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Senior Secured Term Loan, Net | 9 Months Ended
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Sep. 30, 2020
Senior Secured Term Loan, Net | Secured Debt Arrangements, Net At September 30, 2020 and December 31, 2019, our borrowings included the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):
| September 30, 2020 |  |  |  |  |  | December 31, 2019 |  |  |  |
| Maximum Amount of Borrowings(1) |  | Borrowings Outstanding(1) |  | Maturity (2) |  | Maximum Amount of Borrowings(1) |  | Borrowings Outstanding(1) |  | Maturity (2)
JPMorgan (USD) | $ | 1,132,013 |  |  | $ | 989,278 |  |  | June 2024 |  | $ | 1,154,109 |  |  | $ | 1,090,160 |  |  | June 2024
JPMorgan (GBP) | 97,661 |  |  | 97,661 |  |  | June 2024 |  | 51,702 |  |  | 50,410 |  |  | June 2024
JPMorgan (EUR) | 70,326 |  |  | 70,326 |  |  | June 2024 |  | 94,189 |  |  | 94,189 |  |  | June 2024
DB (USD) | 1,000,000 |  |  | 526,743 |  |  | March 2023 |  | 1,250,000 |  |  | 513,876 |  |  | March 2021
Goldman (USD) | 500,000 |  |  | 362,139 |  |  | November 2021 |  | 500,000 |  |  | 322,170 |  |  | November 2021
CS - USD | 378,903 |  |  | 378,781 |  |  | January 2023(3) |  | 226,068 |  |  | 218,644 |  |  | June 2020
CS - GBP | — |  |  | — |  |  | N/A(4) |  | 93,915 |  |  | 93,915 |  |  | June 2020
HSBC - USD | 47,223 |  |  | 47,223 |  |  | January 2021 |  | 50,625 |  |  | 50,625 |  |  | October 2020
HSBC - GBP | — |  |  | — |  |  | N/A |  | 34,634 |  |  | 34,634 |  |  | June 2020
HSBC - EUR | 157,148 |  |  | 157,148 |  |  | July 2021 |  | 154,037 |  |  | 154,037 |  |  | January 2021
Barclays (USD) | 200,000 |  |  | 35,192 |  |  | March 2024 |  | N/A |  | N/A |  | N/A
Barclays (GBP) | — |  |  | — |  |  | N/A(4) |  | 538,916 |  |  | 290,347 |  |  | February 2024(5)
Barclays (EUR) | — |  |  | — |  |  | N/A(4) |  | 182,549 |  |  | 182,549 |  |  | November 2020
Total Secured Credit Facilities | 3,583,274 |  |  | 2,664,491 |  |  |  |  | 4,330,744 |  |  | 3,095,556 |  |  |
Barclays Private Securitization | 813,592 |  |  | 813,592 |  |  | March 2024(5) |  | N/A |  | N/A |  | N/A
Total Secured Debt Arrangements | 4,396,866 |  |  | 3,478,083 |  |  |  |  | 4,330,744 |  |  | 3,095,556 |  |  |
less: deferred financing costs | N/A |  | (12,746) |  |  |  |  | N/A |  | (17,190) |  |  |
Total Secured Debt Arrangements, net(6)(7)(8) | $ | 4,396,866 |  |  | $ | 3,465,337 |  |  |  |  | $ | 4,330,744 |  |  | $ | 3,078,366 |  |  |
——————— (1)As of September 30, 2020, British Pound Sterling ("GBP") and Euros ("EUR") borrowings were converted to U.S. Dollars ("USD") at a rate of 1.29 and 1.17, respectively. As of December 31, 2019, GBP and EUR borrowings were converted at a rate of 1.33 and 1.12, respectively. (2)Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable. (3)Assumes financings are extended in line with the underlying loans. (4)As of September 30, 2020, there are no loans pledged to this facility. (5)Represents weighted average maturity across various financings with the counterparty. See below for additional details. (6)Weighted-average borrowing costs as of September 30, 2020 and December 31, 2019 were USD L + 2.15% / GBP L + 1.82% / EUR L + 1.46% and USD L + 2.07% / GBP L + 1.75% / EUR L + 1.36%, respectively. (7)Weighted average advance rates based on cost as of September 30, 2020 and December 31, 2019 were 64.3% (63.8% (USD) / 67.9% (GBP) / 61.3% (EUR)) and 63.8% (66.7% (USD) / 47.1% (GBP) / 76.1% (EUR)). (8)As of September 30, 2020 and December 31, 2019, approximately 55% and 54% of the outstanding balance under these secured borrowings were recourse to us. Each of our existing secured debt arrangements include "credit based and other mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit of the underlying collateral value decreases, the amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our liquidity. Generally, the lender under the applicable secured debt arrangement calls for and/or sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. If it is determined (subject to certain conditions) that the market value of the underlying collateral has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or may make margin calls, which may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of September 30, 2020 and December 31, 2019, the weighted average haircut under