Note 11—Debt Obligations

Credit Facilities and Repurchase Agreements

Borrowings under our credit facilities and repurchase agreements are as follows ($ in thousands):


	December 31, 2019								December 31, 2018
			Debt		Collateral						Debt		Collateral
			Carrying		Carrying		Wtd. Avg.				Carrying		Carrying		Wtd. Avg.
	UPB		Value (1)		Value		Note Rate		UPB		Value (1)		Value		Note Rate
Structured Business
$400 million joint repurchase facility	$	225,051	$	224,658	$	339,378	4.06	%	$	336,428	$	334,696	$	467,680	4.75	%
$300 million repurchase facility		218,891		218,418		291,292	3.76	%		—		—		—	—
$200 million repurchase facility		40,612		40,530		48,086	4.22	%		—		—		—	—
$128.7 million loan specific credit facilities		128,677		128,274		184,116	4.13	%		85,044		84,701		124,844	4.93	%
$100 million repurchase facility		45,962		45,843		63,800	3.56	%		71,017		70,837		98,597	4.31	%
$75 million credit facility		4,690		4,570		7,000	3.56	%		10,237		10,237		16,889	4.31	%
$75 million credit facility		—		—		—	—			—		—		—	—
$50 million credit facility		14,948		14,933		17,650	3.81	%		14,160		14,159		17,700	4.57	%
$50 million credit facility		12,349		12,191		16,499	4.32	%		—		—		—	—
$50 million credit facility		5,280		5,254		6,600	4.32	%		—		—		—	—
$25 million credit facility		19,936		19,651		28,572	4.07	%		—		—		—	—
$25 million working capital facility		—		—		—	—			—		—		—	—
$20 million credit facility		—		—		—	—			20,000		19,912		41,650	5.07	%
$8 million credit facility		—		—		—	—			8,000		7,946		10,000	5.07	%
$3.3 million master security agreements		3,267		3,267		—	4.08	%		2,846		2,846		—	4.06	%
Repurchase facilities-securities (2)		217,105		217,105		—	3.90	%		118,112		118,112		—	5.07	%
Structured Business total	$	936,768	$	934,694	$	1,002,993	3.94	%	$	665,844	$	663,446	$	777,360	4.78	%
Agency Business
$750 million ASAP agreement	$	148,725	$	148,725	$	148,725	2.81	%	$	104,619	$	104,619	$	104,619	3.55	%
$500 million repurchase facility		187,742		187,698		187,742	2.91	%		130,917		130,906		130,917	3.78	%
$300 million joint repurchase facility		300,446		299,824		300,446	3.26	%		—		—		—	—
$250 million credit facility		—		—		—	—			26,651		26,651		26,651	3.75	%
$150 million credit facility		89,673		89,657		89,673	2.91	%		113,685		113,666		113,685	3.80	%
$150 million credit facility		17,792		17,690		17,792	2.91	%		96,419		96,339		96,419	3.80	%
Agency Business total	$	744,378	$	743,594	$	744,378	3.03	%	$	472,291	$	472,181	$	472,291	3.74	%
Consolidated total	$	1,681,146	$	1,678,288	$	1,747,371	3.54	%	$	1,138,135	$	1,135,627	$	1,249,651	4.35	%

(1)

The debt carrying value for the Structured Business at December 31, 2019 and 2018 was net of unamortized deferred finance costs of $2.1 million and $2.4 million, respectively. The debt carrying value for the Agency Business at December 31, 2019 and 2018 was net of unamortized deferred finance costs of $0.2 million and $0.1 million, respectively.

(2)As of December 31, 2019 and 2018, these facilities were collateralized by CLO bonds retained by us with a principal balance of $234.9 million and $114.2 million, respectively, B Piece bonds with a carrying value of $68.7 million and $76.4 million, respectively, and SFR bonds with a carrying value of $20.0 million at December 31, 2019.

Joint Repurchase Facility. We have a $700.0 million joint repurchase facility, which is shared between the Structured Business and the Agency Business, used to finance structured loans as well as Private Label loans. The facility bears interest at a rate of 175 basis points over LIBOR on structured multifamily senior mortgage loans, 200 to 225 basis points over LIBOR on structured non-multifamily senior mortgage loans, 350 basis points over LIBOR on structured junior mortgage loans and 150 basis points over LIBOR on Private Label loans. The facility matures in March 2020, with a one-year extension option, and has a maximum advance rate of 80% on all structured loans and 85% on Private Label loans. If the estimated market value of the loans financed in this facility decrease, we may be required to pay down borrowings under this facility.

