Note 6—DEBT

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

(dollars in thousands)	September 30, 2013		Weighted-Average Effective Interest Rate at September 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		–	–			589,592	2.1
Mandatorily redeemable preferred shares
Due within one year		–	–			4,901	7.5
Due after one year		–	–			83,819	7.4
Notes payable and other debt – bond related ⁽²⁾
Due within one year		21,261	1.8			–	–
Due after one year		125,043	5.5			57,729	5.0
Notes payable and other debt – non-bond related
Due within one year		1,446	9.2			17,617	9.9
Due after one year		7,156	9.9			8,290	9.8

Total asset related debt		154,906	5.2			761,948	3.2

Other Debt ⁽¹⁾
Subordinate debentures ⁽³⁾
Due within one year		742	8.1			529	8.1
Due after one year		142,157	7.2			193,971	6.9
Notes payable and other debt
Due within one year ⁽⁴⁾		5,342	10.0			10,444	13.5
Due after one year		61,837	5.3			20,634	6.4

Total other debt		210,078	6.7			225,578	7.2

Total asset related debt and other debt		364,984	6.1			987,526	4.1

Debt related to CFVs ⁽⁵⁾
Due within one year		35	6.0			5,908	10.0
Due after one year		96,107	4.5			49,525	2.7
Total debt related to CFVs		96,142	4.5			55,433	3.5

Total debt	$	461,126	5.7		$	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⁾ Included in notes payable and other debt were unamortized discounts of $1.7 million at December 31, 2012.

⁽³⁾ Included in the subordinate debt balance were $1.3 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 September 30, 2013 and December 31, 2012, respectively.

⁽⁴⁾ This amount includes $3.8 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.

⁽⁵⁾ 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 September 30, 2013:

(in thousands)	Asset Related Debt and Other Debt		CFVs Related Debt
2013	$	4,754	$	133
2014		25,157		469
2015		67,007		403
2016		34,133		435
2017		3,737		469
Thereafter		228,985		92,974
Net discount		1,211		1,259
Total	$	364,984	$	96,142

Included in the 2013 principal payments for asset related debt and other debt is $3.8 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 not in default under any of its other debt arrangements.

Asset Related Debt

Senior Interests in and Debt Owed to Securitization Trusts

On July 3, 2013, all but $2.5 million of the Company’s unpaid principal of $577.1 million in senior interests in and debt owed to securitization trusts at June 30, 2013, was transferred to the Purchaser of the Company’s common shares in TEB. During the second quarter of 2013, the Company recognized $4.6 million of unamortized debt issuance costs associated with this debt that was recorded within other assets. During the third quarter of 2013, the remaining $2.5 million in senior interests and debt owed to securitization trusts was repaid.

Interest expense on the senior interests in and debt owed to securitization trusts totaled $11.3 million (including $4.6 million related to the acceleration of the unamortized debt issuance costs discussed above) and $9.6 million for the nine months ended September 30, 2013 and 2012, respectively.

Mandatorily Redeemable Preferred Shares

All of the Company’s mandatorily redeemable preferred shares were transferred to the Purchaser of the Company’s common shares in TEB at the liquidation amount of $121.0 million. 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. In addition, the Company recognized $0.9 million of unamortized debt issuance costs associated with this debt that was recorded within other assets.

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 $6.4 million for the nine months ended September 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 nine months ended September 30, 2013.

Notes Payable and Other Debt – Bond Related

This debt is comprised of proceeds received on bond and bond interest transfers that did not qualify for sale accounting treatment because the Company either transferred a participation interest or the Company entered into a performance guarantee at the time of transfer. This debt also includes financing proceeds received on TRS agreements where the related bond did not receive sale accounting treatment.

Other Debt

Subordinate Debt

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

(dollars in thousands)
Issuer	Principal		Net Premium/ (Discount)		Carrying Value		Interim Principal Payments		Maturity Date	Coupon Interest Rate
MFI	$	29,651	$	–	$	29,651		–	Various dates through December 2033	8.0%

MFH		33,286		565		33,851	$4,689 due April 2015		March 30, 2035	0.75% to March 2015, then 3-month LIBOR plus 3.3%

MFH		30,116		331		30,447	$4,242 due May 2015		April 30, 2035	0.75% to April 2015, then 3-month LIBOR plus 3.3%

MFH		17,219		150		17,369	$2,305 due May 2015		July 30, 2035	0.75% to April 2015, then 3-month LIBOR plus 3.3%

MFH		31,308		273		31,581	$4,191 due May 2015		July 30, 2035	0.75% to April 2015, then 3-month LIBOR plus 3.3%

	$	141,580	$	1,319	$	142,899

Interest expense on the subordinate debt totaled $8.2 million and $11.4 million for the nine months ended September 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 nine months of 2013.

Notes Payable and Other Debt

At September 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 (4.25% at September 30, 2013), which 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

On July 1, 2013, $0.1 million in a letter of credit expired unused and $2.9 million was canceled unused on July 31, 2013. As a result, the Company had no letters of credit outstanding at September 30, 2013.