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Debt | 12 Months Ended
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Dec. 31, 2012
Debt | 17. DEBT The Company had the following debt outstanding as of December 31, 2012 and 2011, respectively: DETAIL OF DEBT (Dollars in Thousands)
Description |  | Current Outstanding Par |  |  | December 31, 2012 |  |  | December 31, 2011 |  |  | Interest Rate Terms |  |  | Weighted Average Interest Rate at 12/31/2012 |  |  | Weighted Average Maturity
Contingent convertible senior notes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
7.625% Contingent convertible senior notes (the “Old Notes”) |  | $ | — |  |  | $ | — |  |  |  | 10,303 |  |  |  | N/A |  |  |  | N/A |  |  | July 2012(1)
10.50% Contingent convertible senior notes (the “New Notes”) |  |  | 8,121 |  |  |  | 8,068 |  |  |  | 8,030 |  |  |  | 10.50 | % |  |  | 10.50 | % |  | May 2014(2)
|  | $ | 8,121 |  |  |  | 8,068 |  |  |  | 18,333 |  |  |  |  |  |  |  |  |  |  |
Junior subordinated notes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Alesco Capital Trust I |  | $ | 28,125 | (3) |  |  | 10,189 |  |  |  | 10,404 |  |  |  | 4.31 | % |  |  | 4.31 | % |  | July 2037
Sunset Financial Statutory Trust I |  |  | 20,000 | (3) |  |  | 7,248 |  |  |  | 6,939 |  |  |  | 4.46 | % |  |  | 4.46 | % |  | March 2035
|  | $ | 48,125 | (3) |  |  | 17,437 |  |  |  | 17,343 |  |  |  |  |  |  |  |  |  |  |
Subordinated notes payable |  | $ | 342 |  |  |  | 342 |  |  |  | 1,491 |  |  |  | 12.00 | %(4) |  |  | 12.00 | % |  | June 2013
Total |  |  |  |  |  | $ | 25,847 |  |  | $ | 37,167 |  |  |  |  |  |  |  |  |  |  |
(1) | Represents the date the Company redeemed the remaining $100 aggregate principal amount of Old Notes outstanding for cash.
(2) | Represents the holder’s earliest put date and the Company’s earliest redemption date. The contractual maturity for the New Notes is May 2027.
The Company may redeem all or part of the $8,121 aggregate principal amount of the New Notes for cash on or after May 20, 2014, at a redemption price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding the repurchase date. The holders of the New Notes may require the Company to repurchase all or a portion of the New Notes for cash on May 15, 2014; May 15, 2017; and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes are required to provide notice to the Company of their plan to redeem the New Notes at any time during the 30 days prior to May 15, 2014; May 15, 2017; and May 15, 2022.
(3) | The outstanding par amount represents the total par amount of the junior subordinated notes held by two separate VIE trusts. The Company does not consolidate these trusts. The Company holds $1,489 par value of these junior subordinated notes, comprised of $870 par value of junior subordinated notes related to Alesco Capital Trust I and $619 par value of junior subordinated notes related to Sunset Financial Statutory Trust I. These notes have a carrying value of $0. Therefore, the net par value held by third parties is $48,125.
(4) | Comprised of 9% paid currently and 3% paid in kind.
