NOTE 7. BORROWINGS

Certain information with respect to the Company's borrowings as of December 31, 2012 is summarized in the following table (dollar amounts in thousands):

	Outstanding Borrowings					Fair Value of Collateral(1)

CLO 2005-1 senior secured notes	$	427,317	0.69	%	1,577	$	510,187
CLO 2005-2 senior secured notes		470,516	0.66		1,791		618,000
CLO 2006-1 senior secured notes		601,091	0.69		2,063		846,365
CLO 2007-1 senior secured notes		2,075,040	0.86		3,057		2,298,373
CLO 2007-1 junior secured notes(2)		209,555	—		3,057		232,109
CLO 2007-A senior secured notes		601,375	1.50		1,749		698,569
CLO 2007-A junior secured notes(3)		10,179	—		1,749		11,824
CLO 2011-1 senior debt		343,485	1.67		2,053		421,584
CLO 2012-1 senior secured notes(4)		362,280	2.58		4,367		40,180
CLO 2012-1 junior secured notes(4)		21,500	—		4,367		2,351

Total collateralized loan obligation secured debt		5,122,338					5,679,542
CLO 2007-1 junior secured notes to affiliates(5)		249,115	—		3,057		275,927
CLO 2007-A junior secured notes to affiliates(6)		47,442	—		1,749		55,110

Total collateralized loan obligation junior secured notes to affiliates		296,557					331,037
Senior secured credit facility		—	2.56		1,064		—
Asset-based borrowing facility		107,789	2.71		1,039		227,415

Total credit facilities		107,789					227,415
7.5% Convertible senior notes		166,028	7.50		1,476		—
8.375% Senior notes		250,735	8.38		10,546		—
7.500% Senior notes		111,443	7.50		10,671		—
Junior subordinated notes		283,517	5.43		8,712		—

Total borrowings	$	6,338,407				$	6,237,994

(1): Collateral for borrowings consists of certain corporate loans, securities available-for-sale, equity investments at estimated fair value and oil and gas assets.
(2): CLO 2007-1 junior secured notes consist of $203.7 million of mezzanine notes with a weighted average borrowing rate of 2.8% and $5.8 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-1.
(3): CLO 2007-A junior secured notes consist of $5.6 million of mezzanine notes with a weighted average borrowing rate of 7.0% and $4.6 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-A.
(4): CLO 2012-1 junior secured notes represent subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2012-1. In addition to the fair value of collateral, CLO 2012-1 held $357.7 million of principal cash as of December 31, 2012 as it was closed on December 21, 2012.
(5): CLO 2007-1 junior secured notes to affiliates consist of $118.8 million of mezzanine notes with a weighted average borrowing rate of 6.3% and $130.3 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-1.
(6): CLO 2007-A junior secured notes to affiliates consist of $36.9 million of mezzanine notes with a weighted average borrowing rate of 7.5% and $10.5 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-A.

Certain information with respect to the Company's borrowings as of December 31, 2011 is summarized in the following table (dollar amounts in thousands):

	Outstanding Borrowings					Fair Value of Collateral(1)

CLO 2005-1 senior secured notes	$	715,354	0.75	%	1,943	$	798,876
CLO 2005-2 senior secured notes		745,226	0.83		2,157		870,712
CLO 2006-1 senior secured notes		683,265	0.87		2,429		884,873
CLO 2007-1 senior secured notes		2,075,040	1.01		3,423		2,343,420
CLO 2007-1 junior secured notes(2)		61,491	—		3,423		69,444
CLO 2007-A senior secured notes		812,318	1.36		2,115		900,660
CLO 2007-A junior secured notes(3)		10,821	—		2,115		11,997
CLO 2011-1 senior debt		436,522	1.77		2,419		557,389

Total collateralized loan obligation secured debt		5,540,037					6,437,371
CLO 2007-1 junior secured notes to affiliates(4)		300,396	—		3,423		337,407
CLO 2007-A junior secured notes to affiliates(5)		65,452	—		2,115		72,570

Total collateralized loan obligation junior secured notes to affiliates		365,848					409,977
Senior secured credit facility		—	3.83		854		—
Asset-based borrowing facility		38,300	2.53		1,405		86,874

Total credit facilities		38,300					86,874
7.0% Convertible senior notes		135,086	7.00		197		—
7.5% Convertible senior notes		164,744	7.50		1,842		—
8.375% Senior notes		250,676	8.38		10,912		—
Junior subordinated notes		283,517	5.48		9,078		—

Total borrowings	$	6,778,208				$	6,934,222

(1): Collateral for borrowings consists of certain corporate loans, securities available-for-sale, equity investments at estimated fair value and oil and gas assets.
(2): CLO 2007-1 junior secured notes consist of $55.7 million of mezzanine notes with a weighted average borrowing rate of 3.7% and $5.8 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-1.
(3): CLO 2007-A junior secured notes consist of $6.2 million of mezzanine notes with a weighted average borrowing rate of 7.1% and $4.6 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-A.
(4): CLO 2007-1 junior secured notes to affiliates consist of $170.1 million of mezzanine notes with a weighted average borrowing rate of 5.3% and $130.3 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-1.
(5): CLO 2007-A junior secured notes to affiliates consist of $55.0 million of mezzanine notes with a weighted average borrowing rate of 6.6% and $10.5 million of subordinated notes that do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from CLO 2007-A.