Structured Business. We utilize credit facilities and repurchase agreements with various financial institutions to finance our Structured Business loans and investments as described below.

At December 31, 2019 and 2018, 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 4.39% and 5.07%, respectively. The leverage on our loan and investment portfolio financed through our credit facilities and repurchase agreements, excluding the securities repurchase facilities, working capital facility and the master security agreements used to finance leasehold and capital expenditure improvements at our corporate office, was 71% and 70% at December 31, 2019 and 2018, respectively.

We have a $300.0 million repurchase facility to finance loans that bears interest at a rate of 195 basis points over LIBOR that matures in December 2020, with quarterly extension options having an extended maturity date no later than March 2023. The facility has a maximum advance rate of 80%.

We have a $200.0 million repurchase facility to finance single-family rental properties that bears interest at a rate of 240 basis points over LIBOR and matures in August 2020, with six-month extension options in perpetuity.

We have several loan specific credit facilities totaling $128.7 million used to finance individual bridge loans. The facilities bear interest at rates ranging from 210 to 250 basis points over LIBOR and mature between May 2020 and May 2022.

We have a $100.0 million repurchase facility to finance multifamily bridge loans that bears interest at a rate ranging from 175 to 195 basis points over LIBOR (depending on the class of loan financed) and matures in June 2020. The facility has a maximum advance rate of 80%.

We have a $75.0 million credit facility to finance multifamily bridge loans that bears interest at 175 basis points over LIBOR and matures in May 2020, with three one-year extension options. This facility includes a $25.0 million sublimit to finance healthcare related loans at an interest rate ranging from 212.5 to 250 basis points over LIBOR depending on the type of healthcare facility financed and the advance rate. The facility has a maximum advance rate of 80% on multifamily bridge loans and 75% on healthcare related loans.

We have another $75.0 million credit facility to finance bridge loans that bears interest at a rate of 175 basis points over LIBOR and matures in June 2020. The facility has a maximum advance rate of 70% to 80%, depending on the property type.

We have a $50.0 million credit facility to finance multifamily loans that bears interest at a rate of 200 basis points over LIBOR and matures in April 2020, with two one-year extension options. This facility has a maximum advance rate of 80%.

We have a $50.0 million credit facility to finance single-family rental properties that bears interest at a rate of 250 basis points over LIBOR with an interest rate floor of 4.00%. The facility matures in October 2022, with a one-year extension option, and has a maximum advance rate equal to the lesser of: (1) 75% of the UPB, (2) 50% of the appraised value of the collateral, or (3) 55% of the projected cost of construction.

We have another $50.0 million credit facility that bears interest at a rate ranging from 250 to 325 basis points over LIBOR, depending on the type of healthcare facility financed, and matures in September 2020. The facility includes a one-year extension option and has a maximum advance rate of 80%.

We have a $25.0 million credit facility used to purchase loans. The facility bears interest at a rate of 225 basis points over LIBOR and matures in June 2022, with a one-year extension option.

We have a $25.0 million unsecured working capital line of credit that bears interest at a rate of 225 basis points over LIBOR. This line matures in August 2020 and is renewable annually.

We had a $20.0 million credit facility used to finance a healthcare facility bridge loan. The facility bore interest at a rate of 250 basis points over LIBOR and, in the fourth quarter of 2019, the facility was repaid and the loan collateralizing this facility was placed into another facility.

We had an $8.0 million credit facility used to finance a healthcare facility bridge loan. The facility bore interest at a rate of 250 basis points over LIBOR and, in the second quarter of 2019, the loan collateralizing this facility was placed into a CLO and we simultaneously repaid this facility.

We have four notes payable under master security agreements that were used to finance leasehold improvements and capital expenditures for our corporate office. The notes bear interest at a weighted average fixed rate of 4.08%, require monthly amortization payments and mature between 2020 and 2022.

We have four uncommitted repurchase facilities that are used to finance securities we retained in connection with our CLOs and our purchases of B Piece bonds from SBL program securitizations and SFR bonds. These facilities bear interest at rates ranging from 120 to 275 basis points over LIBOR and have no stated maturity dates.

Agency Business. We utilize credit facilities with various financial institutions to finance substantially all of our loans held-for-sale as described below.

We have a $750.0 million ASAP agreement with Fannie Mae providing us with a warehousing credit facility for mortgage loans that are to be sold to Fannie Mae and serviced under the Fannie Mae DUS program. The ASAP agreement is not a committed line, has no expiration date and bears interest at a rate of 105 basis points over LIBOR, with a LIBOR Floor of 0.35%.

