Note 6—DEBT

The table below summarizes outstanding debt balances, the weighted-average interest rates and term dates at June 30, 2013 and December 31, 2012:

(dollars in thousands)	June 30, 2013		Weighted-Average Effective Interest Rate at June 30, 2013			December 31, 2012		Weighted-Average Effective Interest Rate at December 31, 2012
Asset Related Debt ⁽¹⁾
Senior interests in and debt owed to securitization trusts
Due within one year	$	–		–	%	$	–		–	%
Due after one year ⁽²⁾		577,107		2.0			589,592		2.1
Mandatorily redeemable preferred shares ⁽³⁾
Due within one year		3,700		5.0			4,901		7.5
Due after one year		117,300		5.3			83,819		7.4
Notes payable and other debt – bond related ⁽⁴⁾
Due within one year		–		–			–		–
Due after one year		53,503		5.1			57,729		5.0
Notes payable and other debt – non-bond related
Due within one year		4,181		9.7			17,617		9.9
Due after one year		7,412		9.8			8,290		9.8

Total asset related debt		763,203		2.9			761,948		3.2

Other Debt ⁽¹⁾
Subordinate debentures ⁽⁵⁾
Due within one year		727		8.1			529		8.1
Due after one year		140,674		7.2			193,971		6.9
Notes payable and other debt
Due within one year ⁽⁶⁾		7,737		14.3			10,444		13.5
Due after one year		56,463		5.0			20,634		6.4

Total other debt		205,601		6.9			225,578		7.2

Total asset related debt and other debt		968,804		3.7			987,526		4.1

Debt related to CFVs ⁽⁷⁾
Due within one year		–		–			5,908		10.0
Due after one year		49,903		2.7			49,525		2.7
Total debt related to CFVs		49,903		2.7			55,433		3.5

Total debt	$	1,018,707		3.7		$	1,042,959		4.1

⁽¹⁾

Asset related debt is debt which finances interest-bearing assets and the interest expense from this debt is included in “Net interest income” on the consolidated statements of operations. Other debt is debt which does not finance interest-bearing assets and the interest expense from this debt is included in “Interest expense” under “Operating and other expenses” on the consolidated statements of operations.

⁽²⁾

All but $2.5 million of this debt was assumed by the purchaser of our common shares in TEB on July 3, 2013, at the June 30, 2013 reported amount. See Note 18, “Subsequent Events” for more information.

⁽³⁾

During the second quarter of 2013, the Company recognized the remaining unamortized issuance discounts ($2.3 million) previously recorded as a net discount against the debt balance in order to carry the debt at its liquidation amount at June 30, 2013. This debt was assumed at its liquidation amount by the purchaser of our common shares in TEB on July 3, 2013. See Note 18, “Subsequent Events” for more information. Included in mandatorily redeemable preferred shares were unamortized discounts of $2.7 million at December 31, 2012.

⁽⁴⁾

Included in notes payable and other debt were unamortized discounts of $1.6 million and $1.7 million at June 30, 2013 and December 31, 2012, respectively. This debt will increase by $94.4 million in the third quarter of 2013 as a result of the sale of our common shares in TEB as certain bonds and interests in bonds that were transferred as part of this transaction did not achieve sale accounting and will be treated as a secured borrowing for accounting purposes. See Note 18, “Subsequent Events” for more information.

⁽⁵⁾

Included in the subordinate debt balance were $0.4 million of net discounts and effective interest rate payable (i.e., the difference between the current pay rate and the effective interest rate) and $7.1 million of net premiums and effective interest rate payable at June 30, 2013 and December 31, 2012, respectively.

⁽⁶⁾

This amount included $4.4 million of debt that has come due and remains payable; however, the Company has a forbearance agreement with the lender such that it is not pursuing any remedies.

⁽⁷⁾

See Note 16, “Consolidated Funds and Ventures” for more information.

Covenant Compliance and Debt Maturities

The following table summarizes principal payment commitments across all debt agreements at June 30, 2013:

(in thousands)	Asset Related Debt and Other Debt			CFVs Related Debt
2013	$	13,233		$	–
2014		29,051			35
2015		69,498			–
2016		6,011			–
2017		6,226			–
Thereafter		846,865			49,868
Net discount		(2,080)			–
Total	$	968,804	⁽¹⁾	$	49,903

⁽¹⁾

On July 3, 2013, $695.7 million of debt was assumed by the purchaser of TEB’s common shares.

Included in the 2013 principal payments for MuniMae related debt is $4.4 million of debt that has come due and remains payable; however, the Company has a forbearance agreement with the lender such that it is not pursuing any remedies. The Company is in compliance with all other debt covenants.

Asset Related Debt

Senior Interests in and Debt Owed to Securitization Trusts

At June 30, 2013, the Company had unpaid principal of $577.1 million in senior interests and debt owed to securitization trusts and all but $2.5 million was assumed by the purchaser of the Company’s common shares in TEB on July 3, 2013. During the second quarter of 2013, the Company recognized $4.6 million of unamortized debt issuance costs associated with this debt and recorded within other assets. See Note 18, “Subsequent Events” for more information.