Contingent Convertible Senior Notes 7.625% Contingent Convertible Senior Notes due 2027 (the “Old Notes”) The Company assumed $26,150 principal amount of 7.625% Contingent Convertible Senior Notes due 2027 from AFN at the time of the Merger. The Company recorded the Old Notes at fair value as of the date of the Merger. Any difference between the fair value of the Old Notes on the Merger date and the principal amount of debt was amortized into earnings over the estimated remaining life of the underlying debt as an adjustment to interest expense. During 2010, the Company repurchased $6,644 principal amount of the Old Notes from unrelated third parties for $5,596 including accrued interest. The Company recognized a gain from repurchases of debt of $923, which was included as a separate component of non-operating income / (expense) in the Company’s consolidated statements of operations. The Company also recognized a gain from the repurchase of subordinated notes during 2010 that was also included in this line. On June 20, 2011, the Company commenced an offer to exchange (the “Exchange Offer”), at the election of each holder, any and all of the Company’s outstanding 7.625% Contingent Convertible Senior Notes due 2027. Under the terms and subject to the conditions of the Exchange Offer, for each validly tendered and accepted $1,000 principal amount of the Old Notes, an eligible holder received $1,000 principal amount of a new series of 10.50% Contingent Convertible Senior Notes due 2027, (the “New Notes”). The Exchange Offer expired on July 19, 2011. The purpose of the offer was to improve the Company’s financial flexibility by extending the first date at which holders of the Old Notes can require the Company to repurchase the Old Notes from May 15, 2012 to May 15, 2014. In July 2011, $7,621 aggregate principal amount of the Old Notes were tendered for exchange, representing approximately 39% of the principal amount of the Old Notes outstanding. In accordance with the terms of the Exchange Offer, the Company issued $7,621 aggregate principal amount of New Notes in exchange for the $7,621 aggregate principal amount of the Old Notes that were tendered. The Company also paid in cash all accrued and unpaid interest on the Old Notes tendered and accepted in the Exchange Offer to, but not including, the settlement date. In addition, the Company completed a privately negotiated exchange of $500 in aggregate principal balance of the Old Notes effective in October 2011. The terms of this exchange were the same as the Exchange Offer that was completed in July 2011. The Company treated the exchanges as modifications rather than extinguishments of the Old Notes and a new issuance of New Notes. Accordingly, the Company expensed all transaction costs associated with the exchange offer. The discount associated with the Old Notes was allocated between the New Notes and the Old Notes on a pro rata basis. The discount allocated to the New Notes is being amortized as interest expense through May 2014 using the effective interest method. The discount allocated to the Old Notes was amortized as interest expense through May 2012 using the effective interest method. In November 2011, the Company repurchased $1,025 aggregate principal amount of the Old Notes from unrelated third parties for $988 including accrued interest. The Company recognized a gain from repurchase of debt of $33, which was included as a separate component of non-operating income / (expense) in the Company’s consolidated statements of operations. In March 2012, the Company repurchased $150 aggregate principal amount of the Old Notes from an unrelated third party for $151, including accrued interest of $4. The Company recognized a gain from repurchase of debt of $3, which was included as a separate component of non-operating income / (expense) in the Company’s consolidated statements of operations. The Company also recognized a gain from the repurchase of subordinated notes during 2012 that was also included in this line. On May 15, 2012, the holders of $10,110 aggregate principal amount of the Old Notes exercised their option to require the Company to repurchase their Old Notes. On July 5, 2012, the Company, at its option, redeemed the remaining $100 aggregate principal amount of the Old Notes outstanding. As of December 31, 2012, the Company had no Old Notes outstanding. As of December 31, 2011, $10,360 aggregate principal amount of Old Notes with a carrying value of $10,303 were outstanding. The Old Notes bore interest at an annual rate of 7.625%. Interest on the Old Notes was payable semiannually on May 15 and November 15 of each year. 10.50% Contingent Convertible Senior Notes due 2027 The Company issued $8,121 aggregate principal amount of New Notes at par during the second half of 2011 in connection with the Exchange Offer and the privately negotiated transaction referenced above. The New Notes are senior, unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future unsubordinated, unsecured indebtedness. The New Notes are subordinate in right of payment to the Company’s existing and future secured indebtedness to the extent of such security. The New Notes bear interest at an annual rate of 10.50% and is payable semiannually on May 15 and November 15 of each year. The New Notes mature on May 15, 2027. As of December 31, 2012 and 2011, the carrying value of the New Notes was $8,068 and $8,030, respectively. The Company may redeem all or part of the New Notes for cash on or after May 20, 2014, at a redemption price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the redemption date. The holders