SECURITIES

In connection with the Merger Transaction and as of the Effective Date, the Company accounts for all of its securities, including RMBS, at estimated fair value. Prior to the Effective Date, the Company accounted for securities based on the following categories: (i) securities available-for-sale, which were carried at estimated fair value, with unrealized gains and losses reported in accumulated other comprehensive loss; (ii) other securities, at estimated fair value, with unrealized gains and losses recorded in the condensed consolidated statements of operations; and (iii) RMBS, at estimated fair value, with unrealized gains and losses recorded in the condensed consolidated statements of operations.

Successor Company

The following table summarizes the Company’s securities as of June 30, 2015 and December 31, 2014, which are carried at estimated fair value (amounts in thousands):



	June 30, 2015						December 31, 2014
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Securities, at estimated fair value	$	548,649	$	502,089	$	479,877	$	721,094	$	654,257	$	638,605
Total	$	548,649	$	502,089	$	479,877	$	721,094	$	654,257	$	638,605

Net Realized and Unrealized Gains (Losses)

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. Unrealized gains or losses are computed as the difference between the estimated fair value of the asset and the amortized cost basis of such asset. Unrealized gains or losses primarily reflect the change in asset values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands):



	Three months ended June 30, 2015			Six months ended June 30, 2015			Two months ended June 30, 2014
Net realized gains (losses)	$	(5,374	)	$	(5,900	)	$	735
Net (increase) decrease in unrealized losses	(6,909		)	(5,075		)	10,823
Net realized and unrealized gains (losses)	$	(12,283	)	$	(10,975	)	$	11,558

Defaulted Securities

As of June 30, 2015, the Company had no corporate debt securities in default. As of December 31, 2014, the Company had a corporate debt security from one issuer in default with an estimated fair value of $8.7 million, which was on non-accrual status.

Concentration Risk

The Company’s corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of June 30, 2015, approximately 82% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by Preferred Proppants LLC, LCI Helicopters Limited and JC Penney Corp. Inc, which combined represented $207.9 million, or approximately 49% of the estimated fair value of the Company’s corporate debt securities. As of December 31, 2014, approximately 70% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by Preferred Proppants LLC, JC Penney Corp. Inc, and LCI Helicopters Limited, which combined represented $213.6 million, or approximately 37% of the estimated fair value of the Company’s corporate debt securities.

Pledged Assets

Note 8 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged securities for borrowings. The following table summarizes the estimated fair value of securities pledged as collateral as of June 30, 2015 and December 31, 2014 (amounts in thousands):



	June 30, 2015		December 31, 2014
Pledged as collateral for collateralized loan obligation secured debt	$	198,986	$	262,085
Total	$	198,986	$	262,085

Predecessor Company

Under the Predecessor Company, the majority of unrealized losses were considered to be temporary impairments due to market factors and were not reflective of credit deterioration. The Company considered many factors when evaluating whether impairment was other-than-temporary. For securities available-for-sale that were determined to be temporarily impaired, the Company did not intend to sell or believed that it was more likely than not that the Company would be required to sell any of its securities available-for-sale prior to recovery. In addition, based on the analyses performed by the Company on each of its securities available-for-sale, the Company believed that it was able to recover the entire amortized cost amount of these securities available-for-sale.

During the one and four months ended April 30, 2014, the Company recognized losses totaling $1.5 million and $4.4 million, respectively, for securities available-for-sale that it determined to be other-than-temporarily impaired. The Company intended to sell these securities and as a result, the entire amount of the loss was recorded through earnings in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations.

Securities available-for-sale sold at a loss typically included those that the Company determined to be other-than-temporarily impaired or had a deterioration in credit quality. The Company recorded gross realized gains of $2.5 million and zero for the one and four months ended April 30, 2014, respectively.

Troubled Debt Restructurings

As discussed above in Note 2 to these condensed consolidated financial statements, beginning the Effective Date, the Company accounted for all of its securities at estimated fair value with unrealized gains and losses recorded in the condensed consolidated financial statements. Accordingly, TDR disclosure pertains to the Predecessor Company.

During the one month ended April 30, 2014, the Company did not modify any securities that qualified as a TDR. During the four months ended April 30, 2014, the Company modified a security with an amortized cost of $24.1 million related to a single issuer in a restructuring that qualified as a TDR. The TDR involving this security, along with corporate loans related to the same issuer, were converted into a combination of equity carried at estimated fair value and cash. Post-modification, the equity securities received from the security TDR had an estimated fair value of $16.1 million. Refer to “Troubled Debt Restructurings” section within Note 5 to these condensed consolidated financial statements for further discussion on the loan TDRs related to this single issuer.

As of April 30, 2014, no securities modified as TDRs were in default within a twelve month period subsequent to their original restructuring.