our secured debt arrangements was approximately 35.7% and 36.2%, respectively. In addition, our existing secured debt arrangements are not entirely term-matched financings and may mature before our commercial real estate debt investments that represent underlying collateral to those financings. We are in frequent dialogue with the lenders under our secured debt arrangements regarding our management of their collateral assets and as we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements. JPMorgan Facility In November 2019, through three indirect wholly-owned subsidiaries, we entered into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). The JPMorgan Facility allows for $1.3 billion of maximum borrowings (with amounts borrowed in British pounds and Euros converted to USD for purposes of calculating availability based on the greater of the spot rate as of the initial financing under the corresponding mortgage loan and the then-current spot rate) and matures in June 2022 and has two one-year extensions available at our option, which are subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in USD, GBP, or EUR. Margin calls may occur any time at specified aggregate margin deficit thresholds. As of September 30, 2020, we had $1.2 billion (including £75.6 million and €60.0 million assuming conversion into USD) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans. DB Facility In March 2020, through an indirect wholly-owned subsidiary, we entered into a Third Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch (as amended, the "DB Facility"), which provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in USD, GBP, or EUR. The repurchase facility matures in March 2021, and has two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds. As of September 30, 2020, we had $526.7 million of borrowings outstanding under the DB Facility secured by certain of our commercial mortgage loans. Goldman Facility In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which provides advances up to $500.0 million and matures in November 2020, and has one one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds. As of September 30, 2020, we had $362.1 million of borrowings outstanding under the Goldman Facility secured by certain of our commercial mortgage loans. CS Facility - USD In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds. As of September 30, 2020, we had $378.8 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans. CS Facility - GBP In June 2018, through an indirect wholly-owned subsidiary, we entered into a Global Master Repurchase Agreement with Credit Suisse Securities (Europe) Limited (the "CS Facility - GBP"). During the third quarter of 2020, the facility was repaid in connection with the sale of the underlying loan. HSBC Facility - USD In October 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - USD"), which provides for a single asset financing. The facility is scheduled to mature in January 2021. Margin calls may occur any time at specified aggregate margin thresholds. As of September 30, 2020, we had $47.2 million of borrowings under the HSBC Facility - USD secured by one commercial mortgage loan. HSBC Facility - GBP In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - GBP"), which provided for a single asset financing. The facility matured and was repaid in June 2020 in connection with the repayment of the underlying loan. HSBC Facility - EUR In July 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - EUR"), which provides for a single asset financing. The facility matures in July 2021. Margin calls may occur any time at specified aggregate margin deficit thresholds. As of September 30, 2020, we had $157.1 million (€134.1 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one commercial mortgage loan. Barclays Facility - USD In March 2020, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement pursuant to a Master Repurchase Agreement with Barclays Bank plc ("Barclays Facility - USD"). The Barclays Facility - USD allows for $200.0 million of maximum borrowings and initially matures in March 2023 with extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds. As of September 30, 2020, we had $35.2 million of borrowings outstanding under the Barclays Facility - USD secured by one commercial mortgage loan. Barclays Facility - GBP/EUR