Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments

Schedule of carrying value and estimated fair value of financial instruments

	As of September 30, 2011				As of December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash, restricted cash, and cash equivalents	$	459,043	$	459,043	$	885,254	$	885,254
Securities available-for-sale	786,195		786,195		838,894		838,894
Corporate loans, net of allowance for loan losses of $191,407 and $209,030 as of September 30, 2011 and December 31, 2010 respectively	6,115,948		5,904,793		5,857,816		6,060,530
Corporate loans held for sale	500,490		537,112		463,628		473,681
Residential mortgage-backed securities	88,209		88,209		93,929		93,929
Equity investments, at estimated fair value	170,175		170,175		99,955		99,955
Interest and principal receivable	59,917		59,917		57,414		57,414
Derivative assets	26,066		26,066		19,519		19,519
Private equity investments, at cost(1)	3,672		1,675		4,800		5,051
Financial Liabilities:
Collateralized loan obligation secured debt	$	5,596,020	$	5,248,045	$	5,630,272	$	5,176,052
Collateralized loan obligation junior secured notes to affiliates	365,848		288,913		366,124		254,522
Credit facilities	38,300		38,300		18,400		18,400
Convertible senior notes	299,877		356,203		344,142		425,564
Junior subordinated notes	283,517		263,671		283,517		264,025
Accounts payable, accrued expenses and other liabilities	51,404		51,404		14,193		14,193
Accrued interest payable	15,987		15,987		22,846		22,846
Accrued interest payable to affiliates	7,579		7,579		6,316		6,316
Related party payable	3,687		3,687		12,988		12,988
Securities sold, not yet purchased	1,192		1,192		—		—
Derivative liabilities	123,957		123,957		76,566		76,566

(1) During the three and nine months ended September 30, 2011, the Company recognized a loss totaling zero and $1.1 million, respectively for private equity investments, at cost, that it determined to be other-than-temporarily impaired based on the estimated fair value using unobservable inputs. Private equity investments, at cost are included in other assets on the condensed consolidated balance sheets.

Schedule of fair value of assets and liabilities measured on a recurring basis

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance as of September 30, 2011
Assets:
Securities available-for-sale	$	5,417		$	712,831		$	67,947	$	786,195
Residential mortgage-backed securities	—			—			88,209		88,209
Equity investments, at estimated fair value	1,231			34,971			133,973		170,175
Total rate of return swaps	—			—			159		159
Foreign exchange options, net	—			—			15,909		15,909
Common stock warrants	1,046			—			2,179		3,225
Commodities swaps, net	—			3,322			—		3,322
Other assets	—			—			1,706		1,706
Total	$	7,694		$	751,124		$	310,082	$	1,068,900
Liabilities:
Securities sold, not yet purchased	$	(1,192	)	$	—		$	—	$	(1,192	)
Cash flow interest rate swaps, net	—			(100,849		)	—		(100,849		)
Foreign exchange forward contracts, net	—			(16,004		)	—		(16,004		)
Credit default swaps—protection sold	—			(3,653		)	—		(3,653		)
Total	$	(1,192	)	$	(120,506	)	$	—	$	(121,698	)

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2010
Assets:
Securities available-for-sale	$	3,374	$	752,423		$	83,097	$	838,894
Residential mortgage-backed securities	—		—			93,929		93,929
Equity investments, at estimated fair value	—		15,023			84,932		99,955
Credit default swaps—protection sold	—		492			—		492
Total rate of return swaps	—		—			104		104
Foreign exchange options, net	—		—			14,791		14,791
Common stock warrants	—		—			3,453		3,453
Total	$	3,374	$	767,938		$	280,306	$	1,051,618
Liabilities:
Cash flow interest rate swaps	$	—	$	(58,365	)	$	—	$	(58,365	)
Foreign exchange forward contracts, net	—		(17,296		)	—		(17,296		)
Commodities swaps, net	—		(226		)	—		(226		)
	$	—	$	(75,887	)	$	—	$	(75,887	)

Schedule of fair value of assets measured on a non-recurring basis

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of September 30, 2011
Loans held for sale(1)	$	—	$	397,115	$	—	$	397,115
Total	$	—	$	397,115	$	—	$	397,115

(1) As of September 30, 2011, total loans held for sale had a carrying value of $500.5 million of which $397.1 million was carried at estimated fair value and the remaining $103.4 million carried at amortized cost. The $397.1 million carried at estimated fair value was classified as Level 2 given that the assets were valued using quoted prices and other observable inputs in an active market.

