
	Notes Payable

The notes payable and borrowings of Tiptree's subsidiaries are discussed below:

PFG

In connection with the PFAS Transaction described in Note 1, PFG issued a note in July 2012 in the amount of $100,000 to a third party. The note bears an annual interest rate of 12.66% and provides for monthly interest and principal payments commencing on August 15, 2012, with final payment due on July 15, 2022. Common stock of Philadelphia Financial Administration Services Company, the borrower, serves as collateral for the note.

Operating Subsidiary

On December 28, 2012, Operating Subsidiary issued a note payable in the amount of $2,500 with an annual interest rate of 5%. This note was payment for 6.60% of the issued and outstanding Series A preferred stock and 8.80% of the issued and outstanding common shares of PFG. The term of this note is eighteen months commencing on December 28, 2012.

On September 18, 2013, Operating Subsidiary entered into a Credit Agreement with Fortress Credit Corp. (Fortress) and borrowed $50,000 thereunder. The Credit Agreement allows Operating Subsidiary to borrow additional amounts up to a maximum aggregate of $125,000, subject to satisfaction of certain customary conditions. The obligations of Operating Subsidiary under the Credit Agreement are secured by liens on substantially all of the assets of Operating Subsidiary. The principal of, and all accrued and unpaid interest on, all loans under the Credit Agreement become immediately due and payable on September 18, 2018. Loans under the Credit Agreement bear interest at a variable rate per annum equal to one-month LIBOR (with a minimum LIBOR rate of 1.25%), plus a margin of 6.50% per annum. The principal amounts of the loan is to be repaid in quarterly installments, the amount of which may be adjusted based on the Net Leverage Ratio (as defined in the Credit Agreement) at the end of each fiscal quarter.

As of September 30, 2013, the $50,000 borrowing was recorded as part of notes payable on the consolidated balance sheet of the Company. The company is obligated to pay interest on a monthly basis and has incurred interest expense of $130 for the nine month period ended September 30, 2013.

The Company capitalized approximately $2,308 of costs associated with transaction and is amortizing the costs ratably over the life of the facility. The Company recorded approximately $15 of expense for the nine month period ended September 30, 2013 relating to these capitalized costs.

Operating Subsidiary believes it was in compliance with all of the financial covenants contained in the Credit Agreement as of September 30, 2013.

The following table summarizes the balance and payment activity of the borrowings of the Company's subsidiaries:



Opening Balance on July 31, 2012	$	100,000
Principal payments	(2,083		)
Additional note December 28, 2012	2,500
Unpaid principal balance at December 31, 2012:	100,417
Principal payments	(3,917		)
Credit Agreement September 18, 2013	50,000
Unpaid Principal balance at September 30, 2013	$	146,500

Interest expense of $10,879 was incurred on the borrowings for the nine month period ended September 30, 2013.

Consolidated CLOs

The Company includes in its consolidated balance sheets, as part of liabilities of consolidated CLOs, the debt obligations used to finance the investment in corporate loans and other investments owned by the CLOs that it manages. The carrying amount of the notes represents the accreted value from the initial consolidation (at January 1, 2010 based upon fair values as of December 31, 2009 for Telos 1 and Telos 2 or note issuance date for Telos 3 and Telos 4) and is recognized through the measurement date using the effective interest method or a method that approximates the effective interest method.

The tables below summarize the debt obligations of the CLOs consolidated by the Company as of September 30, 2013 and December 31, 2012:



	September 30, 2013
	Aggregate Principal amount		Spread over three Months LIBOR		Unamortized Discount		Carrying Amount
Description
Telos 4 (maturity July 2024)
Class A	$	214,000	1.30	%	$	984	$	213,016
Class B	46,500		1.80	%	2,111		44,389
Class C	29,000		2.75	%	1,430		27,570
Class D	19,250		3.50	%	1,592		17,658
Class E	16,000		5.00	%	2,009		13,991
Class X	3,500		0.95	%	—		3,500
Subordinated	10,700		N/A		527		10,173



Telos 3 (maturity October 2024)
Class A	225,000			1.42	%	—		225,000
Class B	36,500			2.25	%	—		36,500
Class C	26,500			3.00	%	582		25,918
Class D	18,000			4.25	%	837		17,163
Class E	15,000			5.50	%	1,537		13,463
Class F	6,000			5.50	%	756		5,244
Subordinated	29,000		(1)	N/A		1,364		27,636

Telos 2 (maturity April 2022)
Class A-1	241,000			0.26	%	31,506		209,494
Class A-2	40,000			0.40	%	8,941		31,059
Class B	27,500			0.55	%	7,716		19,784
Class C	22,000			0.95	%	9,668		12,332
Class D	22,000			2.20	%	12,095		9,905
Class E	16,000			5.00	%	13,210		2,790
Subordinated	2,000			N/A		1,670		330

Telos 1 (maturity October 2021)
Class A-1D	49,560			0.27	%	6,328		43,232
Class A-1R	18,584			0.29	%	2,374		16,210
Class A-1T	68,145			0.27	%	8,697		59,448
Class A-2	60,000			0.40	%	13,132		46,868
Class B	27,200			0.49	%	7,467		19,733
Class C	22,000			0.85	%	9,468		12,532
Class D	22,000			1.70	%	11,763		10,237
Class E	16,000			4.25	%	12,942		3,058
Subordinated	40,223			N/A		26,832		13,391
	$	1,389,162				$	197,538	$	1,191,624


(1)	In addition to original amount of $24,000 reflects $5,000 issued by Telos 3 to a third party.



	December 31, 2012
	Aggregate Principal amount		Spread over three Months LIBOR		Unamortized Discount		Carrying Amount
Description
Telos 2 (maturity April 2022)
Class A-1	$	241,000	0.26	%	$	33,980	$	207,020
Class A-2	40,000		0.40	%	9,592		30,408
Class B	27,500		0.55	%	8,248		19,252
Class C	22,000		0.95	%	10,223		11,777
Class D	22,000		2.20	%	12,633		9,367
Class E	16,000		5.00	%	13,340		2,660
Subordinated	2,000		N/A		1,719		281

Telos 1 (maturity October 2021)
Class A-1D	80,000		0.27	%	11,097		68,903
Class A-1R	30,000		0.29	%	4,163		25,837
Class A-1T	110,000		0.27	%	15,258		94,742
Class A-2	60,000		0.40	%	14,163		45,837
Class B	27,200		0.49	%	8,026		19,174
Class C	22,000		0.85	%	10,065		11,935
Class D	22,000		1.70	%	12,371		9,629
Class E	16,000		4.25	%	13,148		2,852
Subordinated	40,223		N/A		28,145		12,078
	$	777,923			$	206,171	$	571,752