Debt

The long term debt of Tiptree’s subsidiaries are discussed below:

Operating Company

On September 18, 2013, Operating Company entered into a Credit Agreement with Fortress Credit Corp. (Fortress) and borrowed $50,000 thereunder, with an associated original issue discount of $1,000, which is being amortized over the term of the agreement. The Credit Agreement allows Operating Company to borrow additional amounts up to a maximum aggregate of $125,000, subject to satisfaction of certain customary conditions. The obligations of Operating Company under the Credit Agreement are secured by liens on substantially all of the assets of Operating Company. The principal of, and all accrued and unpaid interest on, all loans under the Credit Agreement become immediately due and payable on September 18, 2018. Loans under the Credit Agreement bear interest at a variable rate per annum equal to one-month LIBOR (with a minimum LIBOR rate of 1.25%), plus a margin of 6.50% per annum. The weighted average rate paid for the three months ended March 31, 2014 was 7.75%. The principal amounts of the loan is to be repaid in quarterly installments, the amount of which may be adjusted based on the Net Leverage Ratio (as defined in the Credit Agreement) at the end of each fiscal quarter.

As of March 31, 2014, $49,000 in principal was outstanding and was recorded as part of debt on the consolidated balance sheet of the Company. The Company is obligated to pay interest on a monthly basis and has incurred interest expense of $959 for the period ended March 31, 2014. The Company capitalized approximately $1,272 of costs associated with entering into the credit agreement transaction and is amortizing the costs ratably over the life of the facility. The Company recorded approximately $64 of expense for the period ended March 31, 2014 relating to these capitalized costs. Operating Company believes it was in compliance with all of the financial covenants contained in the Credit Agreement as of March 31, 2014.

Also included in debt are any warehouse lines outstanding associated with the Company’s CLOs. As of March 31, 2014 there was $139,150 outstanding for Telos 5.

PFG

On July 13, 2012, Philadelphia Financial Administration Services Company, LLC (PFASC), an entity capitalized by TFP and PFGI, purchased certain assets of Hartford Life Private Placement, LLC (HLPP) from affiliates of The Hartford Financial Services Group, Inc. (The Hartford) for a purchase price of $117,500. PFASC and certain insurance subsidiaries of The Hartford entered into a long-term servicing agreement whereby PFASC administers approximately $37.0 billion in company owned life insurance (COLI) and bank owned life insurance (BOLI) business previously serviced by HLPP in exchange for a fee. We refer to this transaction as the PFAS Transaction.

In connection with the PFAS Transaction, PFAS issued a note in July 2012 in the amount of $100,000 to a third party. The note bears an annual interest rate of 12.66% and provides for monthly interest and principal payments commencing on August 15, 2012, with final payment due on July 15, 2022. Membership interests of PFLAC, the borrower, serve as collateral for the note.

PFG believes it was in compliance with all of the financial covenants contained in the note as of March 31, 2014.

Care

On April 24, 2012, Care refinanced a bridge loan for the acquisition of the Greenfield properties by entering into three separate non-recourse loans (each a Greenfield Loan and collectively the Greenfield Loans) with KeyCorp Real Estate Capital Markets, Inc. (KeyCorp) for an aggregate amount of approximately $15,680. The Greenfield Loans bear interest at a fixed rate of 4.76%, amortize over a thirty-year period, provide for monthly interest and principal payments commencing on June 1, 2012 and mature on May 1, 2022. The Greenfield Loans are secured by separate cross-collateralized, cross-defaulted first priority deeds of trust on each of the Greenfield properties. The Greenfield Loans are non-recourse to the Company except for certain non-recourse carveouts (customary for transactions of this type), as provided in the related guaranty agreements for each Greenfield Loan. A breach of the representations or covenants could result in a default under each of the Greenfield Loans, which would result in all amounts owing under each of the Greenfield Loans to become immediately due and payable since all of the Greenfield Loans are cross-defaulted. In June 2012, KeyCorp sold each of the Greenfield Loans to Federal Home Loan Mortgage Corporation (Freddie Mac) under Freddie Mac’s Capital Markets Execution (CME) Program.

