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Senior secured notes and corporate debt, net

3 Months Ended

Mar. 31, 2024

Senior secured notes and corporate debt, net

Senior secured notes and corporate debt, net

Note 11. Senior secured notes, and corporate debt, net

Senior secured notes, net

ReadyCap Holdings, LLC (“ReadyCap Holdings”) 4.50% senior secured notes due 2026. On October 20, 2021, ReadyCap Holdings, an indirect subsidiary of the Company, completed the offer and sale of $350.0 million of its 4.50% Senior Secured Notes due 2026 (the “Senior Secured Notes”). The Senior Secured Notes are fully and unconditionally guaranteed by the Company, each direct parent entity of ReadyCap Holdings, and other direct or indirect subsidiaries of the Company from time to time that is a direct parent entity of Sutherland Asset III, LLC or otherwise pledges collateral to secure the Senior Secured Notes (collectively, the “Guarantors”).

ReadyCap Holdings’ and the Guarantors’ respective obligations under the Senior Secured Notes are secured by a perfected first-priority lien on certain capital stock and assets (collectively, the “SSN Collateral”) owned by certain subsidiaries of the Company.

The Senior Secured Notes are redeemable by ReadyCap Holdings’ following a non-call period, through the payment of the outstanding principal balance of the Senior Secured Notes plus a “make-whole” or other premium that decreases the closer the Senior Secured Notes are to maturity. ReadyCap Holdings is required to offer to repurchase the Senior Secured Notes at 101% of the principal balance of the Senior Secured Notes in the event of a change in control and a downgrade of the rating on the Senior Secured Notes in connection therewith, as set forth more fully in the note purchase agreement.

The Senior Secured Notes were issued pursuant to a note purchase agreement, which contains certain customary negative covenants and requirements relating to the collateral and our company, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and limitations on transactions with affiliates.

As of March 31, 2024, the Company was in compliance with all covenants with respect to the Senior Secured Notes.

Corporate debt, net

The Company issues senior unsecured notes in public and private transactions. The notes are governed by a base indenture and supplemental indentures. Often, the notes are redeemable by us following a non-call period, through the payment of the outstanding principal balance plus a “make-whole” or other premium that typically decreases the closer the notes are to maturity. The Company often is required to offer to repurchase the notes, in some cases at 101% of the principal balance of the notes in the event of a change in control or fundamental change pertaining to our company, as defined in the applicable supplemental indentures. The notes rank equal in right of payment to any of its existing and future unsecured and unsubordinated indebtedness; effectively junior in right of payment to any of its existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness, other liabilities (including trade payables) and (to the extent not held by us) preferred stock, if any, of our subsidiaries. The supplemental indentures governing the notes often contain customary negative covenants and financial covenants relating to maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and limitations on transactions with affiliates.

In addition, in connection with the Broadmark Merger, RCC Merger Sub, a wholly owned subsidiary of the Company, assumed Broadmark’s obligations on certain senior unsecured notes. The note purchase agreement governing these notes contain financial covenants that require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as other customary affirmative and negative covenants.

As of March 31, 2024, the Company was in compliance with all covenants with respect to Corporate debt.

The Debt ATM Agreement

On May 20, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”), pursuant to which it may offer and sell, from time to time, up to $100.0 million of the 6.20% 2026 Notes and the 5.75% 2026 Notes. Sales of the 6.20% 2026 Notes and the 5.75% 2026 Notes pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act (the “Debt ATM Program”). The Agent is not required to sell any specific number of the notes, but the Agent will make all sales using commercially reasonable efforts consistent with its normal trading and sales practices on mutually agreed terms between the Agent and the Company. No such sales through the Debt ATM Program were made during the three months ended March 31, 2024 or March 31, 2023, respectively.

The table below presents information about senior secured notes and corporate debt.


(in thousands)	Coupon Rate		Maturity Date	March 31, 2024
Senior secured notes principal amount⁽¹⁾	4.50	%	10/20/2026	$	350,000
Unamortized deferred financing costs - Senior secured notes					(4,430)
Total Senior secured notes, net				$	345,570
Corporate debt principal amount⁽²⁾	5.50	%	12/30/2028		110,000
Corporate debt principal amount⁽³⁾	6.20	%	7/30/2026		104,614
Corporate debt principal amount⁽³⁾	5.75	%	2/15/2026		206,270
Corporate debt principal amount⁽⁴⁾	6.125	%	4/30/2025		120,000
Corporate debt principal amount⁽⁵⁾	7.375	%	7/31/2027		100,000
Corporate debt principal amount⁽⁶⁾	5.00	%	11/15/2026		100,000
Unamortized discount - corporate debt					(6,432)
Unamortized deferred financing costs - corporate debt					(4,618)
Junior subordinated notes principal amount⁽⁷⁾	SOFR + 3.10	%	3/30/2035		15,000
Junior subordinated notes principal amount⁽⁸⁾	SOFR + 3.10	%	4/30/2035		21,250
Total corporate debt, net				$	766,084
Total carrying amount of debt				$	1,111,654
(1) Interest on the senior secured notes is payable semiannually on April 20 and October 20 of each year.
(2) Interest on the corporate debt is payable semiannually on June 30 and December 30 of each year.
(3) Interest on the corporate debt is payable quarterly on January 30, April 30, July 30, and October 30 of each year.
(4) Interest on the corporate debt is payable semiannually on April 30 and October 30 of each year.
(5) Interest on the corporate debt is payable semiannually on January 31 and July 31 of each year.
(6) Interest on the corporate debt is payable semiannually on May 15 and November 15 of each year; assumed as part of the Broadmark Merger.
(7) Interest on the Junior subordinated notes I-A is payable quarterly on March 30, June 30, September 30, and December 30 of each year.
(8) Interest on the Junior subordinated notes I-B is payable quarterly on January 30, April 30, July 30, and October 30 of each year.

The table below presents the contractual maturities for senior secured notes and corporate debt.


(in thousands)	March 31, 2024
2024	$	—
2025		120,000
2026		760,884
2027		100,000
2028		110,000
Thereafter		36,250
Total contractual amounts	$	1,127,134
Unamortized deferred financing costs, discounts, and premiums, net		(15,480)
Total carrying amount of debt	$	1,111,654