of the New Notes may require the Company to repurchase all or a portion of their New Notes for cash on May 15, 2014; May 15, 2017; and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes are required to provide notice to the Company of their plan to redeem the New Notes at any time during the 30 days prior to May 15, 2014; May 15, 2017; and May 15, 2022. As of December 31, 2012, the Company was in compliance with the covenants of the New Notes. The Conversion Feature The New Notes are redeemable prior to their stated maturity date into cash, or if note holders exercise their conversion option, convertible into shares of the Company’s Common Stock under certain circumstances. The conversion feature of the New Notes provides that each holder may exchange their notes for the Company’s Common Stock at a conversion rate of $116.37 per share of common stock for every $1,000 of par value. In other words, for each $1,000 of par value held, the holder can exchange the notes for 8.5933 shares of the Company’s Common Stock. Junior Subordinated Notes The Company assumed $49,614 aggregate principal amount of junior subordinated notes outstanding at the time of the Merger. As of December 31, 2012 and 2011, the carrying value of the Company’s junior subordinated notes outstanding was $17,437 and $17,343, respectively. The Company recorded the debt at fair value on the acquisition date. Any difference between the fair value of the junior subordinated notes on the Merger date and the principal amount of debt is amortized into earnings over the estimated remaining life of the underlying debt as an adjustment to interest expense. The junior subordinated notes are payable to two special purpose trusts: 1. Alesco Capital Trust I: $28,995 in aggregate principal amount issued in June 2007. As of December 31, 2012 and 2011, the carrying value of these notes was $10,189 and $10,404, respectively. The notes mature on July 30, 2037 and may be called by the Company at par any time after July 30, 2012. The notes accrued interest payable quarterly at a fixed interest rate equal to 9.495% per annum through the distribution payment date on July 30, 2012 and thereafter accrue at a floating interest rate equal to LIBOR plus 400 basis points per annum through July 30, 2037. All principal is due at maturity. The Alesco Capital Trust I simultaneously issued 870 shares of the Alesco Capital Trust I’s common securities to the Company for a purchase price of $870, which constitutes all of the issued and outstanding common securities of the Alesco Capital Trust I. 2. Sunset Financial Statutory Trust I (“Sunset Financial Trust”): $20,619 in aggregate principal amount issued in March 2005. As of December 31, 2012 and 2011, the carrying value of these notes was $7,248 and $6,939, respectively. The notes mature on March 30, 2035. The notes accrue interest payable quarterly at a floating rate of interest of 90-day LIBOR plus 415 basis points. All principal is due at maturity. The Sunset Financial Trust simultaneously issued 619 shares of the Sunset Financial Trust’s common securities to the Company for a purchase price of $619, which constitutes all of the issued and outstanding common securities of the Sunset Financial Trust. Alesco Capital Trust I and Sunset Financial Trust (collectively, ”the Trusts”) described above are VIEs pursuant to variable interest provisions included in FASB ASC 810 because the holders of the equity investment at risk do not have adequate decision making ability over the Trust’s activities. The Company is not the primary beneficiary of the Trusts as it does not have the power to direct the activities of the Trusts. The Trusts are not consolidated by the Company and, therefore, the Company’s consolidated financial statements include the junior subordinated notes issued to the Trusts as a liability, and the investment in the Trusts’ common securities as an asset. The common securities were deemed to have a fair value of $0 as of the Merger Date. These are accounted for as cost method investments; therefore we do not adjust the value at each reporting period. Any income generated on the common securities is recorded as interest income, a component of interest expense, net, in the consolidated statement of operations. The junior subordinated notes have several financial covenants. Since the Merger, IFMI has been in violation of one covenant of the Alesco Capital Trust I. As a result of this violation, IFMI is prohibited from issuing additional debt that is either subordinated to or pari passu with the Alesco Capital Trust I debt. This violation does not prohibit IFMI from issuing senior debt or the Operating LLC from issuing debt of any kind. IFMI is in compliance with all other covenants of the junior subordinated notes. The Company does not consider this violation to have a material adverse impact on its operations or on its ability to obtain financing in the future. Subordinated Notes Payable The Subordinated Notes mature on June 20, 2013 and bear interest at an annual rate of 12%. A portion of this interest, 9%, is payable in cash semiannually on May 1 and November 1 of each year. The remaining portion, 3%, is paid in kind at an annual rate of 3%, which is also payable semiannually. All accrued in kind interest is added to the unpaid principal balance of the Subordinated Notes on each May 1 and November 1, and thereafter the increased principal balance accrues interest at the annual rate of 12%. The Subordinated Notes are unsecured obligations of the Company. On July 29, 2010, CCS, one of the Company’s U.S. broker-dealer subsidiaries at the time (see