NOTE 7. BORROWINGS

Certain information with respect to the Company's borrowings as of December 31, 2013 is summarized in the following table (dollar amounts in thousands):

	Outstanding Borrowings					Collateral(1)

CLO 2005-1 senior secured notes	$	193,909	0.73	%	1,212	$	303,104
CLO 2005-2 senior secured notes		335,570	0.63		1,426		496,917
CLO 2006-1 senior secured notes		384,925	0.69		1,698		649,894
CLO 2007-1 senior secured notes		2,075,040	0.79		2,692		2,354,938
CLO 2007-1 mezzanine notes		406,428	3.65		2,692		461,250
CLO 2007-1 subordinated notes(2)		136,097	18.15		2,692		154,456
CLO 2007-A senior secured notes		428,152	1.57		1,384		540,677
CLO 2007-A mezzanine notes		55,327	7.44		1,384		69,867
CLO 2007-A subordinated notes(2)		15,096	42.22		1,384		19,063
CLO 2011-1 senior debt		388,703	1.25		1,688		517,597
CLO 2012-1 senior secured notes		362,727	2.34		4,002		376,603
CLO 2012-1 subordinated notes(2)		18,000	11.67		4,002		18,689
CLO 2013-1 senior secured notes		449,409	1.98		4,214		468,915


Total collateralized loan obligation secured debt		5,249,383					6,431,970
Senior secured credit facility(3)		75,000	1.39		699		—
2015 Asset-based borrowing facility		50,289	2.42		674		213,935
2018 Asset-based borrowing facility(4)		—	—		1,519		—


Total credit facilities		125,289					213,935
8.375% Senior notes		250,800	8.38		10,181		—
7.500% Senior notes		111,476	7.50		10,306		—
Junior subordinated notes		283,517	5.39		8,347		—


Total borrowings	$	6,020,465				$	6,645,905

(1): Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities available-for-sale and equity investments at estimated fair value. Also includes the carrying value of oil and gas assets. For purposes of this table, collateral for CLO senior, mezzanine and subordinated notes are calculated pro rata based on the outstanding borrowings for each respective CLO.
(2): Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on year-to-date estimated distributions, if any.
(3): Capital stock of material domestic and foreign subsidiaries, as defined by the senior secured credit facility agreement, are eligible to be pledged as collateral. As of December 31, 2013, the total investments held within these eligible subsidiaries exceeded the amount of the outstanding debt.
(4): Borrowing rates range from 1.75% to 3.25% plus London interbank offered rate ("LIBOR") per annum based on the amount outstanding.

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					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 mezzanine notes		203,727	2.81		3,057		225,654
CLO 2007-1 subordinated notes(2)		5,828	26.22		3,057		6,455
CLO 2007-A senior secured notes		601,375	1.50		1,749		698,569
CLO 2007-A mezzanine notes		5,580	7.02		1,749		6,482
CLO 2007-A subordinated notes(2)		4,599	60.24		1,749		5,342
CLO 2011-1 senior debt		343,485	1.67		2,053		421,584
CLO 2012-1 senior secured notes(3)		362,280	2.58		4,367		40,180
CLO 2012-1 subordinated notes(2)(3)		21,500	—		4,367		2,351


Total collateralized loan obligation secured debt		5,122,338					5,679,542
CLO 2007-1 mezzanine notes to affiliates		118,845	6.29		3,057		131,636
CLO 2007-1 subordinated notes to affiliates(2)		130,270	25.89		3,057		144,291
CLO 2007-A mezzanine notes to affiliates		36,945	7.53		1,749		42,916
CLO 2007-A subordinated notes to affiliates(2)		10,497	60.24		1,749		12,194


Total collateralized loan obligation junior secured notes to affiliates		296,557					331,037
Senior secured credit facility		—	2.56		1,064		—
2015 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 the estimated fair value of certain corporate loans, securities available-for-sale and equity investments at estimated fair value. Also includes the carrying value of oil and gas assets. For purposes of this table, collateral for CLO senior, mezzanine and subordinated notes are calculated pro rata based on the outstanding borrowing for each respective CLO.
(2): Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on year-to-date estimated distributions, if any.
(3): 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.

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, CLO 2005-1, CLO 2005-2 and CLO 2006-1 are no longer in their reinvestment periods. 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, 2013 and 2012, $759.2 million and $886.6 million, respectively, of original CLO 2007-A, CLO 2005-1, CLO 2005-2 and CLO 2006-1 senior notes were repaid. CLO 2007-1, CLO 2012-1 and CLO 2013-1 will end their reinvestment periods during May 2014, December 2016 and July 2017, 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, 2013 and 2012, $77.2 million and $93.0 million, respectively, of original CLO 2011-1 senior notes were repaid.

On September 27, 2013, the Company amended the CLO 2011-1 senior loan agreement (the "CLO 2011-1 Agreement") to upsize the transaction by $300.0 million, of which CLO 2011-1 is now able to borrow up to an incremental $225.0 million. Under the amended CLO 2011-1 Agreement, CLO 2011-1 matures on August 15, 2020 and borrowings under the CLO 2011-1 Agreement bear interest at a rate of the three-month LIBOR plus 1.35%.

