Debt

9 Months Ended

Sep. 30, 2020

Warehouse Credit Facilities—To provide capital for the mortgage loans that it originates, Redfin Mortgage, our wholly owned mortgage origination subsidiary, utilizes warehouse credit facilities that are classified as current liabilities in our consolidated balance sheets. Borrowings under each warehouse credit facility are secured by the related mortgage loan and rights and income associated with the loan. The following table summarizes borrowings under these facilities as of the periods presented:


Lender	Borrowing Capacity as of September 30, 2020		Borrowings as of September 30, 2020		Borrowings as of December 31, 2019
Western Alliance Bank	$	50,000	$	13,459	$	8,489
Texas Capital Bank, N.A.	40,000		19,650		10,210
Flagstar Bank	15,000		7,199		2,603
Total	$	105,000	$	40,308	$	21,302

Borrowings under the facility with Western Alliance Bank ("Western Alliance") mature on June 15, 2021 and generally bear interest at a rate equal to the greater of (i) one-month LIBOR plus 2.00% or (ii) 3.50%. The weighted average interest rate on outstanding borrowings as of September 30, 2020 and December 31, 2019 was 3.52% and 3.79%, respectively. Redfin Corporation has agreed to make capital contributions in an amount as necessary for Redfin Mortgage to satisfy its adjusted tangible net worth financial covenant under the agreement, but it was not obligated to make any such capital contributions as of September 30, 2020. See Note 16 for developments subsequent to September 30, 2020 with respect to this facility.

Borrowings under the facility with Texas Capital Bank, N.A. ("Texas Capital") mature on July 14, 2021 and generally bear interest at a rate equal to the greater of (i) the rate of interest accruing on the outstanding principal balance of the loan minus 0.50% or (ii) 3.50%. The weighted average interest rate on outstanding borrowings as of September 30, 2020 and December 31, 2019 was 3.50% and 3.51%, respectively. Redfin Corporation has guaranteed Redfin Mortgage’s obligations under the agreement. See Note 16 for developments subsequent to September 30, 2020 with respect to this facility.

Borrowings under the facility with Flagstar Bank, FSB ("Flagstar") generally bear interest at a rate equal to the greater of (i) one-month LIBOR plus 2.00% or (ii) 3.00%. The weighted average interest rate on outstanding borrowings as of September 30, 2020 and December 31, 2019 was 3.00% and 3.69%, respectively. This facility does not have a stated maturity date, but Flagstar may terminate the facility upon 30 days prior notice. Redfin Mortgage would be required to pay all amounts owed to Flagstar upon the facility's termination.

Secured Revolving Credit Facility—To provide capital for the homes that it purchases, RedfinNow has, through a special purpose entity called RedfinNow Borrower, entered into a secured revolving credit facility with Goldman Sachs. Borrowings under the facility are secured by RedfinNow Borrower's assets, including the financed homes, as well as the equity interests in RedfinNow Borrower. The following table summarizes borrowings under this facility as of the periods presented:


Lender	Borrowing Capacity as of September 30, 2020		Borrowings as of September 30, 2020		Borrowings as of December 31, 2019
Goldman Sachs Bank USA	$	100,000	$	14,923	$	4,444

The facility matures on January 26, 2021, but we may extend the maturity date for an additional six months to repay outstanding borrowings. Goldman Sachs may, at its sole option, finance a portion of RedfinNow Borrower's acquisition costs of qualified homes that have been purchased. The portion financed is based, in part, on how long the qualifying home has been owned by a Redfin entity. Borrowings under the facility prior to March 24, 2020 generally bore interest at a rate of one-month LIBOR (subject to a floor of 0.50%) plus 2.65%. For borrowings under the facility on and after March 24, 2020, each new borrowing generally bears interest at a rate of one-month LIBOR (subject to a floor of 0.50%) plus an additional rate agreed upon between RedfinNow Borrower and Goldman Sachs. The weighted average interest rate on outstanding borrowings as of September 30, 2020 and December 31, 2019 was 4.38% and 4.45%, respectively.

RedfinNow Borrower must repay all borrowings and accrued interest upon the termination of the facility, and it has the option to repay the borrowings, and the related interest, with respect to a specific financed home upon the sale of such home. In certain situations involving a financed home remaining unsold after a certain time period or becoming ineligible for financing under the facility, RedfinNow Borrower may be obligated to

repay all or a portion of the borrowings, and related interest, with respect to such home prior to the sale of such home. In instances involving "bad acts," Redfin Corporation has guaranteed repayment of amounts owed under the facility, in some situations, and indemnification of certain expenses incurred, in other situations.

As of September 30, 2020, RedfinNow Borrower had $41,981 of total assets, of which $23,713 related to inventory and $12,914 in cash and cash equivalents. As of December 31, 2019, RedfinNow Borrower had $16,200 of total assets, of which $7,456 related to inventory and $5,663 in cash and equivalents.

For the three months ended September 30, 2020 and 2019, we amortized $155 and $102 of the debt issuance costs, respectively, and recognized $101 and $0 of interest expense, respectively. For the nine months ended September 30, 2020 and 2019, we amortized $464 and $102 of the debt issuance costs, respectively, and recognized $432 and $0 of interest expense, respectively.

Convertible Senior Notes due 2023—On July 23, 2018, we issued $143,750 aggregate principal amount of convertible senior notes due 2023 (our "2023 notes"). The notes are our general unsecured, senior obligations and bear interest at a fixed rate of 1.75% per year, payable semi-annually in arrears on January 15 and July 15. The effective interest rate of the liability portion of the debt is 7.25%. The notes mature on July 15, 2023, unless earlier repurchased, redeemed or converted. For more than 20 trading days during the 30 consecutive trading days ended September 30, 2020, the volume weighted average price of our common stock was equal to or exceeded 130% of the conversion price of the notes. As a result, the notes will be convertible at the option of the holders during the quarter ending December 31, 2020, and have been reclassified from non-current liabilities to current liabilities on our consolidated balance sheet as of September 30, 2020. As of the date of the filing of this report, we have received an immaterial amount of conversion requests with respect to the notes, and we will settle these conversion requests by paying and delivering a combination of cash and shares of our common stock. We intend to settle any future conversions of the notes by paying or delivering, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of September 30, 2020, the if-converted value of the 2023 notes exceeded the principal amount by $91,190.

The following details the carrying value of our 2023 notes as of the dates presented:


	September 30, 2020		December 31, 2019
Principal	$	143,750	$	143,750
Less: debt discount, net of amortization	(17,013)		(21,231)
Less: debt issuance costs, net of amortization	(2,242)		(2,803)
Net carrying amount of the 2023 notes	$	124,495	$	119,716

The total estimated fair value of our 2023 notes as of September 30, 2020 and December 31, 2019 was approximately $250,039 and $142,672, respectively, based on the closing trading price of the notes on last day of trading for the period. The fair value has been classified as Level 2 within the fair value hierarchy given the limited trading activity of the notes.

The following table sets forth total interest expense recognized related to our 2023 notes for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Amortization of debt discount	$	1,422	$	1,359	$	4,217	$	4,031
Amortization of debt issuance costs	189		182		562		541
Total amortization of debt issuance costs and accretion of equity portion	1,611		1,541		4,779		4,572
Contractual interest expense	629		629		1,887		1,887
Total interest expense related to the notes	$	2,240	$	2,170	$	6,666	$	6,459