Note 5.—Debt

Warehouse Borrowings

The Company, through its subsidiaries, enters into Master Repurchase Agreements with lenders providing warehouse facilities. The warehouse facilities are uncommitted facilities used to fund, and are secured by, residential mortgage loans from the time of funding until the time of settlement when sold to the investor. In accordance with the terms of the Master Repurchase Agreements, the Company’s subsidiaries are required to maintain cash balances with the lender as additional collateral for the borrowings, which are included in restricted cash in the accompanying consolidated balance sheets. At June 30, 2020, the Company was not in compliance with certain financial covenants and received the necessary waivers.

The following table presents certain information on warehouse borrowings and related accrued interest for the periods indicated:


	Maximum		Balance Outstanding at
	Borrowing		June 30,		December 31,
	Capacity		2020		2019		Maturity Date
Short-term borrowings:
Repurchase agreement 1 (1)	$	—	$	—	$	25,953	May 29, 2020
Repurchase agreement 2 (2)		100,000		1,571		72,971	July 28, 2020
Repurchase agreement 3 (1)		—		—		250,722	May 29, 2020
Repurchase agreement 4 (3)		200,000		—		119,838	August 29, 2020
Repurchase agreement 5		300,000		—		72,666	June 22, 2021
Repurchase agreement 6 (1)		—		—		159,413	June 25, 2020
Total warehouse borrowings	$	600,000	$	1,571	$	701,563

(1)

In May 2020, the Company settled all of the loans on repurchase agreements 1, 3 and 6 and closed the lines.

(2)

In July 2020, the line was extended to July 2021, and the maximum borrowing capacity was reduced to $75.0 million.

(3)

In July 2020, the line was extended 30 days pending the renewal process.

MSR Financings

In February 2018, IMC (Borrower) amended the Line of Credit Promissory Note (FHLMC and GNMA Financing) originally entered into in August 2017, increasing the maximum borrowing capacity of the revolving line of credit to $50.0 million and extending the term to January 31, 2019. In May 2018, the agreement was amended increasing the maximum borrowing capacity of the revolving line of credit to $60.0 million, increasing the borrowing capacity up to 60% of the fair market value of the pledged mortgage servicing rights and reducing the interest rate per annum to one-month LIBOR plus 3.0%. As part of the May 2018 amendment, the obligations under the Line of Credit were secured by FHLMC and GNMA pledged mortgage servicing rights (subject to an acknowledgement agreement) and was guaranteed by IRES. In April 2019, the maturity of the line was extended until January 31, 2020. In January 2020, the maturity of the line was extended to March 31, 2020. In April 2020, the maturity of the line was extended to May 31, 2020. In May 2020, the line was repaid with the proceeds from the MSR sale. At June 30, 2020, the Company had no outstanding borrowings under the FHLMC and GNMA Financing and had no available capacity for borrowing as a result of the sale of the FHLMC servicing.

MSR Advance Financing

In April 2020, Ginnie Mae announced they revised and expanded their issuer assistance program to provide financing to fund servicer advances through the Pass-Through Assistance Program (PTAP). The PTAP funds advanced by Ginnie Mae bear interest at a fixed rate that will apply to a given months pass-through assistance and will be posted on Ginnie Mae’s website each month. The maturity date is the earlier of the seven months from the month the request and repayment agreement was approved, or July 30, 2021. At June 30, 2020, the Company had $448 thousand in approved PTAP funds outstanding at an interest rate of 5.7%. In July 2020, the outstanding PTAP funds were repaid.

Convertible Notes

In May 2015, the Company issued $25.0 million Convertible Promissory Notes (2015 Convertible Notes) to purchasers, some of which are related parties. The 2015 Convertible Notes were originally due to mature on or before May 9, 2020 and accrued interest at a rate of 7.5% per annum, to be paid quarterly. Transaction costs of approximately $50 thousand were deferred and amortized over the life of the 2015 Convertible Notes.

Noteholders could convert all or a portion of the outstanding principal amount of the 2015 Convertible Notes into shares of the Company’s common stock (Conversion Shares) at a rate of $21.50 per share, subject to adjustment for stock splits and dividends (Conversion Price). The Company has the right to convert the entire outstanding principal of the 2015 Convertible Notes into Conversion Shares at the Conversion Price if the market price per share of the common stock, as measured by the average volume-weighted closing stock price per share of the common stock on the NYSE AMERICAN (or any other U.S. national securities exchange then serving as the principal such exchange on which the shares of common stock are listed), reaches the level of $30.10 for any twenty (20) trading days in any period of thirty (30) consecutive trading days after the Closing Date (as defined in the Convertible Notes). Upon conversion of the 2015 Convertible Notes by the Company, the entire amount of accrued and unpaid interest (and all other amounts owing) under the 2015 Convertible Notes are immediately due and payable. To the extent the Company pays any cash dividends on its shares of common stock prior to conversion of the 2015 Convertible Notes, upon conversion of the 2015 Convertible Notes, the noteholders will also receive such dividends on an as-converted basis of the 2015 Convertible Notes less the amount of interest paid by the Company prior to such dividend.

On April 15, 2020, the Company amended and restated the outstanding 2015 Convertible Notes in the principal amount of $25 million originally issued in May 2015 pursuant to the terms of the Note Purchase Agreement between the Company and the noteholders of the 2015 Convertible Notes. The 2015 Convertible Notes have been amended to extend the maturity date by six months (until November 9, 2020) and to reduce the interest rate on such notes to 7.0% per annum (Amended Notes). In connection with the issuance of the Amended Notes, the Company issued to the noteholders of the Amended Notes, warrants to purchase up to an aggregate of 212,649 shares of the Company’s common stock at a cash exercise price of $2.97 per share. The warrants are exercisable commencing on October 16, 2020 and expire on April 15, 2025.

Long-term Debt

Junior Subordinated Notes

The Company carries its Junior Subordinated Notes at estimated fair value as more fully described in Note 7.—Fair Value of Financial Instruments. The following table shows the remaining principal balance and fair value of Junior Subordinated Notes issued as of June 30, 2020 and December 31, 2019:


	June 30,		December 31,
	2020		2019
Junior Subordinated Notes (1)	$	62,000	$	62,000
Fair value adjustment		(20,189)		(16,566)
Total Junior Subordinated Notes	$	41,811	$	45,434

(1)

Stated maturity of March 2034; requires quarterly interest payments at a variable rate of 3‑month LIBOR plus 3.75% per annum.

During the three months ended June 30, 2020, the change in fair value of the long-term debt was the result of a decrease in the 3-month LIBOR forward curve, which reduced the undiscounted cash flows used in this calculation.