Borrowings

Repurchase Agreements

Our operating partnership and certain of its Delaware Statutory Trust subsidiaries, as applicable, have entered into master repurchase agreements with major financial institutions. The purpose of these repurchase agreements is to finance the acquisition and ownership of mortgage loans, rental properties and REO properties in our portfolio. We have effective control of the assets associated with these agreements and therefore have concluded these are financing arrangements. As of March 31, 2015, the weighted average annualized interest rate on borrowings under our repurchase agreements was 3.06%, excluding amortization of deferred financing costs.

The following table sets forth data with respect to our repurchase agreements as of March 31, 2015 and December 31, 2014 ($ in thousands):



	Maximum borrowing capacity		Book value of collateral		Amount outstanding
March 31, 2015
CS repurchase agreement due April 20, 2015	$	225,000	$	331,633	$	183,806
Wells repurchase agreement due March 23, 2016	525,780		986,572		525,780
DB repurchase agreement due March 11, 2016	219,701		457,553		219,701
	$	970,481	$	1,775,758	$	929,287
December 31, 2014
CS repurchase agreement due April 20, 2015	$	225,000	$	332,618	$	222,044
Wells repurchase agreement due March 23, 2015	$	750,000	$	1,036,409	$	569,509
DB repurchase agreement due March 11, 2016	$	250,000	$	450,532	$	223,447
	$	1,225,000	$	1,819,559	$	1,015,000

Under the terms of each repurchase agreement, as collateral for the funds drawn thereunder, subject to certain conditions, our operating partnership will sell to the applicable lender equity interests in the Delaware statutory trust subsidiary that owns the applicable underlying mortgage assets on our behalf, or the trust will directly sell such underlying mortgage assets. In the event the lender determines the value of the collateral has decreased, the lender has the right to initiate a margin call and require us, or the applicable trust subsidiary, to post additional collateral or to repay a portion of the outstanding borrowings. The price paid by the lender for each mortgage asset we finance under the repurchase agreements is based on a percentage of the market value of the mortgage asset and may depend on its delinquency status. With respect to funds drawn under the repurchase agreements, our applicable subsidiary is required to pay the lender interest based on LIBOR or at the lender’s cost of funds plus a spread calculated based on the type of applicable mortgage assets collateralizing the funding, as well as certain other customary fees, administrative costs and expenses to maintain and administer the repurchase agreements. We do not collateralize any of our repurchase facilities with cash. Pursuant to the CS Repurchase Agreement, we are entitled to collateralize a portion of the facility with securities. As of March 31, 2015, approximately $10.6 million of the amounts outstanding under the CS Repurchase Agreement was collateralized by $17.0 million of the Class M Notes issued and retained by us in connection with the securitization completed in September 2014 by ARLP 2014-1, and approximately $29.4 million of the amounts outstanding under the CS Repurchase Agreement was collateralized by $45.1 million of the Class A2 Notes issued and retained by us in connection with the securitization completed in November 2014 by ARLP 2014-2.

The repurchase agreements require us to maintain various financial and other covenants, including maintaining a minimum adjusted tangible net worth, a maximum ratio of indebtedness to adjusted tangible net worth and specified levels of unrestricted cash. In addition, the repurchase agreements contain customary events of default. We are restricted by the terms of our repurchase agreements from paying dividends greater than our REIT taxable income in a calendar year.

We are currently in compliance with the covenants and other requirements with respect to the repurchase agreements. We monitor our banking partners’ ability to perform under the repurchase agreements and have concluded there is currently no reason to doubt that they will continue to perform under the repurchase agreements as contractually obligated. For additional information on the repurchase agreements, please see Note 1, "Organization and basis of presentation."

