Securitizations and Variable Interest Entities

Collateralized Loan Obligations

In February 2013, Salus completed a CLO securitization with a notional aggregate principal amount of $175.5 of the asset-based loans that it had originated through that date. In September 2013, Salus increased the CLO securitization to a notional aggregate principal amount of $331.1 of the asset-based loans that it had originated through that date. Salus’ continuing involvement with the trust created as part of the securitization include servicing the receivables; retaining an undivided interest (seller’s interest) in the receivables; and holding certain retained interests in subordinate securities, subordinate interests in accrued interest and fees on the securitized receivables, and cash reserve accounts. Salus continues to consolidate the loans transferred into the trust as it has determined that it is the primary beneficiary of the variable-interest entity represented by the trust, as result of it holding subordinate interest and servicing the receivables. Neither the Company nor Salus provided guarantees or recourse to the securitization trust other than standard representations and warranties.

Included within “Asset-based loans” under Investments in the accompanying Consolidated Balance Sheets as of September 30, 2015 and 2014 were asset-based loans of $200.2 and $455.9, respectively, that serve as collateral to the unaffiliated obligations of the CLO of $39.6, net of discount of $0.8 and $192.0, net of discount of $1.0, respectively. The unaffiliated obligations of the CLO are included within “Debt” in the accompanying Consolidated Balance Sheets as of September 30, 2015 and 2014, respectively. At September 30, 2015 and 2014, the asset-based loans receivable included $317.2 and $292.0, respectively, of seller’s interest.

For additional information related to the increase in the provision for credit losses on the asset-based loan portfolio resulting, see Note 5, Investments.

For additional information related to the restructuring of the CLO pursuant to a special redemption of the unaffiliated outstanding senior debt tranches, which reduced the CLO debt, see Note 14, Debt.

The table below summarizes select information related to the CLO vehicle in which Salus held a variable interest at September 30, 2015 and 2014.



	September 30,
	2015		2014
Maximum loss exposure	$	200.2	$	455.9

Asset-based loans receivable	$	200.2	$	455.9
Cash and other assets	85.8		35.5
Total assets of consolidated VIE	$	286.0	$	491.4

Senior, Secured	$	219.2	$	375.0
Subordinated	137.6		109.0
Long-term debt	356.8		484.0
Other liabilities	3.1		6.7
Total liabilities of consolidated VIE	$	359.9	$	490.7

Unconsolidated Variable Interest Entities

FGL Insurance participates in an investment managed by Fifth Street Management, LLC (“Fifth Street”). Fifth Street Senior Loan Fund II (the “Fifth Street Fund”) invests in loans selected and/or originated by Fifth Street. Fifth Street is an unaffiliated, limited liability company that originates financing for the Fifth Street Fund’s investment activities through CLOs. FGL’s maximum exposure to loss as a result of its investments in Fifth Street is limited to the carrying value of its investments in Fifth Street which totaled $56.9 and $30.0 as of September 30, 2015 and 2014, respectively.

During Fiscal 2015, FGL invested in an unaffiliated limited partnership fund that will invest in consumer whole loans, asset-backed investments, high yield, private investments, bank portfolio liquidations, bridge financing and other investments. The initial funding occurred March 20, 2015 with the remaining commitment expected to fund over the course of the next three years.

FGL also executed a commitment of $75.0 to purchase common shares in an unaffiliated private business development company (“BDC”). The BDC invests in secured and unsecured debt and equity securities of middle market companies in the United States. Due to the voting structure of the transaction, FGL does not have voting power. The initial capital call occurred June 30, 2015, with the remaining commitment expected to fund through 2017.