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2010
Loans held for sale(1)	$	—	$	254,682	$	14,443	$	269,125
Private equity investments(2)	—		—		1,800		1,800
Total	$	—	$	254,682	$	16,243	$	270,925

(1) As of December 31, 2010, total loans held for sale had a carrying value of $463.6 million of which $269.1 million was carried at estimated fair value and the remaining $194.5 million carried at amortized cost. Of the $269.1 million carried at estimated fair value, $254.7 million was classified as Level 2 given that the assets were valued using quoted prices and other observable inputs in an active market. The remaining $14.4 million was classified as Level 3 given that the Company applied unobservable inputs based on the best available information to determine the estimated fair value.

(2) Represents private equity investments accounted for under the cost method that were classified as Level 3 when the assets were impaired and measured at estimated fair value using unobservable inputs.

Schedule of additional information of assets measured on level 3 basis

	Securities Available- For-Sale			Residential Mortgage- Backed Securities			Equity Investments, at Estimated Fair Value			Total Rate of Return Swaps			Common Stock Warrants			Foreign Exchange Options, Net			Other Assets
Beginning balance as of July 1, 2011	$	93,075		$	88,538		$	156,684		$	163		$	4,399		$	18,952		$	1,119
Total gains or losses (realized and unrealized):
Included in earnings(1)	(611		)	1,428			(14,417		)	(4		)	(37		)	(3,043		)	1,027
Included in other comprehensive (loss) income	(8,982		)	—			—			—			—			—			—
Transfers out of Level 3(2)	(17,332		)	—			(28,546		)	—			—			—			—
Purchases	2,761			—			20,252			—			—			—			400
Sales	—			—			—			—			—			—			—
Settlements	(964		)	(1,757		)	—			—			(2,183		)	—			(840		)
Ending balance as of September 30, 2011	$	67,947		$	88,209		$	133,973		$	159		$	2,179		$	15,909		$	1,706
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date(1)	$	—		$	10,620		$	(2,622	)	$	—		$	(536	)	$	(3,043	)	$	1,027

(1) Amounts are included in net realized and unrealized (loss) gain on investments, net realized and unrealized (loss) gain on derivatives and foreign exchange or net realized and unrealized gain (loss) on residential mortgage-backed securities, residential mortgage loans, and residential mortgage-backed securities issued, carried at estimated fair value in the condensed consolidated statements of operations.

(2) Certain securities available-for-sale and equity investments, at estimated fair value, were transferred out of Level 3 primarily the result of additional observable inputs from third party broker quotes. There were no significant transfers in to Level 3 from Level 1 or 2.

	Securities Available- For-Sale			Residential Mortgage- Backed Securities			Equity Investments, at Estimated Fair Value			Total Rate of Return Swaps		Common Stock Warrants			Foreign Exchange Options, Net		Other Assets
Beginning balance as of January 1, 2011	$	83,097		$	93,929		$	84,932		$	104	$	3,453		$	14,791	$	—
Total gains or losses (realized and unrealized):
Included in earnings(1)	(356		)	(373		)	28,471			55		909			1,118		1,031
Included in other comprehensive (loss) income	(6,043		)	—			—			—		—			—		—
Transfers out of Level 3(2)	(4,346		)	—			(28,546		)	—		—			—		—
Purchases	8,903			—			40,344			—		—			—		400
Sales	(1,665		)	—			(286		)	—		—			—		—
Settlements	(11,643		)	(5,347		)	9,058			—		(2,183		)	—		275
Ending balance as of September 30, 2011	$	67,947		$	88,209		$	133,973		$	159	$	2,179		$	15,909	$	1,706
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date(1)	$	—		$	17,729		$	33,952		$	—	$	(536	)	$	1,118	$	1,031

(1) Amounts are included in net realized and unrealized (loss) gain on investments, net realized and unrealized (loss) gain on derivatives and foreign exchange or net realized and unrealized gain (loss) on residential mortgage-backed securities, residential mortgage loans, and residential mortgage-backed securities issued, carried at estimated fair value in the condensed consolidated statements of operations.