We have a $500.0 million repurchase facility that bears interest at a rate of 115 basis points over LIBOR and matures in October 2020. The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have a $100.0 million repurchase facility that bears interest at a rate of 115 basis points over LIBOR and matures in June 2020. The committed amount under the facility was temporarily increased $150.0 million to $250.0 million, which expired in January 2020. The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have a $150.0 million credit facility that bears interest at a rate of 115 basis points over LIBOR and was scheduled to mature in January 2020, which was temporarily extended to March 2020. We are currently in negotiations with the lender to further amend and extend the agreement. The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have another $150.0 million credit facility that bears interest at a rate of 115 basis points over LIBOR and matures in July 2020. The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have a $50.0 million letter of credit facility with a financial institution to secure obligations under the Fannie Mae DUS program and the Freddie Mac SBL program. The facility bears interest at a fixed rate of 2.875%, matures in September 2020 and is primarily collateralized by our servicing revenue as approved by Fannie Mae and Freddie Mac. The facility includes a $5.0 million sublimit for an obligation under the Freddie Mac SBL program. At December 31, 2019, the letters of credit outstanding include $45.0 million for the Fannie Mae DUS program and $5.0 million for the Freddie Mac SBL program.

CLOs

We account for our 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.

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


							Collateral (3)
	Debt						Loans				Cash
			Carrying		Wtd. Avg.				Carrying		Restricted
December 31, 2019	Face Value		Value (1)		Rate (2)		UPB		Value		Cash (4)

CLO XII	$	534,193	$	529,448	3.30	%	$	596,366	$	593,652	$	17,800
CLO XI		533,000		528,690	3.25	%		624,443		621,508		15,550
CLO X		441,000		437,391	3.26	%		509,887		507,854		37,287
CLO IX		356,400		353,473	3.17	%		407,696		406,463		47,230
CLO VIII		282,874		281,119	3.12	%		359,186		357,914		544
Total CLOs	$	2,147,467	$	2,130,121	3.23	%	$	2,497,578	$	2,487,391	$	118,411


	Debt						Collateral (3)
							Loans				Cash
			Carrying		Wtd. Avg.				Carrying		Restricted
December 31, 2018	Face Value		Value (1)		Rate (2)		UPB		Value		Cash (4)

CLO X	$	441,000	$	436,384	4.01	%	$	539,007	$	536,869	$	20,993
CLO IX		356,400		352,244	3.92	%		440,906		439,691		20,094
CLO VIII		282,874		279,857	3.87	%		354,713		353,574		10,287
CLO VII		279,000		276,527	4.56	%		325,057		324,195		30,725
CLO VI		250,250		248,536	5.05	%		279,348		278,364		41,404
Total CLOs	$	1,609,524	$	1,593,548	4.22	%	$	1,939,031	$	1,932,693	$	123,503

(1)

Debt carrying value is net of $17.3 million and $16.0 million of deferred financing fees at December 31, 2019 and 2018, respectively.

(2)

At December 31, 2019 and 2018, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 3.63% and 4.73%, respectively.

(3)

As of December 31, 2019 and 2018, 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 totaling $58.6 million and $25.1 million at December 31, 2019 and 2018, respectively.

CLO XII. In November 2019, we completed CLO XII, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $585.8 million. Of the total CLO notes issued, $534.2 million were investment grade notes issued to third party investors and $51.6 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 $510.9 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has a three-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 $124.1 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $635.0 million, representing leverage of 84%. We retained a residual interest in the portfolio with a notional amount of $100.8 million, including the $51.6 million below investment grade notes. The notes had an initial weighted average interest rate of 1.50% plus one-month LIBOR and interest payments on the notes are payable monthly.

CLO XI. In June 2019, we completed CLO XI, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $602.1 million. Of the total CLO notes issued, $533.0 million were investment grade notes issued to third party investors and $69.1 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 $520.4 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has a three-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 $129.6 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 $650.0 million, representing leverage of 82%. We retained a residual interest in the portfolio with a notional amount of $117.0 million, including the $69.1 million below investment grade notes. The notes had an initial weighted average interest rate of 1.44% plus one-month LIBOR and interest payments on the notes are payable monthly.

