thousands):


									September 30, 2018							December 31, 2017
									Debt		Collateral		Wtd.			Debt		Collateral		Wtd.
	Current	Extended							Carrying		Carrying		Avg. Note			Carrying		Carrying		Avg. Note
Structured Business	Maturity	Maturity	Note Rate						Value (1)		Value		Rate			Value (1)		Value		Rate
$375 million repurchase facility	Mar. 2020	Mar. 2021	L+	1.75	%	to	3.50	%	$	334,582	$	470,650		4.53	%	$	102,350	$	145,850	3.90	%
$100 million repurchase facility	June 2019	June 2020	L+	1.75	%	to	2.00	%		94,024		132,107		4.09	%		2,445		6,600	3.61	%
$75 million credit facility	Dec. 2018	N/A	L+	1.75	%	to	2.50	%		20,355		30,469		4.07	%		—		—	—
$75 million credit facility	June 2019	N/A	L+	2.00	%					14,482		21,000		4.32	%		8,999		16,000	3.61	%
$50 million credit facility	Feb. 2019	N/A	L+	2.00	%					28,557		35,700		4.32	%		32,538		40,700	3.61	%
$50 million credit facility	Sept. 2019	Sept. 2021	L+	2.50	%	to	3.25	%		—		—		—			3,581		4,625	4.88	%
$25.5 million credit facility	Oct. 2019	N/A	L+	2.50	%					15,773		34,000		4.83	%		13,920		18,753	4.12	%
$25 million working capital facility	June 2019	N/A	L+	2.25	%					—		—		—			10,000		—	4.12	%
$23.2 million credit facility	Feb. 2020	Feb. 2021	L+	2.30	%					23,068		30,900		4.62	%		—		—	—
$20 million credit facility	Mar. 2020	Mar. 2021	L+	2.50	%					19,904		41,650		4.83	%		—		—	—
$17.4 million credit facility	June 2020	June 2021	L+	2.40	%					12,405		15,844		4.73	%		—		—	—
$8 million credit facility	Aug. 2021	N/A	L+	2.50	%					7,941		10,000		4.83			—		—	—
$7.5 million credit facility (2)	Sept. 2018	N/A	L+	2.75	%					—		—		—			7,432		9,340	4.37	%
Repurchase facility - securities (3)	N/A	N/A	L+	2.35	%	to	3.25	%		102,701		—		4.97	%		53,938		—	4.45	%
$3 million master security agreement	Oct. 2020	N/A		2.96	%	to	3.42	%		1,337		—		3.20	%		1,834		—	3.21	%
$2.2 million master security agreement	Mar. 2021	N/A		4.60	%					1,854		—		4.66	%		—		—	—
Structured Business total									$	676,983	$	822,320		4.53	%	$	237,037	$	241,868	4.02	%

Agency Business

$500 million ASAP agreement (4)	N/A	N/A	L+	1.05	%				$	96,617	$	96,617		3.31	%	$	121,880	$	121,880	2.61	%
$250 million credit facility (5)	June 2019	N/A	L+	1.25	%					102,180		102,182		3.51	%		23,785		23,785	2.86	%
$200 million repurchase facility	Aug. 2019	N/A	L+	1.275	%					73,573		73,573		3.54	%		24,827		24,873	2.91	%
$150 million credit facility	Jan . 2019	N/A	L+	1.30	%					136,567		136,644		3.56	%		21,802		21,821	2.96	%
$150 million credit facility	July 2019	N/A	L+	1.30	%					83,666		83,783		3.56	%		99,242		99,357	2.91	%
Agency Business total									$	492,603	$	492,799		3.50	%	$	291,536	$	291,716	2.78	%
Consolidated total									$	1,169,586	$	1,315,119		4.10	%	$	528,573	$	533,584	3.34	%

(1)

The debt carrying value for the Structured Business at September 30, 2018 and December 31, 2017 was net of unamortized deferred finance costs of $2.6 million and $2.2 million, respectively. The debt carrying value for the Agency Business at both September 30, 2018 and December 31, 2017 was net of unamortized deferred finance costs of $0.2 million.

(2)

In September 2018, the loan collateralizing this facility paid off and we simultaneously repaid this facility.

(3)

As of September 30, 2018 and December 31, 2017, this facility was collateralized by CLO bonds retained by us with a principal balance of $114.2 million and $61.0 million, respectively, and B Piece bonds with a carrying value of $50.5 million and $27.8 million, respectively.

