Commitments & Contingencies

9 Months Ended

Sep. 30, 2011

Commitments & Contingencies

Commitments & Contingencies

Note 10. Commitments & Contingencies

Commitments

As part of its strategy of investing in corporate loans, the Company commits to purchase interests in primary market loan syndications, which obligate the Company to acquire a predetermined interest in such loans at a specified price on a to-be-determined settlement date. Consistent with standard industry practices, once the Company has been informed of the amount of its syndication allocation in a particular loan by the syndication agent, the Company bears the risks and benefits of changes in the fair value of the syndicated loan from that date forward. In addition, the Company also commits to purchase corporate loans in the secondary market that similar to the above, the Company bears the risks and benefits of changes in the fair value from the trade date forward. As of September 30, 2011 and December 31, 2010, the Company had committed to purchase corporate loans with aggregate commitments totaling $101.6 million and $90.9 million, respectively. In addition, the Company participates in certain contingent financing arrangements, whereby the Company is committed to provide funding of up to a specific amount at the discretion of the borrower. As of September 30, 2011 and December 31, 2010, the Company had unfunded financing commitments for corporate loans totaling $8.2 million and $31.6 million, respectively. In addition, as of September 30, 2011 and December 31, 2010, the Company had unfunded financing commitments for private equity investments totaling $7.7 million and $13.1 million, respectively. The Company did not have any material losses as of September 30, 2011, nor does it expect material losses related to those corporate loans and private equity investments for which it committed to purchase and fund.

Contingencies

On July 10, 2009, the Company surrendered for cancellation, without consideration, approximately $64.0 million of mezzanine notes issued to the Company by CLO 2005-2 (the “2005-2 Notes”) and approximately $222.4 million of mezzanine and junior notes issued to the Company by CLO 2006-1 (the “2006-1 Notes”), as well as certain other notes issued to the Company by another CLO. The surrendered notes were cancelled by the trustee under the applicable indenture, and the obligations due under such surrendered notes were deemed extinguished.

During 2010, certain holders of the senior notes of CLO 2006-1 (the “2006-1 Noteholders”) notified the related trustee of purported defaults under the indenture related to the surrender of the 2006-1 Notes. The Company does not believe based on discussions with counsel that an event of default has occurred and is engaged in discussions with the 2006-1 Noteholders to resolve this matter. Accordingly, the Company does not believe that this matter will have a material effect on its financial condition.