(2) Certain securities available-for-sale and equity investments, at estimated fair value, were transferred out of Level 3 primarily the result of additional observable inputs from third party broker quotes. There were no significant transfers in to Level 3 from Level 1 or 2.

	Securities Available- For-Sale		Residential Mortgage- Backed Securities			Equity Investments, at Estimated Fair Value			Total Rate of Return Swaps		Common Stock Warrants		Foreign Exchange Options		Free-Standing Derivatives Interest Rate Swaps
Beginning balance as of July 1, 2010	$	72,773	$	107,081		$	26,482		$	37	$	126	$	—	$	4,764
Total gains or losses (realized and unrealized):
Included in earnings(1)	649		2,208			(5,835		)	98		84		15,309		(3,482		)
Included in other comprehensive income	5,279		—			—			—		—		—		—
Transfers in to level 3(2)	22,287		—			41,740			—		—		—		—
Purchases, sales, other settlements and issuances, net	11,846		(3,037		)	6,545			—		2,716		—		(10		)
Ending balance as of September 30, 2010	$	112,834	$	106,252		$	68,932		$	135	$	2,926	$	15,309	$	1,272
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date(1)	$	—	$	7,698		$	(5,835	)	$	—	$	84	$	15,309	$	(3,482	)

(1) Amounts are included in net realized and unrealized gain (loss) on investments, net realized and unrealized gain (loss) on derivatives and foreign exchange or net realized and unrealized gain (loss) on residential mortgage-backed securities, residential mortgage loans, and residential mortgage-backed securities issued, carried at estimated fair value in the condensed consolidated statements of operations.

(2) Certain securities available-for-sale and equity investments, at estimated fair value, were transferred in to level 3 reflecting reduced transparency of prices for these financial instruments as a result of less trading activity.

	Securities Available- For-Sale			Residential Mortgage- Backed Securities			Equity Investments, at Estimated Fair Value			Total Rate of Return Swaps			Common Stock Warrants		Foreign Exchange Options		Free-Standing Derivatives Interest Rate Swaps
Beginning balance as of January 1, 2010	$	81,288		$	47,572		$	18,289		$	11,809		$	2,471	$	—	$	(281	)
Transfers in from deconsolidation (1)	—			74,366			—			—			—		—		—
Total gains or losses (realized and unrealized):
Included in earnings(2)	4,927			(5,076		)	(8,732		)	1,801			135		15,309		1,348
Included in other comprehensive (loss) income	6,957			—			—			—			—		—		—
Transfers in to level 3(3)	22,788			—			41,740			—			—		—		—
Purchases, sales, other settlements and issuances, net	(3,126		)	(10,610		)	17,635			(13,475		)	320		—		205
Ending balance as of September 30, 2010	$	112,834		$	106,252		$	68,932		$	135		$	2,926	$	15,309	$	1,272
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date(2)	$	—		$	5,383		$	(8,732	)	$	—		$	135	$	15,309	$	151

(1) Represents the subordinate tranches of the residential mortgage loan securitization trusts as a result of the Company’s deconsolidation as of January 1, 2010, computed as $11.4 million of REO plus $62.9 million, which represents the difference between the residential mortgage loans of $2.1 billion less RMBS Issued, at estimated fair value, of $2.0 billion. See Note 2 for further discussion.

(2) Amounts are included in net realized and unrealized gain (loss) on investments, net realized and unrealized gain (loss) on derivatives and foreign exchange or net realized and unrealized gain (loss) on residential mortgage-backed securities, residential mortgage loans, and residential mortgage-backed securities issued, carried at estimated fair value in the condensed consolidated statements of operations.

(3) Certain securities available-for-sale and equity investments, at estimated fair value, were transferred in to level 3 reflection reduced transparency of prices for these financial instruments as a result of less trading activity.