(4)

The note rate under this agreement is subject to a LIBOR Floor of 35 basis points.

(5)

The committed amount under the facility was temporarily increased $150.0 million to $250.0 million, which expires in January 2019.

Structured Business

At September 30, 2018 and December 31, 2017, the weighted average interest rate for the credit facilities and repurchase agreements of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 4.86% and 4.51%, respectively. The leverage on our loans and investment portfolio financed through our credit facilities and repurchase agreements, excluding the securities repurchase facility, working capital line of credit and the security agreements used to finance leasehold and capital expenditure improvements at our corporate office, was 70% and 72% at September 30, 2018 and December 31, 2017, respectively.

In September 2018, we entered into an $8.0 million credit facility to finance a healthcare facility bridge loan. The facility bears interest at a rate of 250 basis points over LIBOR and matures in August 2021.

In June 2018, we entered into a $17.4 million credit facility to finance a multifamily bridge loan. The facility bears interest at a rate of 240 basis points over LIBOR and matures in June 2020, with a one-year extension option.

In June 2018, we amended our $10.0 million working capital facility to increase the committed amount by $15.0 million to $25.0 million, reduce the interest rate by 25 basis points and extend the maturity to June 2019.

In April 2018, we amended our $100.0 million repurchase facility adjusting the interest rate from 200 basis points over LIBOR to an interest rate range of 175 basis points to 200 basis points over LIBOR, depending on the class of loan financed.

In April 2018, we amended our $75.0 million credit facility adjusting the interest rate range from 200 basis points to 250 basis points over LIBOR to an interest rate range of 175 basis points to 250 basis points over LIBOR, depending on the type of loan financed.

In March 2018, we amended our $225.0 million repurchase facility to increase the committed amount by $75.0 million to $300.0 million, reduce the interest rates by 50 basis points and extend the maturity to March 2020 with a one-year extension option. In June 2018, we also temporarily increased the committed amount by $75.0 million to $375.0 million, which expires in December 2018.

In March 2018, we entered into a $20.0 million credit facility to finance a healthcare facility bridge loan. The facility bears interest at a rate of 250 basis points over LIBOR and matures in March 2020, with a one-year extension option.

In March 2018, we entered into a master security agreement to finance certain capital expenditures. We have a $2.2 million note payable under this agreement which bears interest at a fixed rate of 4.60%, requires monthly amortization payments and matures in March 2021.

In February 2018, we entered into a $23.2 million credit facility to finance a self storage bridge loan. The facility bears interest at a rate of 230 basis points over LIBOR and matures in February 2020, with a one-year extension option.

Agency Business

In August 2018, we amended our $100.0 million repurchase facility to increase the committed amount by $100.0 million to $200.0 million, reduced the interest rate from 135 basis points over LIBOR to 127.5 basis points over LIBOR and extended the maturity to August 2019.

In August 2018, we increased our letter of credit outstanding with Fannie Mae by $2.0 million to $44.0 million. Our letters of credit outstanding at September 30, 2018 also includes a $5.0 million letter of credit for the Freddie Mac SBL program.

In April 2018, we amended our $150.0 million credit facility reducing the interest rate 5 basis points to 130 basis points over LIBOR, and, in August 2018, we amended this facility extending the maturity to July 2019.

In January 2018, we amended our $150.0 million warehouse facility reducing the interest rate 10 basis points to 130 basis points over LIBOR and extending the maturity to January 2019.

Collateralized Loan Obligations (“CLOs”)

We account for CLO transactions on our consolidated balance sheet as financing facilities. Our CLOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings, and are non-recourse to us.

The following table outlines borrowings and the corresponding collateral under our CLOs ($ in thousands):


	Debt						Collateral (3)
							Loans				Cash
	Face		Carrying		Wtd. Avg.				Carrying		Restricted
September 30, 2018	Value		Value (1)		Rate (2)		UPB		Value		Cash (4)
CLO X	$	441,000	$	436,132	3.76	%	$	510,303	$	508,357	$	42,032
CLO IX		356,400		351,934	3.67	%		417,089		415,776		3,911
CLO VIII		282,874		279,538	3.62	%		304,078		303,302		39,409
CLO VII		279,000		276,221	4.31	%		285,134		284,322		43,885
CLO VI		250,250		248,264	4.81	%		276,083		275,086		40,342
Total CLOs	$	1,609,524	$	1,592,089	3.98	%	$	1,792,687	$	1,786,843	$	169,579


December 31, 2017
CLO IX	$	356,400	$	351,042	2.97	%	$	372,350	$	371,236	$	88,650
CLO VIII		282,874		278,606	2.92	%		364,838		363,339		162
CLO VII		279,000		275,331	3.61	%		346,524		345,220		13,476
CLO VI		250,250		247,470	4.10	%		314,382		313,582		10,618
CLO V		267,750		265,973	4.06	%		347,797		346,803		2,203
Total CLOs	$	1,436,274	$	1,418,422	3.48	%	$	1,745,891	$	1,740,180	$	115,109

(1)

Debt carrying value is net of $17.4 million and $17.9 million of deferred financing fees at September 30, 2018 and December 31, 2017, respectively.

