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Borrowings | 12 Months Ended
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Dec. 31, 2012
Borrowings | Note 8 – Borrowings At December 31, 2012 and 2011, the Company’s borrowings had the following weighted average maturities and interest rates:
|  | December 31, 2012 |  | December 31, 2011 |  |
|  | Debt Balance |  |  | Weighted Average Remaining Maturity |  |  | Weighted Average Rate |  | Debt Balance |  | Weighted Average Remaining Maturity |  | Weighted Average Rate |  |
Wells Facility borrowings |  | $ | 225,155 |  |  |  | 1.1 years | * |  | 1.8% |  | $221,980 |  | 1.6 years* |  | 1.5% |  | **
JPMorgan Facility borrowings |  |  | 3 |  |  |  | 5 days |  |  | 2.7% |  | 68,720 |  | 0.9 years |  | 3.3% |  | L+250 ***
TALF borrowings |  |  | — |  |  |  | — |  |  | —% |  | 251,327 |  | 1.3 years |  | 2.8% |  | Fixed
Total borrowings |  | $ | 225,158 |  |  |  | 1.1 years |  |  | 1.8% |  | $542,027 |  | 1.3 years |  | 2.3% |  |
* | Assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised. See below for a description of the Wells Facility.
** | Borrowings outstanding under the Wells Facility bear interest at a LIBOR plus 125 basis points, 150 basis points or 235 basis points depending on the collateral pledged.
*** | During April 2012, the Company amended the JPMorgan Facility to reduce the interest rate spread by 50 basis points to LIBOR + 250 basis points.
At December 31, 2012, the Company’s borrowings had the following remaining maturities:
|  | Less than 1 year |  |  | 1 to 3 years |  |  | 3 to 5 years |  |  | More than 5 years |  |  | Total |
Wells Facility borrowings* |  | $ | 179,068 |  |  | $ | 46,087 |  |  | $ | — |  |  | $ | — |  |  | $ | 225,155 |
JPMorgan Facility borrowings |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |
Total |  | $ | 179,071 |  |  | $ | 46,087 |  |  | $ | — |  |  | $ | — |  |  | $ | 225,158 |
* | Assumes extension options on Wells Facility with respect to the Hilton CMBS are exercised. See below for a description of the Wells Facility.
The Company’s collateralized financings consisted borrowings under the Wells Facility and the Company’s $100,000 master repurchase facility entered into with JPMorgan Chase Bank, N.A. (the “JPMorgan Facility”) as well as TALF borrowings in 2011. The table below summarizes the outstanding balances, as well as the maximum and average balances as of December 31, 2012 and 2011.
|  |  |  |  | 2012 |  |  |  |  |  | 2011 |
|  | Balance at December 31, 2012 |  |  | Maximum Month-End Balance |  |  | Average Month-End Balance |  |  | Balance at December 31, 2011 |  |  | Maximum Month-End Balance |  |  | Average Month-End Balance |
Wells Facility borrowings |  | $ | 225,155 |  |  | $ | 469,147 |  |  | $ | 283,100 |  |  | $ | 221,980 |  |  | $ | 242,728 |  |  | $ | 233,829 |
JPMorgan Facility borrowings |  |  | 3 |  |  |  | 68,720 |  |  |  | 37,461 |  |  |  | 68,720 |  |  |  | 69,014 |  |  |  | 52,261 |
TALF borrowings |  |  | — |  |  |  | 251,327 |  |  |  | 19,333 |  |  | $ | 251,327 |  |  | $ | 297,334 |  |  | $ | 271,035 |
Total |  | $ | 225,158 |  |  |  |  |  |  |  |  |  |  | $ | 542,027 |  |  |  |  |  |  |  |  |
TALF Borrowings. During 2010 and 2009, the Company secured $178,469 and $128,106, respectively, of financing through the TALF. The proceeds of the TALF loans were used to finance, in separately negotiated transactions, AAA-rated CMBS, with an aggregate face value of $210,908 and $151,045, respectively. All of the Company’s TALF loans were refinanced during 2012 with borrowings under the Wells Facility. Repurchase Agreements. In January 2010, the Company entered into the JPMorgan Facility. The Company may borrow up to $100,000 under the JPMorgan Facility in order to finance the origination and acquisition of commercial first mortgage loans and AAA-rated CMBS. Amounts borrowed under the JPMorgan Facility bear interest at a spread of 3.00% over one-month LIBOR with no floor. The JPMorgan Facility has a term of one-year, with two one-year extensions available at the Company’s option and upon the payment of the $500 extension fee for each one-year extension. The Company utilized the both extension options and the extended maturity date was January 4, 2013. The JPMorgan Facility contains, among others, the following restrictive covenants: (1) negative covenants relating to restrictions on the Company’s operations which would cease to allow the Company to qualify as a REIT and (2) financial covenants to be met by the Company when the repurchase facility is being utilized, including a minimum consolidated tangible net worth covenant ($125,000), maximum total debt to consolidated tangible net worth covenant (3:1), a minimum liquidity covenant (the greater of 10% of total consolidated recourse indebtedness and $12,500) and a minimum net income covenant ($1 during any four consecutive fiscal quarters). Additionally, beginning on the 91st day following the closing date and depending on the utilization rate of the facility, a portion of the undrawn amount may be subject to non-use fees. Subsequent to September 30, 2010, the non-use fee has been waived by the lender. During April 2012, the Company amended the JPMorgan Facility to reduce the interest rate spread by 