Interest expense on the senior interests in and debt owed to securitization trusts totaled $11.2 million (including $4.6 million related to the acceleration of the unamortized debt issuance costs discussed above) and $6.5 million for the six months ended June 30, 2013 and 2012, respectively.

Mandatorily Redeemable Preferred Shares

At June 30, 2013, the Company had unpaid principal of $121.0 million in mandatorily redeemable preferred shares all of which was assumed by the purchaser of the Company’s common shares in TEB on July 3, 2013. During the second quarter of 2013, the Company recognized the remaining unamortized issuance discounts ($2.3 million) previously recorded as a net discount against the debt balance in order to carry the debt at its liquidation amount at June 30, 2013. This debt was assumed at its liquidation amount by the purchaser of our common shares in TEB on July 3, 2013. During the second quarter of 2013, the Company recognized $0.9 million of unamortized debt issuance costs associated with this debt and recorded within other assets. See Note 18, “Subsequent Events” for more information.

Interest expense on mandatorily redeemable preferred shares totaled $6.5 million (including $3.2 million related to the acceleration of debt issuance costs and issuance discounts discussed above) and $4.3 million for the six months ended June 30, 2013 and 2012, respectively.

During the first quarter of 2013, TEB issued $74 million (unpaid principal) of mandatorily redeemable preferred shares with a distribution rate of 5.0%. Proceeds from this issuance were used to redeem $43.2 million (liquidation preference) of then outstanding mandatorily redeemable preferred shares at a rate of 7.5%. The Company recorded a loss on debt extinguishment of $1.5 million during the first quarter of 2013, due to the acceleration of unamortized debt issuance costs and issuance discounts related to the redemption. These losses are reflected in “Net (losses) gains on early extinguishment of liabilities” for the six months ended June 30, 2013.

Other Debt

Subordinate Debt

The table below provides a summary of the key terms of the subordinate debt issued by MuniMae Holdings II, LLC (“MMH II”)and MMA Financial Holdings, Inc. (“MFH”) and held by third parties at June 30, 2013:

(dollars in thousands)
Issuer	Principal		Net Premium/ (Discount)		Carrying Value		Interim Principal Payments	Maturity Date	Coupon Interest Rate
MMH II	$	29,827	$	-	$	29,827	-	Various dates through December 2033	8.0%
MFH		33,286		54		33,340	$4,689 due April 2015	March 30, 2035	0.75% to March 2015, then 3-month LIBOR plus 3.3%
MFH		30,116		(130)		29,986	$4,242 due May 2015	April 30, 2035	0.75% to April 2015, then 3-month LIBOR plus 3.3%
MFH		17,219		(99)		17,120	$2,305 due May 2015	July 30, 2035	0.75% to April 2015, then 3-month LIBOR plus 3.3%
MFH		31,308		(180)		31,128	$4,191 due May 2015	July 30, 2035	0.75% to April 2015, then 3-month LIBOR plus 3.3%
	$	141,756	$	(355)	$	141,401

Interest expense on the subordinate debt totaled $5.7 million and $7.6 million for the six months ended June 30, 2013 and 2012, respectively.

During March of 2013, the Company repurchased the remaining unpaid principal balance ($45.5 million) of MFH subordinate debt due May 2034 for a cash payment of $17.4 million plus accrued interest. As a result of this transaction, the Company recognized a gain on debt extinguishment of $37.9 million, comprised of the difference between the cash payment of $17.4 million and the carrying value of the repurchased debt of $56.9 million, reduced by the acceleration of $1.6 million of debt issuance costs. The gain on debt extinguishment is recorded in “Net (losses) gains on early extinguishment of liabilities” on the consolidated statements of operations for the first six months of 2013.

Notes Payable and Other Debt

At June 30, 2013, this debt includes $36.6 million related to the TRS entered into during March of 2013 in connection with the Company’s sale of its preferred stock investment. See Note 3, “Investment in Preferred Stock”, for more information. The debt is non-amortizing, matures on March 31, 2015 and bears an interest rate of 3-month LIBOR plus 400 bps (4.27% at June 30, 2013) and resets quarterly. The Company recorded debt issuance costs of $0.8 million associated with the transaction, of which $0.4 million was paid at inception and $0.4 million is payable at termination.

Letters of Credit

The Company had $3.0 million of outstanding letters of credit posted as collateral on the Company’s behalf at June 30, 2013, of which $0.1 million expired unused on July 1, 2013 and the remaining $2.9 million was canceled unused on July 31, 2013.

During the first quarter of 2013, the Company terminated a $19.0 million letter of credit that was issued to secure the Company’s guarantee of investor returns in certain low-income housing tax credit equity funds in which the Company holds a general partner interest. In order to terminate the letter of credit, the Company placed $14.0 million of cash into a restricted collateral account to cover any potential losses associated with the tax credit equity fund guarantees (see Note 3, “Investment in Preferred Stock” and Note 7, “Derivative Financial Instruments”). As of June 30, 2013, the Company does not expect these guarantee obligations to result in any losses.