Beginning in October 2019, through an indirect wholly-owned subsidiary, we entered into five secured debt arrangements pursuant to a Global Master Repurchase Agreement with Barclays Bank plc (the "Barclays Facility - GBP/EUR"). In June 2020, all assets previously financed pursuant to this facility were refinanced under the Barclays Private Securitization. Barclays Private Securitization In June 2020, through a newly formed entity, we entered into a private securitization with Barclays Bank plc, of which Barclays Bank plc retained $782.0 million of senior notes. This Barclays Private Securitization finances the loans that were previously financed under the Barclays Facility - GBP/EUR. In addition, we pledged an additional commercial mortgage loan with an outstanding principal balance of £26.0 million and pledged additional collateral of a financed loan of €5.3 million as of June 30, 2020. The securitization eliminates daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to 18 months. The securitization includes LTV based covenants with significant headroom to existing levels that are also subject to a six-month holiday through December 2020. These deleveraging requirements are based on significant declines in the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements. In addition to the pledge of the additional collateral noted above, we paid down the previous financing by €16.5 million (totaling $18.5 million in USD) and agreed to increase the financing spreads by 0.25%. The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of September 30, 2020 ($ in thousands):
| Borrowings outstanding | Fully-Extended Maturity(1)
Total/Weighted-Average GBP | $670,024 | January 2024
Total/Weighted-Average EUR | 143,568 | August 2021(2)
Total/Weighted-Average Securitization | $813,592 | March 2024
——————— (1)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised. (2)The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice. The table below provides the assets and liabilities of the Barclays Private Securitization VIE included in our condensed consolidated balance sheet ($ in thousands):
| September 30, 2020
Assets: |
Cash | $ | 921 |
Commercial mortgage loans, net(1) | 1,224,154 |
Other Assets | 9,401 |
Total Assets | $ | 1,234,476 |
Liabilities: |
Secured debt arrangements, net (net of deferred financing costs of $0.2 million) | $ | 813,431 |
Accounts payable, accrued expenses and other liabilities(2) | 1,084 |
Total Liabilities | $ | 814,515 |
——————— (1)Net of the General CECL Allowance of $6.1 million. (2)Represents General CECL Allowance related to unfunded commitments on commercial mortgage loans, net of $0.3 million.
| Three months ended
| September 30, 2020
Net Interest Income: |
Interest income from commercial mortgage loans | $ | 15,075 |
Interest expense | (4,278) |
Net interest income | $ | 10,797 |
Provision for loan losses and impairments | $ | (2,318) |
Foreign currency gain | 17,078
Net Income | $ | 25,557 |
As of September 30, 2020, we had $813.6 million (£518.6 million and €122.5 million assuming conversion into USD) of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans. At September 30, 2020, our borrowings had the following remaining maturities ($ in thousands):
| Less than 1 year |  | 1 to 3 years |  | 3 to 5 years |  | More than 5 years |  | Total
JPMorgan | $ | 45,918 |  |  | $ | 432,440 |  |  | $ | 678,907 |  |  | $ | — |  |  | $ | 1,157,265 |
DB | 15,594 |  |  | 511,149 |  |  | — |  |  | — |  |  | 526,743 |
Goldman | — |  |  | 362,139 |  |  | — |  |  | — |  |  | 362,139 |
CS - USD | 94,299 |  |  | 146,994 |  |  | 137,488 |  |  | — |  |  | 378,781 |
HSBC - USD | 47,223 |  |  | — |  |  | — |  |  | — |  |  | 47,223 |
HSBC - EUR | 157,148 |  |  | — |  |  | — |  |  | — |  |  | 157,148 |
Barclays - USD | — |  |  | — |  |  | 35,192 |  |  | — |  |  | 35,192 |
Barclays Private Securitization | 143,568 |  |  | 289,769 |  |  | 380,255 |  |  | — |  |  | 813,592 |
Total | $ | 503,750 |  |  | $ | 1,742,491 |  |  | $ | 1,231,842 |  |  | $ | — |  |  | $ | 3,478,083 |
The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers. The table below summarizes the outstanding balances at September 30, 2020, as well as the maximum and average month-end balances for the nine months ended September 30, 2020 for our borrowings under secured debt arrangements ($ in thousands).