On June 25, 2013, the Company closed CLO 2013-1, a $519.4 million secured financing transaction maturing on July 15, 2025. The Company issued $458.5 million par amount of senior secured notes to unaffiliated investors, of which $442.0 million was floating rate with a weighted-average coupon of three-month LIBOR plus 1.67% and $16.5 million was fixed rate at 3.73%. The investments that are owned by CLO 2013-1 collateralize the CLO 2013-1 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.

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 to unaffiliated third party investors. During 2013, the Company purchased $3.5 million of CLO 2012-1 subordinated notes from unaffiliated third party investors, therefore, reducing the subordinates notes issued to unaffiliated third party investors from $21.5 million to $18.0 million, as of December 31, 2013. This transaction resulted in the Company recording a one-time gain on extinguishment of debt totaling $0.3 million for the year ended December 31, 2013. CLO 2012-1's debt is collateralized by the investments that are owned by CLO 2012-1, and as a result, those investments are not available to the Company, its creditors or shareholders.

During the year ended December 31, 2013, the Company issued $84.8 million par amount of CLO 2007-1 class D notes for proceeds of $81.1 million. In addition, during the year ended December 31, 2013, the Company issued $12.4 million par amount of CLO 2007-A class F notes for proceeds of $12.7 million. Comparatively, during the year ended December 31, 2012, the Company issued $119.7 million par amount of CLO 2007-1 class D notes for proceeds of $95.1 million and $11.3 million par amount of CLO 2007-A class C notes for proceeds of $10.6 million.

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, 2013 and 2012, the Company had $75.0 million and zero, respectively of borrowings outstanding under the 2015 Facility.

Asset-Based Borrowing Facility

On November 14, 2013, 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 $94.6 million, which 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, 2013 and 2012, the Company had $50.3 million and $107.8 million, respectively, of borrowings outstanding under the 2015 Natural Resources Facility.

On February 27, 2013, the Company entered into a separate credit agreement for a five-year $6.0 million non-recourse, asset-based revolving credit facility, maturing on February 27, 2018 (the "2018 Natural Resources Facility"), that is subject to, among other things, the terms of a borrowing base derived from the value of eligible specified oil and gas assets. On December 20, 2013, the 2018 Natural Resources Facility was adjusted and increased to $42.0 million. The Company has the right to prepay loans under the 2018 Natural Resources Facility in whole or in part at any time. Loans under the 2018 Natural Resources Facility bear interest at a rate equal to LIBOR plus a tiered applicable margin ranging from 1.75% to 3.25% per annum. The 2018 Natural Resources Facility contains customary covenants applicable to the Company. As of December 31, 2013, the Company had no borrowings outstanding under the 2018 Natural Resources Facility.

As of December 31, 2013 and 2012, the Company believes it was in compliance with the covenant requirements for its credit facilities.

Convertible Debt

7.5% Convertible Senior Notes

On January 18, 2013, in accordance with the indenture relating to the Company's $172.5 million 7.5% convertible senior notes due January 15, 2017 ("7.5% Notes"), 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. The conversion rate as of January 18, 2013 was equal to 141.8256 common shares for each $1,000 principal amount of 7.5% Notes, plus an additional 9.2324 common shares per $1,000 principal amount to account for the make-whole premium. Holders of $172.5 million 7.5% Notes submitted their notes for conversion for which the Company satisfied by physical settlement with 26.1 million common shares.

In accordance with accounting for convertible debt instruments that may be settled in cash upon conversion, the Company had 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 was included in paid-in-capital on the Company's consolidated balance sheet as of December 31, 2012. The remaining liability component of $166.0 million, included within convertible senior notes on the Company's consolidated balance sheets as of December 31, 2012, was comprised of the principal $172.5 million less the unamortized debt discount of $6.5 million as of December 31, 2012. The total debt discount amortization recognized for the years ended December 31, 2013, 2012 and 2011 was zero, $1.3 million and $1.2 million, respectively. The debt discount was amortized at the effective interest rate of 8.6%. For the years ended December 31, 2013, 2012 and 2011, the total interest expense recognized on the 7.5% Notes was $0.5 million, $12.9 million and $12.9 million, respectively.

7.0% Convertible Senior Notes

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.

Contractual Obligations

The table below summarizes the Company's contractual obligations (excluding interest) under borrowing agreements as of December 31, 2013 (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 notes	$	195,897	$	—	$	—	$	195,897	$	—
CLO 2005-2 notes		338,773		—		—		338,773		—
CLO 2006-1 notes		384,925		—		—		384,925		—
CLO 2007-1 notes		2,641,442		—		—		—		2,641,442
CLO 2007-A notes		498,843		—		—		498,843		—
CLO 2011-1 debt		388,703		—		—		388,703		—
CLO 2012-1 notes		385,500		—		—		—		385,500
CLO 2013-1 notes		458,500		—		—		—		458,500
Credit facilities		125,289		—		125,289		—		—
Senior notes		373,750		—		—		—		373,750
Junior subordinated notes		283,517		—		—		—		283,517


Total	$	6,075,139	$	—	$	125,289	$	1,807,141	$	4,142,709

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.