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Related-party arrangements
 6 Months Ended
Jun. 30, 2012
Related-party arrangements [Abstract]  
Related-party arrangements

11. Related-party arrangements

In October 2007, the Company entered into a $350.0 million loan arrangement with its principal stockholder. In February 2009, the promissory note underlying the loan arrangement was revised as a result of the principal stockholder being licensed as a finance lender under the California Finance Lenders Law. Accordingly, the lender was revised to The Mann Group. Interest accrues on each outstanding advance at a fixed rate equal to the one-year LIBOR rate as reported by the Wall Street Journal on the date of such advance plus 3% per annum and is payable quarterly in arrears. The borrowing rate was 4.5% at both June 30, 2012 and December 31, 2011, respectively. In August 2010, the Company amended and restated the promissory note to extend the maturity date from December 31, 2011 to December 31, 2012. In January 2012, the Company amended the note with The Mann Group to extend the maturity date from December 31, 2012 to March 31, 2013 and to extend the date through which the Company can continue to borrow under the amended terms of the note until June 30, 2012. In addition, interest is payable on the first day of the calendar quarter following the calendar quarter in which an advance is made, or such other time as the Company and The Mann Group mutually agree. On May 9, 2012, the Company amended the note with The Mann Group to extend the maturity date of the $350.0 million loan arrangement from March 31, 2013 to July 1, 2013. Under the amended and restated promissory note The Mann Group may require the Company to prepay up to $200.0 million in advances that have been outstanding for at least 12 months. If The Mann Group exercises this right, the Company will have 90 days after The Mann Group provides written notice (or the number of days to maturity of the note if less than 90 days) to prepay such advances. On June 27, 2012, the Company amended the note with the Mann Group to allow accrued and unpaid interest that becomes due and payable under the note to be paid-in-kind and capitalized into new principal indebtedness upon agreement of the parties. In addition, the Company and The Mann Group agreed that the cancelled principal amount related to the common stock purchase agreement (see Note 6 – Common and preferred stock) would be permanently retired and not available for re-borrowing under the note. The amendment also extends the date through which the Company can borrow under the note to December 31, 2012.

In August 2010, the Company entered into a letter agreement confirming a previous commitment by The Mann Group to not require the Company to prepay amounts outstanding under the amended and restated promissory note if the prepayment would require the Company to use its working capital resources. In the event of a default, all unpaid principal and interest either becomes immediately due and payable or may be accelerated at The Mann Group’s option, and the interest rate will increase to the one-year LIBOR rate calculated on the date of the initial advance or in effect on the date of default, whichever is greater, plus 5% per annum. All borrowings under the loan arrangement are unsecured. The loan arrangement contains no financial covenants. There are no warrants associated with the loan arrangement.

The principal amount outstanding under the loan arrangement as of June 30, 2012, subsequent to the completion of the common stock purchase agreement was as follows (in thousands):

 

         

Principal amount outstanding at December 31, 2011

   $ 277,216  

Borrowings

     6,250  

Capitalization of accrued and unpaid interest due and payable as of June 27, 2012

  

 

11,876

  

Cancellation of principal indebtedness related to the common stock purchase agreement completed on June 27, 2012

  

 

(77,200

) 
   

 

 

  

Principal amount outstanding at June 30, 2012

   $ 218,142  
   

 

 

  

As of June 30, 2012, the Company had accrued interest of $97,500 related to the remaining principal outstanding and $26.9 million of available borrowings remained under the loan arrangement.

On February 8, 2012, the Company sold $86.3 million worth of units in an underwritten public offering, with each unit consisting of one share of common stock and a warrant to purchase 0.6 of a share of common stock. Concurrent with this public offering, The Mann Group LLC purchased $77.2 million worth of restricted shares of common stock and on June 27, 2012, the Company completed the closing of the sale of 31,250,000 share of its common stock (see Note 8 – Common and preferred stock and Note 11 – Related-party arrangements).