(2)

At September 30, 2018 and December 31, 2017, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 4.49% and 4.08%, respectively.

(3)

As of September 30, 2018 and December 31, 2017, there was no collateral at risk of default or deemed to be a “credit risk” as defined by the CLO indenture.

(4)

Represents restricted cash held for principal repayments as well as for reinvestment in the CLOs. Does not include restricted cash related to interest payments, delayed fundings and expenses.

CLO X - In June 2018, we completed a collateralized securitization vehicle ("CLO X"), issuing seven tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $494.2 million. Of the total CLO notes issued, $441.0 million were investment grade notes issued to third party investors and $53.2 million were below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $501.9 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has a four-year replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $58.1 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $560.0 million, representing leverage of 79%. We retained a residual interest in the portfolio with a notional amount of $119.0 million, including the $53.2 million below investment grade notes. The notes had an initial weighted average interest rate of 1.45% plus one-month LIBOR and interest payments on the notes are payable monthly.

CLO V - In June 2018, we completed the unwind of CLO V, redeeming $267.8 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within our existing financing facilities (including CLO X), as well as with cash held by CLO V, and expensed $1.3 million of deferred financing fees into interest expense on the consolidated statements of income.

Luxembourg Debt Fund

In November 2017, we formed a $100.0 million Luxembourg commercial real estate debt fund ("Debt Fund") and issued $70.0 million of floating rate notes to third party investors which bear an initial interest rate of 4.15% over LIBOR. The notes mature in 2025 and we retained a $30.0 million equity interest in the Debt Fund. The Debt Fund is a VIE for which we are the primary beneficiary and is consolidated in our financial statements. The Debt Fund is secured by a portfolio of loan obligations with a face value of $100.0 million, which includes first mortgage bridge loans, senior participation interests in first mortgage bridge loans, subordinate participation interest in first mortgage bridge loans and participation interests in mezzanine loans. The Debt Fund allows, for a period of three years, principal proceeds from portfolio assets to be reinvested in qualifying replacement assets, subject to certain conditions.

Borrowings and the corresponding collateral under our Debt Fund are as follows ($ in thousands):


	Debt							Collateral (3)
								Loans				Cash
	Face		Carrying		Wtd. Avg.					Carrying		Restricted
Period	Value		Value (1)		Rate (2)			UPB		Value		Cash (4)
September 30, 2018	$	70,000	$	68,099		6.50	%	$	98,696	$	98,261	$	—


December 31, 2017		$	70,000		$	68,084			5.79	%	$	96,995		$	96,564		$	3,005

(1)

Debt carrying value is net of $1.9 million of deferred financing fees at both September 30, 2018 and December 31, 2017.

(2)

At September 30, 2018 and December 31, 2017, the aggregate weighted average note rate, including certain fees and costs, was 7.08% and 6.05%, respectively.

(3)

At both September 30, 2018 and December 31, 2017, there was no collateral at risk of default or deemed to be a “credit risk.”

(4)

Represents restricted cash held for reinvestment. Excludes restricted cash related to interest payments, delayed fundings and expenses.

Senior Unsecured Notes

In March 2018, we issued $100.0 million aggregate principal amount of 5.625% senior unsecured notes due in May 2023 (the "Initial Notes") in a private placement, and, in May 2018, we issued an additional $25.0 million (the "Reopened Notes" and, together with the Initial Notes, the "5.625% Notes,") which brought the aggregate outstanding principal amount to $125.0 million. The Reopened Notes are fully fungible with, and rank equally in right of payment with the Initial Notes. We received total proceeds of $122.3 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds from the Initial Notes to fully redeem our 7.375% senior unsecured notes due in 2021 (the “7.375% Notes") totaling $97.9 million and the net proceeds from the Reopened Notes to make investments and for general corporate purposes. The 5.625% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2023, at a redemption price equal to 100% of the aggregate principal amount, plus a "make-whole" premium and accrued and unpaid interest. We have the right to redeem the 5.625% Notes on or after April 1, 2023, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in May and November starting in November 2018. At September 30, 2018, the debt carrying value of the 5.625% Notes was $122.4 million, net of $2.6 million of deferred financing fees, and the weighted average note rate was 6.08%, including certain fees and costs.