CLO Debt

The indentures governing the Company's CLO transactions stipulate the reinvestment period during which the collateral manager, which is an affiliate of the Company's Manager, can generally sell or buy assets at its discretion and can reinvest principal proceeds into new assets. CLO 2007-A ended its reinvestment period during the fourth quarter of 2010, both CLO 2005-1 and CLO 2005-2 ended their reinvestment periods in the second quarter of 2011, and CLO 2006-1 ended its reinvestment period during the third quarter of 2012. As a result, principal proceeds from the assets held in each of these transactions are generally used to amortize the outstanding balance of senior notes outstanding. During the years ended December 31, 2012 and 2011, $886.6 million and $528.2 million, respectively, of original CLO 2007-A, CLO 2005-1, CLO 2005-2 and CLO 2006-1 senior notes were repaid. CLO 2007-1 and CLO 2012-1 will end their reinvestment periods during May 2014 and December 2016, respectively. CLO 2011-1 does not have a reinvestment period and all principal proceeds from holdings in CLO 2011-1 are used to amortize the transaction. During the years ended December 31, 2012 and 2011, $93.0 million and $2.9 million, respectively, of original CLO 2011-1 senior notes were repaid.

On March 31, 2011, the Company closed CLO 2011-1, a $400.0 million secured financing transaction secured by the assets held in CLO 2011-1. At closing, the Company entered into a senior loan agreement (the "CLO 2011-1 Agreement") through which CLO 2011-1 was able to borrow up to $300.0 million through a non-recourse loan secured by the assets held in CLO 2011-1. On July 6, 2011, the Company amended the CLO 2011-1 Agreement to upsize the transaction to $600.0 million, whereby CLO 2011-1 was able to borrow up to an additional $150.0 million, or total of $450.0 million. Under the amended CLO 2011-1 Agreement, the CLO 2011-1 senior loan matures on August 15, 2018 and borrowings under the CLO 2011-1 Agreement bear interest at a rate of the three-month London interbank offered rate ("LIBOR") plus 1.35%.

On December 21, 2012, the Company closed CLO 2012-1, a $412.4 million secured financing transaction maturing December 16, 2024. The Company issued $367.5 million par amount of senior secured notes to unaffiliated investors, of which $342.5 million was floating rate with a weighted-average coupon of three-month LIBOR plus 2.09% and $25.0 million was fixed rate at 2.39%. The Company also issued $21.5 million of subordinated notes. The investments that are owned by CLO 2012-1 collateralize the CLO 2012-1 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.

During the years ended December 31, 2012 and 2011, the Company issued $119.7 million par amount of CLO 2007-1 class D notes for proceeds of $95.1 million and zero, respectively. In addition, during years ended December 31, 2012 and 2011, the Company issued $11.3 million par amount of CLO 2007-A class C notes for proceeds of $10.6 million and zero, respectively.

Credit Facilities

Senior Secured Credit Facility

On November 30, 2012, the Company entered into a credit agreement for a three-year $150.0 million revolving credit facility, maturing on November 30, 2015 (the "2015 Facility"). The Company may obtain additional commitments under the 2015 Facility so long as the aggregate amount of commitments at any time does not exceed $350.0 million. The Company has the right to prepay loans under the 2015 Facility in whole or in part at any time. In connection with entering into the 2015 Facility, the Company terminated the commitments under its existing asset-based revolving credit facility. Loans under the 2015 Facility bear interest at a rate equal to, at the Company's option, LIBOR plus 2.25% per annum, or an alternate base rate plus 1.25% per annum. The 2015 Facility contains customary covenants, including ones that require the Company to satisfy a net worth financial test and maintain certain ratios relating to leverage and consolidated total assets. In addition, the 2015 Facility contains customary negative covenants applicable to the Company. As of December 31, 2012, the Company had no borrowings outstanding under the 2015 Facility.

Asset-Based Borrowing Facility

On December 7, 2012, the Company's five-year nonrecourse, asset-based revolving credit facility (the "2015 Natural Resources Facility"), maturing on November 5, 2015, was adjusted and reduced to $126.1 million, that is subject to, among other things, the terms of a borrowing base derived from the value of eligible specified oil and gas assets. The borrowing base is subject to certain caps and concentration limits customary for financings of this type. The Company has the right to prepay loans under the 2015 Natural Resources Facility in whole or in part at any time. Loans under the 2015 Natural Resources Facility bear interest at a rate equal to LIBOR plus a tiered applicable margin ranging from 1.75% to 2.75% per annum. The 2015 Natural Resources Facility contains customary covenants applicable to the Company. As of December 31, 2012 and 2011, the Company had $107.8 million and $38.3 million of borrowings outstanding under the 2015 Natural Resources Facility.