50 basis points to LIBOR + 2.50%. The Company has borrowed under this facility from time to time as needed to fund the acquisition of additional assets. Upon the closing of the Company’s 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) offering August 2012, the Company repaid $53,014 of the Company’s outstanding borrowings under the JPMorgan Facility. At December 31, 2012, the Company had $3 of borrowings outstanding under the JPMorgan Facility. During August 2010, the Company through an indirect wholly-owned subsidiary entered into the Wells Facility pursuant to which the Company may borrow up to $250,000 in order to finance the acquisition of AAA-rated CMBS. The Wells Facility has a term of one year, with two one-year extensions available at the Company’s option, subject to certain restrictions, and upon the payment of an extension fee equal to 25 basis points on the then outstanding balance of the facility for each one-year extension. Advances under the Wells Facility accrue interest at a per annum pricing rate equal to the sum of (i) 30 day LIBOR and (ii) a pricing margin of 1.25%. The purchase price of the CMBS is determined on a per asset basis by applying an advance rate schedule agreed upon by the Company and Wells Fargo. The Wells Facility contains, among others, the following restrictive covenants: (1) negative covenants intended to restrict the Company from failing to qualify as a REIT and (2) financial covenants to be met by the Company, including a minimum net asset value covenant (which shall not be less than an amount equal to (i) $100,000, (ii) 75% of the greatest net asset value during the prior calendar quarter, and (iii) 65% of the greatest net asset value during the prior calendar year), a maximum total debt to consolidated tangible net worth covenant (8:1), a minimum liquidity covenant ($2,500), and a minimum EBITDA to interest expense covenant (1.5:1). The Company has agreed to provide a limited guarantee of up to 15%, or a maximum of $37,500, of the obligations of its indirect wholly-owned subsidiary under the Wells Facility. During December 2011, the Company, through an indirect wholly-owned subsidiary entered into an Amendment Letter related to the Wells Facility to increase its maximum permitted borrowing under the facility from $250,000 to $506,000 in order to pay down its TALF borrowings and to finance the CMBS that had been financed under the TALF program. The Amendment Letter additionally adjusts the pricing margin for all assets financed under the Wells Facility occurring after December 22, 2011 from 1.25% to 1.50%, and adds a minimum liquidity covenant, requiring the Company to maintain at all times an amount in Repo Liquidity (as generally defined under the Wells Facility to include all amounts held in the collection account established under the Wells Facility for the benefit of Wells Fargo Bank, N.A., cash, cash equivalents, super-senior CMBS rated AAA by at least two rating agencies, and total amounts immediately and unconditionally available on an unrestricted basis under all outstanding capital commitments, subscription facilities and secured revolving credit or repurchase facilities) no less than the greater of 10% of total consolidated recourse indebtedness of the Company and $12,500. Advances under the Wells Facility accrue interest at a per annum pricing rate equal to the sum of (i) 30 day LIBOR and (ii) the applicable pricing margin. The Wells Facility matured in August 2012, with a one-year extension available at the Company’s option on all assets financed on or prior to December 22, 2011, subject to certain restrictions, and upon the payment of an extension fee equal to 0.25% on the then aggregate outstanding repurchase price for all such assets. The Company utilized the additional capacity under the Wells Facility to refinance all of the Company’s outstanding TALF debt during January 2012 at a rate of LIBOR plus 150 basis points. Prior to the refinancing, the Company had TALF borrowings totaling $250,293 with a weighted average cost of funds of 2.8%. The increased borrowings under the Wells Facility related to this collateral totaled $264,401 and the Company entered into interest rate swap agreements with an initial aggregate notional value of $56,273 to economically hedge a portion of this floating-rate debt. During the year ended December 31, 2012, the Company repaid $187,620 of debt under the Wells Facility upon receiving paydowns from the Company’s CMBS and $123,064 upon the sale of a portion of the Company’s CMBS portfolio. The Wells Facility was further amended during the second quarter of 2012 to provide an additional $100,000 of financing capacity for the purchase of Hilton CMBS at a rate of LIBOR plus 235 basis points with respect to borrowings secured by the Hilton CMBS. The additional $100,000 of capacity to finance the Hilton CMBS matures in November 2014 and may be extended for an additional year upon the payment of an extension fee equal to 0.50% on the then aggregate outstanding repurchase price for all such assets. At December 31, 2012, the Company had $225,155 of borrowings outstanding under the Wells Facility.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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