Other Secured Debt

On November 25, 2014, we completed a securitization transaction in which ARLP 2014-2 issued $270.8 million in Class A Notes with a weighted coupon of approximately 3.85% and $234.0 million in Class M Notes. We initially retained $95.8 million of the Class A Notes and all of the Class M Notes in our TRS. On February 9, 2015, we sold $50.7 million of the retained Class A Notes to an unrelated third party. No interest will be paid on any Class M Notes while any Class A Notes remain outstanding. The Class A Notes and Class M Notes are secured solely by the non-performing mortgage loans and REO properties of ARLP 2014-2 and not by any of our other assets. The assets of ARLP 2014-2 are the only source of repayment and interest on the Class A Notes and the Class M Notes. The Class A Notes and the Class M Notes mature on January 26, 2054, and we do not guaranty any of the obligations of ARLP 2014-2 under the terms of the Indenture governing the notes or otherwise. As of March 31, 2015, the book value of the underlying securitized assets held by ARLP 2014-2 was $332.5 million.

On September 25, 2014, we completed a securitization transaction in which ARLP 2014-1 issued $150.0 million in Class A Notes with a weighted coupon of approximately 3.47% and $32.0 million in Class M Notes with a weighted coupon of 4.25%. The Class A Notes and the Class M Notes are secured solely by the non-performing mortgage loans and REO properties of ARLP 2014-1 and not by any of our other assets. The assets of ARLP 2014-1 are the only source of repayment and interest on the Class A Notes and the Class M Notes. The Class A Notes and the Class M Notes mature on September 25, 2044, and we do not guaranty any of the obligations of ARLP 2014-1 under the terms of the Indenture governing the notes or otherwise. As of March 31, 2015, the book value of the underlying securitized assets held by ARLP 2014-1 was $213.8 million.

We retained all of the Class M Notes issued by ARLP 2014-1 in our TRS. On September 30, 2014, pursuant to a master repurchase agreement, the TRS sold $15.0 million of the Class M Notes to NewSource for a purchase price of $15.0 million. The master repurchase agreement initially required the TRS to repurchase the Class M Notes from NewSource at a 5.0% yield on December 28, 2014, with the parties having the option to extend the master repurchase agreement for additional 89-day periods. In no event can the master repurchase agreement be extended beyond September 29, 2015. The agreement is currently due to expire on June 25, 2015.

The following table sets forth data with respect to these notes as of March 31, 2015 ($ in thousands):



	Interest Rate		Amount outstanding
March 31, 2015
ARLP Securitization Trust, Series 2014-1
ARLP 2014-1 Class A Notes due September 25, 2044⁽¹⁾	3.47	%	$	145,953
ARLP 2014-1 Class M Notes due September 25, 2044⁽²⁾	4.25	%	32,000
ARLP Securitization Trust, Series 2014-2
ARLP 2014-2 Class A Notes due January 26, 2054⁽³⁾	3.85	%	264,034
ARLP 2014-2 Class M Notes due January 26, 2054	—	%	234,010
ARNS, Inc.
Securities sold under agreement to repurchase due June 25, 2015	5.00	%	14,991
Intercompany eliminations
Elimination of Class M Notes due to ARNS, Inc.			(32,000		)
Elimination of ARLP 2014-2 Class A Notes due to ARNS, Inc.			(45,138		)
Elimination of ARLP 2014-2 Class M Notes due to ARNS, Inc.			(234,010		)
			$	379,840
December 31, 2014
ARLP Securitization Trust, Series 2014-1
ARLP 2014-1 Class A Notes due September 25, 2044⁽¹⁾	3.47	%	$	150,000
ARLP 2014-1 Class M Notes due September 25, 2044⁽²⁾	4.25	%	32,000
ARLP Securitization Trust, Series 2014-2
ARLP 2014-2 Class A Notes due January 26, 2054⁽³⁾	3.85	%	269,820
ARLP 2014-2 Class M Notes due January 26, 2054	—	%	234,010
ARNS, Inc.
Securities sold under agreement to repurchase due March 27, 2015	5.00	%	14,991
Intercompany eliminations
Elimination of ARLP 2014-1 Class M Notes due to ARNS, Inc.			(32,000		)
Elimination of ARLP 2014-2 Class A Notes due to ARNS, Inc.			(95,729		)
Elimination of ARLP 2014-2 Class M Notes due to ARNS, Inc.			(234,010		)
			$	339,082

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(1)	The expected redemption date for the Class A Notes is September 25, 2017.


(2)	The expected redemption date for the Class M Notes is September 25, 2018.


(3)	The expected redemption date for the Class A Notes is November 27, 2017.