CLO X. In June 2018, we completed 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 stated maturity date in June 2028 and 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 were 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 IX. In December 2017, we completed CLO IX, issuing five tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $388.2 million. Of the total CLO notes issued, $356.4 million were investment grade notes issued to third party investors and $31.8 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 $387.3 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has a stated maturity date in December 2027 and a three-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 $92.7 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which were subsequently utilized, resulting in the issuer owning loan obligations with a face value of $480.0 million, representing leverage of 74%. We retained a residual interest in the portfolio with a notional amount of $123.6 million, including the $31.8 million below investment grade notes. The notes had an initial weighted average interest rate of 1.36% plus LIBOR and interest payments on the notes are payable monthly.

CLO VIII. In August 2017, we completed CLO VIII, issuing six tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $312.1 million. Of the total CLO notes issued, $282.9 million were investment grade notes issued to third party investors and $29.2 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 $293.7 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has a stated maturity date in August 2027 and a three-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 $71.3 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which were subsequently utilized, resulting in the issuer owning loan obligations with a face value of $365.0 million, representing leverage of 78%. We retained a residual interest in the portfolio with a notional amount of $82.1 million, including the $29.2 million below investment grade notes. The notes had an initial weighted average interest rate of 1.31% plus LIBOR and interest payments on the notes are payable monthly.

CLO VII. In November 2019, we unwound CLO VII redeeming $279.0 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within our existing financing facilities (including CLO XII), as well as with cash held by CLO VII, and expensed $1.4 million of deferred financing fees into interest expense on the consolidated statements of income.

CLO VI. In June 2019, we unwound CLO VI redeeming $250.3 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within our existing financing facilities (including CLO XI), as well as with cash held by CLO VI, and expensed $1.2 million of deferred financing fees into interest expense on the consolidated statements of income.

CLO V. In June 2018, we unwound 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.

CLO IV. In September 2017, we unwound CLO IV, redeeming $219.0 million of our outstanding notes which were repaid primarily from the refinancing of the remaining assets within our existing financing facilities (including CLO VIII), as well as with cash held by CLO IV, and expensed $1.1 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 Debt Fund and issued $70.0 million of floating rate notes to third party investors which bore 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 and cash 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):


							Collateral (3)
	Debt						Loans				Cash
	Face		Carrying		Wtd. Avg.				Carrying		Restricted
Period	Value		Value (1)		Rate (2)		UPB		Value		Cash (4)
December 31, 2019	$	70,000	$	68,629	5.99	%	$	70,755	$	68,629	$	29,245
December 31, 2018	$	70,000	$	68,183	6.75	%	$	69,186	$	68,924	$	30,814

(1)

Debt carrying value is net of $1.4 million and $1.8 million of deferred financing fees at December 31, 2019 and 2018, respectively.

(2)

At December 31, 2019 and 2018, the aggregate weighted average note rate, including certain fees and costs, was 7.17% and 7.49%, respectively.

(3)

At both December 31, 2019 and 2018, 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 October 2019, we issued $110.0 million aggregate principal amount of 4.75% senior unsecured notes due in October 2024 (the “4.75% Notes”) in a private placement. We received proceeds of $108.2 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds to make investments and for general corporate purposes. The 4.75% Notes are unsecured and can be redeemed by us at any time prior to October 15, 2024, 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 4.75% Notes on or after October 15, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in April and October starting in April 2020. At December 31, 2019, the debt carrying value of the 4.75% Notes was $108.4 million, net of $1.6 million of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 5.23%.

In March 2019, we issued $90.0 million aggregate principal amount of 5.75% senior unsecured notes due in April 2024 (the “5.75% Notes”) in a private placement. We received proceeds of $88.2 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds to make investments and for general corporate purposes. The 5.75% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2024, 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 5.75% Notes on or after April 1, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in April and October. At December 31, 2019, the debt carrying value of the 5.75% Notes was $88.4 million, net of $1.6 million of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 6.18%.

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% 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. At December 31, 2019 and 2018, the debt carrying value of the 5.625% Notes were $123.1 million and $122.5 million, respectively, net of $1.9 million and $2.5 million, respectively, of deferred financing fees. At both December 31, 2019 and 2018, the weighted average note rate was 6.08%, respectively, including certain fees and costs.

Convertible Senior Unsecured Notes

In November 2019, we issued $264.0 million in aggregate principal amount of 4.75% convertible notes through a private placement offering, which includes the exercised purchaser’s total over-allotment option of $34.0 million. The 4.75% convertible notes pay interest semiannually in arrears and are scheduled to mature in November 2022, unless earlier converted or repurchased by the holders pursuant to their terms. The initial conversion rate and the conversion rate at December 31, 2019 was 56.1695 shares of common stock per $1,000 of principal representing a conversion price of $17.80 per share of common stock. We received proceeds totaling $256.5 million, 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 exchange of $228.7 million of our 5.25% convertible notes for a combination of $233.1 million in cash (which includes accrued interest) and 4,478,315 shares of our common stock. The remaining net proceeds were used for general corporate purposes. During 2019, we recorded a loss on extinguishment of debt of $7.3 million in connection with this exchange, which included an inducement charge of $1.1 million.