At December 31, 2017, the debt carrying value of our 7.375% Notes was $95.3 million, which was net of $2.6 million of deferred financing fees, and the weighted average note rate was 8.16%.

Convertible Senior Unsecured Notes

We issued $264.5 million in aggregate principal amount of 5.25% convertible senior notes (the "5.25% Convertible Notes”) through two separate private placement offerings during the three months ended September 30, 2018, which includes the exercised purchaser’s total over-allotment option of $34.5 million. The 5.25% Convertible Notes pay interest semiannually in arrears and are scheduled to mature in July 2021, unless earlier converted or repurchased by the holders pursuant to their terms. The initial conversion rates of the two offerings ($115.0 million issued on July 3, 2018 and $149.5 million issued on July 20, 2018) were 86.9943 shares and 77.8331 shares of common stock per $1,000 of principal, respectively, representing a conversion price of $11.50 per share and $12.85 per share of common stock, respectively. The initial conversion rates and conversion prices remain unchanged at September 30, 2018.

We received proceeds totaling $256.1 million from the offerings of our 5.25% Convertible Notes, net of the underwriter’s discount and fees, which is being amortized through interest expense over the life of such notes. We used the net proceeds from the issuance primarily for the initial exchange of $127.6 million of our 5.375% convertible senior unsecured notes (the “5.375% Convertible Notes”) and $99.8 million of our 6.50% convertible senior unsecured notes (the “6.50% Convertible Notes”) for a combination of $219.8 million in cash (which includes accrued interest) and 6.8 million shares of our common stock. The remaining net proceeds were used for general corporate purposes. In the three months ended September 30, 2018, we recorded a loss on extinguishment of debt of $5.0 million in connection with these exchanges, which included an inducement charge of $1.1 million.

At September 30, 2018, there were $16.2 million and $0.2 million aggregate principal amount remaining of our 5.375% Convertible Notes and 6.50% Convertible Notes, respectively. The initial conversion rates of the 5.375% Convertible Notes and 6.50% Convertible Notes were 107.7122 shares and 119.3033 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $9.28 per share and $8.38 per share of common stock, respectively. At September 30, 2018, the 5.375% Convertible Notes and 6.50% Convertible Notes had conversion rates of 109.2211 shares and 123.2929 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $9.16 per share and $8.11 per share of common stock, respectively. The 5.375% Convertible Notes and 6.50% Convertible Notes pay interest semiannually in arrears and have scheduled maturity dates in November 2020 and October 2019, respectively, unless earlier converted or repurchased by the holders pursuant to their terms.

Our convertible senior unsecured notes are not redeemable by us prior to their maturities and are convertible into, at our election, cash, shares of our common stock or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The conversion rates are subject to adjustment upon the occurrence of certain specified events and the holders may require us to repurchase all, or any portion, of their notes for cash equal to 100% of the principal amount, plus accrued and unpaid interest, if we undergo a fundamental change specified in the agreements. We intend to settle the principal balance of our convertible debt in cash and have not assumed share settlement of the principal balance for purposes of computing EPS. At the time of issuance, there is no precedent or policy that would indicate that we would settle the principal in shares or the conversion spread in cash.

Accounting guidance requires that convertible debt instruments with cash settlement features, including partial cash settlement, account for the liability component and equity component (conversion feature) of the instrument separately. The initial value of the liability component reflects the present value of the discounted cash flows using the nonconvertible debt borrowing rate at the time of the issuance. The debt discount represents the difference between the proceeds received from the issuance and the initial carrying value of the liability component, which is accreted back to the notes principal amount through interest expense over the term of the notes, which was 2.72 years and 2.41 years at September 30, 2018 and December 31, 2017, respectively, on a weighted average basis.