As of December 31, 2012, the Company believes it was in compliance with the covenant requirements for both credit facilities.

Convertible Debt

On January 15, 2010, the Company issued $172.5 million of 7.5% convertible senior notes due January 15, 2017 ("7.5% Notes"). The 7.5% Notes bear interest at a rate of 7.5% per annum on the principal amount, accruing from January 15, 2010. Interest is payable semiannually in arrears on January 15 and July 15 of each year, beginning on July 15, 2010. The 7.5% Notes will mature on January 15, 2017 unless previously redeemed, repurchased or converted in accordance with their terms prior to such date. Holders of the 7.5% Notes may convert their notes at the applicable conversion rate at any time prior to the close of business on the business day immediately preceding the stated maturity date subject to the Company's right to terminate the conversion rights of the notes. As of December 31, 2012, the conversion rate for each $1,000 principal amount of 7.5% Notes was 141.8256 common shares (equal to a conversion price of approximately $7.05 per share). On January 18, 2013, the Company issued a conversion rights termination notice ("Termination Notice") to holders of the 7.5% Notes whereby it terminated the right to convert the 7.5% Notes to common shares (see Note 17).

In accordance with accounting for convertible debt instruments that may be settled in cash upon conversion, the Company separately accounted for the liability and equity components to reflect the nonconvertible debt borrowing rate. The Company determined that the equity component of the 7.5% Notes totaled $10.0 million and is included in paid-in-capital on the Company's consolidated balance sheet as of December 31, 2012 and 2011. The remaining liability component of $166.0 million and $164.7 million, included within convertible senior notes on the Company's consolidated balance sheets as of December 31, 2012 and 2011, respectively, is comprised of the principal $172.5 million less the unamortized debt discount of $6.5 million and $7.8 million as of December 31, 2012 and 2011, respectively. The total debt discount amortization recognized for the years ended December 31, 2012, 2011 and 2010 was $1.3 million, $1.2 million and $1.0 million, respectively. The debt discount amortized at the effective interest rate of 8.6%. For the years ended December 31, 2012, 2011 and 2010, the total interest expense recognized on the 7.5% Notes was $12.9 million, $12.9 million and $12.4 million, respectively.

During the first quarter of 2012, the Company repurchased $23.1 million par amount of its 7.0% convertible senior notes due July 15, 2012 (the "7.0% Notes"). These transactions resulted in the Company recording a loss of $0.4 million and a $0.2 million write-off of unamortized debt issuance costs. During 2011, the Company repurchased $45.5 million par amount of its 7.0% Notes, which resulted in the Company recording a loss of $1.7 million and a write-off of $0.1 million of unamortized debt issuance costs. On July 13, 2012, the Company repaid in full its $112.0 million of outstanding 7.0% Notes, which matured on July 15, 2012.

Senior Notes

On March 20, 2012, the Company issued $115.0 million par amount of 7.500% senior notes due March 20, 2042 ("7.500% Senior Notes"), resulting in net proceeds of $111.4 million. Interest on the 7.500% Senior Notes is payable quarterly in arrears on June 20, September 20, December 20 and March 20 of each year.

On November 15, 2011, the Company issued $258.8 million par amount of 8.375% senior notes due November 15, 2041 ("8.375% Senior Notes"), resulting in net proceeds of $250.7 million. Interest on the 8.375% Senior Notes is payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year.

Contractual Obligations

The table below summarizes the Company's contractual obligations (excluding interest) under borrowing agreements as of December 31, 2012 (amounts in thousands):

	Payments Due by Period

	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
CLO 2005-1 senior secured notes	$	429,903	$	—	$	—	$	429,903	$	—
CLO 2005-2 senior secured notes		474,538		—		—		474,538		—
CLO 2006-1 senior secured notes		601,091		—		—		—		601,091
CLO 2007-1 senior secured notes		2,075,040		—		—		—		2,075,040
CLO 2007-1 junior secured notes		232,491		—		—		—		232,491
CLO 2007-A senior secured notes		601,375		—		—		601,375		—
CLO 2007-A junior secured notes		10,821		—		—		10,821		—
CLO 2011-1 senior debt		343,485		—		—		—		343,485
CLO 2012-1 senior secured notes		367,500		—		—		—		367,500
CLO 2012-1 junior secured notes		21,500		—		—		—		21,500
CLO 2007-1 junior secured notes to affiliates		249,115		—		—		—		249,115
CLO 2007-A junior secured notes to affiliates		47,442		—		—		47,442		—
Asset-based borrowing facility		107,789		—		107,789		—		—
Convertible senior notes		172,500		—		—		172,500		—
Senior notes		373,750		—		—		—		373,750
Junior subordinated notes		283,517		—		—		—		283,517

Total	$	6,391,857	$	—	$	107,789	$	1,736,579	$	4,547,489

The remaining contractual maturities in the table above were allocated assuming no prepayments and represent the principal amount of all notes, excluding any discount and accounting adjustments. Expected maturities may differ from contractual maturities because the Company, as the borrower, may have the right to call or prepay certain obligations, with or without call or prepayment penalties.