note 23), commenced its offer to purchase all of the outstanding Subordinated Notes for an amount equal to 80% of the outstanding principal balance (including accrued paid in kind interest up to, but excluding, the payment date) plus 100% of accrued and unpaid cash interest up to, but excluding, the payment date. As of July 29, 2010, the Subordinated Notes had a principal balance of $9,508. On August 27, 2010, CCS completed its cash offer to purchase all of the outstanding Subordinated Notes that were tendered. A total of $8,081 principal amount of the Subordinated Notes (representing 85% of the outstanding Subordinated Notes) was tendered prior to the expiration of the offer to repurchase on August 26, 2010. CCS accepted for purchase all of the Subordinated Notes tendered for a total purchase price of $6,762, including accrued interest. The Company recognized a gain from repurchase of debt of $1,632 for the year ended December 31, 2010. See note 29 for a description of notes held and redeemed by related parties. In September 2012, the Company repurchased $1,177 principal amount of Subordinated Notes from an unrelated third party for $1,139, including accrued cash interest and paid in kind interest of $50. The Company recognized a gain from repurchase of debt of $83, net of expenses, which was included as a separate component of non-operating income / (expense) in the Company’s consolidated statements of operations. See note 29. As of December 31, 2012 and 2011, the Subordinated Notes payable was $342 and $1,491, respectively. Promissory Notes Issued In Connection With the Repurchase of Mandatorily Redeemable Equity Interests On October 5, 2012, PrinceRidge and the Company entered into a Separation, Release and Repurchase Agreement (collectively, the “PrinceRidge Separation Agreements”) with each of Ahmed Alali, Ronald J. Garner, and Matthew G. Johnson (collectively, the “PrinceRidge Separated Employees”). Under the PrinceRidge Separation Agreements, the PrinceRidge Separated Employees resigned from all positions and offices held with PrinceRidge and its affiliates as well as any membership that the PrinceRidge Separated Employees may have held with the Board of Managers of the PrinceRidge GP. In connection with the repurchase of the mandatorily redeemable equity interests, PrinceRidge paid $2,640 in cash and issued to the PrinceRidge Separated Employees promissory notes in the initial aggregate principal amount of $4,824. See note 18. The promissory notes were issued on October 5, 2012. The terms and conditions of each of the promissory notes were substantially the same. Under each of the promissory notes, interest accrued on the unpaid balance of the principal amount at a rate of five percent (5%) per annum from October 5, 2012 until the aggregate principal amount of $4,824 was paid in full on December 21, 2012. Former Bank Loan In July 2010, Dekania Investors, LLC, a subsidiary of the Company, entered into a secured credit facility with TD Bank, N.A. (the “Former Bank Loan”). The proceeds of the Former Bank Loan were used to finance working capital requirements and for general corporate purposes. The Former Bank Loan was comprised of $9,300 of term loan capacity and a maximum of $1,300 for the issuance of letters of credit. In July 2010, Dekania Investors, LLC drew $9,300 and made scheduled payments of principal and interest as required over the term of the credit facility through December 22, 2011, at which time the Company paid off and terminated the Former Bank Loan. The minimum annual interest rate of the Former Bank Loan was 6.0%. Dekania Investors, LLC paid a fee on the face amount of each letter of credit issued equal to (1) 4.5%, (2) a fronting fee of 0.25%, and (3) customary issuance fees. TD Bank charged an upfront fee for the Former Bank Loan of $250, and the Company was required to pay TD Bank $450 as an exit fee for a previous credit facility in the third quarter of 2010. Deferred Financing For the year ended December 31, 2012, the Company did not charge any unamortized deferred financing costs to interest expense in the consolidated statements of operations since all deferred financing costs were fully amortized prior to December 31, 2011. For the years ended December 31, 2011 and 2010, the Company charged $134 and $675, respectively, of unamortized deferred financing costs to interest expense in the consolidated statements of operations related to the termination of former bank credit facilities. The Company paid $349 of deferred financing costs during the second half of 2010 associated with the Former Bank Loan, which was fully amortized to interest expense in 2011. Deferred financing costs are recorded in other assets in the consolidated balance sheets. The Company recognized interest expense from deferred financing costs of $0, $282, and $1,111 for the years ended December 31, 2012, 2011, and 2010, respectively. Interest Expense, net Interest expense includes interest incurred in connection with the Company’s debt described in this note, the amortization of deferred financing related to the former bank credit facilities, the amortization of discount related to the convertible senior notes and the junior subordinated notes, interest income or expense related to the amounts owed to withdrawing partners of PrinceRidge (see note 18), and the amortization of discount related to a settlement payable in connection with a legal proceeding that involved CCS (see note 26).

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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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