The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes were as follows (in thousands):


	Liability								Equity
	Component								Component
			Unamortized Debt		Unamortized Deferred		Net Carrying		Net Carrying
Period	UPB		Discount		Financing Fees		Value		Value
September 30, 2018	$	280,816	$	9,285	$	7,878	$	263,653	$	9,436

December 31, 2017	$	243,750	$	5,742	$	6,721	$	231,287	$	6,733

During the three months ended September 30, 2018, we incurred total aggregate interest expense on the notes of $5.0 million, of which $3.1 million, $1.0 million and $0.9 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively. During the nine months ended September 30, 2018, we incurred total interest expense on the notes of $16.0 million, of which $9.9 million, $4.1 million and $2.0 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively. During the three months ended September 30, 2017, we incurred total interest expense on the notes of $2.2 million, of which $1.6 million, $0.4 million and $0.2 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively. During the nine months ended September 30, 2017, we incurred total interest expense on the notes of $6.6 million, of which $4.8 million, $1.1 million and $0.7 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively. Including the amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes is 7.45% per annum.

Junior Subordinated Notes

In the first quarter of 2017, we purchased, at a discount, $20.9 million of our junior subordinated notes with a carrying value of $19.8 million and recorded a gain on extinguishment of debt of $7.1 million. As a result, we settled our related equity investment and extinguished $21.5 million of notes. The carrying value of borrowings under our junior subordinated notes were $140.1 million and $139.6 million at September 30, 2018 and December 31, 2017, respectively, which is net of a deferred amount of $12.1 million and $12.5 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $2.1 million and $2.2 million, respectively. These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a fixed or floating rate of interest based on LIBOR. The current weighted average note rate was 5.25% and 4.53% at September 30, 2018 and December 31, 2017, respectively. Including certain fees and costs, the weighted average note rate was 5.34% and 4.63% at September 30, 2018 and December 31, 2017, respectively.

Related Party Financing

In connection with the Acquisition, we entered into a five year $50.0 million preferred equity interest financing agreement with ACM to finance a portion of the aggregate purchase price. At December 31, 2017, the outstanding principal balance was $50.0 million. In January 2018, we paid $50.0 million in full satisfaction of this debt. During the nine months ended September 30, 2018, we recorded interest expense of $0.3 million and, during the three and nine months ended September 30, 2017, we recorded interest expense of $1.0 million and $2.9 million, respectively.

Debt Covenants

Credit Facilities and Repurchase Agreements. The credit facilities and repurchase agreements contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests. We were in compliance with all financial covenants and restrictions at September 30, 2018.

CLOs. Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date for us to receive such payments. If we fail these covenants in any of our CLOs, all cash flows from the applicable CLO would be diverted to repay principal and interest on the outstanding CLO bonds and we would not receive any residual payments until that CLO regained compliance with such tests. Our CLOs were in compliance with all such covenants as of September 30, 2018, as well as on the most recent determination dates in October 2018. In the event of a breach of the CLO covenants that could not be cured in the near-term, we would be required to fund our non-CLO expenses, including employee costs, distributions required to maintain our REIT status, debt costs, and other expenses with (i) cash on hand, (ii) income from any CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, or (v) accessing the equity or debt capital markets, if available. We have the right to cure covenant breaches which would resume normal residual payments to us by purchasing non-performing loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time.

A summary of our CLO compliance tests as of the most recent determination dates in October 2018 is as follows:


Cash Flow Triggers	CLO VI		CLO VII		CLO VIII		CLO IX		CLO X
Overcollateralization (1)

Current	129.87	%	129.03	%	129.03	%	134.68	%	126.98	%
Limit	128.87	%	128.03	%	128.03	%	133.68	%	125.98	%
Pass / Fail	Pass		Pass		Pass		Pass		Pass

Interest Coverage (2)

Current	208.68	%	212.40	%	268.75	%	276.05	%	236.32	%
Limit	120.00	%	120.00	%	120.00	%	120.00	%	120.00	%
Pass / Fail	Pass		Pass		Pass		Pass		Pass

(1)

The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC-) as defined in each CLO vehicle.

(2)

The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.

Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows:


Determination (1)	CLO VI		CLO VII		CLO VIII		CLO IX		CLO X
October 2018	129.87	%	129.03	%	129.03	%	134.68	%	126.98	%
July 2018	129.87	%	129.03	%	129.03	%	134.68	%	126.98	%
April 2018	129.87	%	129.03	%	129.03	%	134.69	%	—
January 2018	129.87	%	129.03	%	129.03	%	134.68	%	—
October 2017	129.87	%	129.03	%	129.03	%	—		—

(1)

The table above represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods presented.

The ratio fluctuates based on the performance of the underlying assets, transfers of assets into the CLOs prior to expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs. No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee. The junior subordinated indentures are also cross-defaulted with each other.