In 2018, we completed a similar exchange where we used the net proceeds from two separate private placements of our 5.25% convertible notes to initially exchange $127.6 million of our 5.375% convertible notes and $99.8 million of our 6.50% convertible notes for a combination of $219.8 million in cash (which includes accrued interest) and 6,820,196 shares of our common stock. During 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 December 31, 2019, there were $11.5 million, $24.3 million and $1.1 million aggregate principal amount remaining of our 5.25% convertible notes issued on July 3, 2018, 5.25% convertible notes issued on July 20, 2018 and 5.375% convertible notes, respectively. The initial conversion rates of the 5.25% convertible notes issued on July 3, 2018, 5.25% convertible notes issued on July 20, 2018 and 5.375% convertible notes were 86.9943 shares, 77.8331 shares and 107.7122 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $11.50 per share, $12.85 per share and $9.28 per share of common stock, respectively. At December 31, 2019, the 5.25% convertible notes issued on July 3, 2018, 5.25% convertible notes issued on July 20, 2018 and 5.375% convertible notes had conversion rates of 89.2795 shares, 79.8777 shares and 114.6568 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $11.20 per share, $12.52 per share and $8.72 per share of common stock, respectively. The 5.25% convertible notes and 5.375% convertible notes pay interest semiannually in arrears and have scheduled maturity dates in July 2021 and November 2020, 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 2.67 years and 2.49 years at December 31, 2019 and 2018, respectively, on a weighted average basis.

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


	Liability								Equity
	Component								Component
			Unamortized		Unamortized Deferred		Net Carrying		Net Carrying
Period	UPB		Debt Discount		Financing Fees		Value		Value
December 31, 2019	$	300,914	$	9,235	$	7,527	$	284,152	$	9,962
December 31, 2018	$	270,057	$	8,229	$	7,060	$	254,768	$	9,436

During 2019, we incurred total aggregate interest expense on the notes of $28.3 million, of which $13.5 million, $6.8 million and $7.9 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively. During 2018, we incurred total aggregate interest expense on the notes of $21.1 million, of which $13.4 million, $4.8 million and $2.9 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 was 6.80% and 7.45% at December 31, 2019 and 2018, respectively.

Junior Subordinated Notes

In 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. The carrying value of borrowings under our junior subordinated notes were $140.9 million and $140.3 million at December 31, 2019 and 2018, respectively, which is net of a deferred amount of $11.4 million and $12.0 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $2.0 million and $2.1 million, respectively. These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a floating rate based on LIBOR. The weighted average note rate was 4.75% and 5.66% at December 31, 2019 and 2018, respectively. Including certain fees and costs, the weighted average note rate was 4.83% and 5.75% at December 31, 2019 and 2018, respectively.

Debt Covenants

Credit Facilities, Repurchase Agreements and Unsecured Debt. The credit facilities, repurchase agreements and unsecured debt (senior and convertible notes) 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 December 31, 2019.

CLOs. Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date in order 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 December 31, 2019, as well as on the most recent determination dates in January 2020. 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.

Our CLO compliance tests as of the most recent determination dates in January 2020 are as follows:


Cash Flow Triggers	CLO VIII		CLO IX		CLO X		CLO XI		CLO XII
Overcollateralization (1)
Current	129.03	%	134.68	%	126.98	%	121.95	%	118.87	%
Limit	128.03	%	133.68	%	125.98	%	120.95	%	117.87	%
Pass / Fail	Pass		Pass		Pass		Pass		Pass

Interest Coverage (2)
Current	285.83	%	250.76	%	250.52	%	229.31	%	187.58	%
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 VIII		CLO IX		CLO X		CLO XI		CLO XII
January 2020	129.03	%	134.68	%	126.98	%	121.95	%	118.87	%
October 2019	129.03	%	134.68	%	126.98	%	121.95	%	—
July 2019	129.03	%	134.68	%	126.98	%	121.95	%	—
April 2019	129.03	%	134.69	%	126.98	%	—		—
January 2019	129.03	%	134.68	%	126.98	%	—		—

(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 will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the 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.