| As of September 30, 2020 |  |  |  | For the nine months ended September 30, 2020 |  |
| Balance |  | Amortized Cost of Collateral |  | Maximum Month-End Balance |  | Average Month-End Balance
JPMorgan | $ | 1,157,265 |  |  | $ | 1,976,965 |  |  | $ | 1,192,288 |  |  | $ | 1,106,461 |
DB | 526,743 |  |  | 804,835 |  |  | 526,743 |  |  | 501,470 |
Goldman | 362,139 |  |  | 548,671 |  |  | 362,139 |  |  | 343,882 |
CS - USD | 378,781 |  |  | 523,272 |  |  | 378,781 |  |  | 339,425 |
CS - GBP | — |  |  | — |  |  | 90,111 |  |  | 57,459 |
HSBC - USD | 47,223 |  |  | 67,203 |  |  | 50,625 |  |  | 48,357 |
HSBC - GBP | — |  |  | — |  |  | 34,500 |  |  | 32,900 |
HSBC - EUR | 157,148 |  |  | 204,040 |  |  | 160,034 |  |  | 152,982 |
Barclays - USD | 35,192 |  |  | 49,929 |  |  | 35,193 |  |  | 27,372 |
Barclays - GBP | — |  |  | — |  |  | 666,810 |  |  | 347,590 |
Barclays - EUR | — |  |  | — |  |  | 180,595 |  |  | 94,028 |
Barclays Private Securitization | 813,592 |  |  | 1,230,305 |  |  | 839,563 |  |  | 814,844 |
Total | $ | 3,478,083 |  |  | $ | 5,405,220 |  |  |  |  |
The table below summarizes the outstanding balances at December 31, 2019, as well as the maximum and average month-end balances for the year ended December 31, 2019 for our borrowings under secured debt arrangements ($ in thousands).
| As of December 31, 2019 |  |  |  | For the year ended December 31, 2019 |  |
| Balance |  | Amortized Cost of Collateral |  | Maximum Month-End Balance |  | Average Month-End Balance
JPMorgan | $ | 1,234,759 |  |  | $ | 1,845,400 |  |  | $ | 1,234,759 |  |  | $ | 947,400 |
DB | 513,876 |  |  | 766,676 |  |  | 757,117 |  |  | 604,067 |
Goldman | 322,170 |  |  | 513,559 |  |  | 324,821 |  |  | 246,318 |
CS - USD | 218,644 |  |  | 308,884 |  |  | 218,644 |  |  | 182,646 |
CS - GBP | 93,915 |  |  | 129,723 |  |  | 150,811 |  |  | 134,694 |
HSBC - USD | 50,625 |  |  | 66,960 |  |  | 50,625 |  |  | 50,625 |
HSBC - GBP | 34,634 |  |  | 49,976 |  |  | 50,784 |  |  | 42,296 |
HSBC - EUR | 154,037 |  |  | 190,780 |  |  | 154,037 |  |  | 151,889 |
Barclays - GBP | 290,347 |  |  | 738,455 |  |  | 290,347 |  |  | 139,004 |
Barclays - EUR | 182,549 |  |  | 241,674 |  |  | 182,549 |  |  | 181,159 |
Total | $ | 3,095,556 |  |  | $ | 4,852,087 |  |  |  |  |
We were in compliance with the covenants under each of our secured debt arrangements at September 30, 2020 and December 31, 2019.
Senior Debt |
Senior Secured Term Loan, Net | Senior Secured Term Loan, Net In May 2019, we entered into a $500.0 million senior secured term loan. The senior secured term loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The senior secured term loan matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. During the three and nine months ended September 30, 2020, we repaid $1.3 million and $3.8 million of principal related to the senior secured term loan, respectively. The outstanding principal balance as of September 30, 2020 and December 31, 2019 was $493.8 million and $497.5 million, respectively. As of September 30, 2020, the senior secured term loan had a carrying value of $484.2 million net of deferred financing costs of $7.6 million and an unamortized discount of $2.0 million. As of December 31, 2019, the senior secured term loan had a carrying value of $488.0 million net of deferred financing costs of $7.3 million and an unamortized discount of $2.3 million. Covenants The senior secured term loan includes the following financial covenants: (i) our ratio of total recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1. We were in compliance with the covenants under the senior secured term loan at September 30, 2020 and December 31, 2019. Interest Rate Swap In connection with the senior secured term loan, we previously entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the senior secured term loan at 4.87%. During the second quarter of 2020 we terminated the interest rate swap and recognized a realized loss of $53.9 million. Interest Rate Cap During the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum all-in coupon on our senior secured term loan to 3.50%. In connection with the interest rate cap, we incurred up-front fees of $1.1 million, which we recorded as a deferred financing cost on our condensed consolidated balance sheet and interest expense will be recognized over the duration of the interest rate cap in our condensed consolidated statement of operations

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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