In February 2013, with Care’s acquisition of the Calamar Properties, affiliates of Care entered into two separate loans from Liberty Bank. Both of these loans amortize over a thirty year period at a weighted average fixed rate of 4.21%. These loans are secured by separate first priority mortgages on each of the properties. A breach of representations or covenants could result in a default under each of these loans, which would result in all amounts owing under the applicable loan to become immediately due and payable.

In December 2013, affiliates of Care refinanced an internal bridge loan for the Terraces Portfolio, by entering into two separate loans from First Niagara Bank. Both of these loans amortize over a twenty-five year period at a weighted average floating rate of LIBOR + 2.50%. These loans are secured by separate first priority mortgages on each of the properties. A breach of representations or covenants could result in a default under each of these loans, which would result in all amounts owing under applicable loan to become immediately due and payable.

Effective November 2013, in connection with the acquisition of The Heritage Portfolio, the Company entered into two separate loans from First Niagara Bank. Both of these loans amortize over a twenty-five year period at a floating rate of LIBOR + 2.75%. These loans are secured by separate first priority mortgages on each of the properties. A breach of representations or covenants could result in a default under each of these loans, which would result in all amounts owing under applicable loan to become immediately due and payable.

Each of these loan transactions described above contains typical representations and covenants for loans of its type. As of March 31, 2014, Care believes it was in compliance with such financial covenants.

Siena

On July 25, 2013, Siena closed on a line of credit with Wells Fargo Bank. This revolving line is for $65,000 with an interest rate of LIBOR + 250 basis points and a maturity date of January 25, 2017. As of March 31, 2014 there was $6,733 outstanding on this line. This warehouse line of credit contains certain covenants, which Siena believes that it is in compliance with as of March 31, 2014.

Luxury

In February 2014, Luxury entered into a new $30,000 warehouse line of credit agreement. The expiration date of the new line is February 5, 2015, and the line bears interest at 30-day LIBOR plus 2.75% with a 3% floor. A $250 compensating balance is required for the new line. Luxury’s three existing credit agreements contain customary financial covenants that require, among other items, minimum amounts of tangible net worth, profitability, maximum indebtedness ratios, and minimum liquid assets. As of March 31, 2014, Luxury believes it was in compliance or had obtained waivers of compliance with such financial covenants. Luxury’s ability to borrow under the warehouse line of credit agreements is not adversely affected by the waivers. The waivers are valid until June 30, 2014.

The following table summarizes the balance of the Company’s debt holdings excluding notes payable of consolidated VIE CLOs at (See Note 3 for notes payable of the consolidated VIE CLOs):



	March 31, 2014			December 31, 2013
Operating Company:
Warehouse borrowing	$	139,150		$	133,715
Revolving credit facility	49,000			49,500
Original issue discount on credit facility	(893		)	(943		)
Operating Company	187,257			182,272
PFG:
Note payable	89,515			91,015
Siena:
Revolving line of credit	6,733			5,371
Care:
Mortgage borrowings	81,731			82,151
Unamortized (discount)/premium	(185		)	(200		)
Care	81,546			81,951
Luxury:
Warehouse borrowing	15,468			—
Mortgage borrowings	747			—
Luxury	16,215			—
Total debt	$	381,266		$	360,609

Interest expense of $5,532 and $4,816 was incurred on the Company’s debt for the period ended March 31, 2014 and 2013 respectively.

Future maturities of the Company’s long-term debt (excluding warehouse borrowing) are as follows as of March 31, 2014:



2014	$	11,360
2015		13,665
2016		13,739
2017		21,232
2018		54,423
Thereafter		112,588
Total	$	227,007

Consolidated CLOs

The Company includes in its consolidated balance sheets, as part of liabilities of consolidated CLOs, the debt obligations used to finance the investment in corporate loans and other investments owned by the CLOs that it manages. The carrying amount of the notes represents the accreted value from the initial consolidation and is recognized through the measurement date using the effective interest method or a method that approximates the effective interest method. See Note 4 for additional information.