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TRANSACTIONS WITH AFFILIATES AND AFFILIATED ENTITIES
 9 Months Ended
Sep. 30, 2022
Transactions With Affiliates And Affiliated Entities  
TRANSACTIONS WITH AFFILIATES AND AFFILIATED ENTITIES TRANSACTIONS WITH AFFILIATES AND AFFILIATED ENTITIES
 
On June 17, 2022, the Company entered into definitive agreements with the Former Manager to internalize the Company’s management function. As part of the termination of the existing Management Agreement, the Company agreed to pay $400.0 million (subject to certain adjustments) to the Former Manager. Following the Internalization, the Company no longer pays a management or incentive fee to the Former Manager.

In connection with the termination of the Management Agreement, the Company entered into the Transition Services Agreement with the Former Manager in order to facilitate the transition of the Company’s management functions and its operations through the earliest to occur of (i) the date on which no remaining service is to be provided under the Transition Services Agreement or (ii) December 31, 2022 (or earlier if the Transition Services Agreement is terminated earlier). Under the Transition Services Agreement, the Former Manager provides (or causes to be provided), at cost, all of the services it was previously providing to the Company immediately prior to the Effective Date (“Transition Services”). The Transition Services primarily include information technology, legal, regulatory compliance, tax and accounting services. The Company may elect to terminate any individual service at any time upon written notice to the Former Manager. The Transition Services are provided for a fee intended to be equal to the Former Manager’s cost of providing the Transition Services, including the allocated cost of, among other things, overhead, employee wages and compensation and actually incurred out-of-pocket expenses, and will be invoiced on a monthly basis. The Transition Services Agreement may be terminated earlier in accordance with its terms or if the Company and the Former Manager agree that no further services are required. The Company incurred $3.9 million and $4.4 million in costs for Transition Services during the three and nine months ended September 30, 2022, respectively, and these costs are recorded in General and Administrative expense in the Consolidated Statements of Income.

Prior to the Internalization and the termination of the Management Agreement on June 17, 2022, the Former Manager was entitled to receive a management fee in an amount equal to 1.5% per annum of the Company’s gross equity calculated and payable monthly in arrears in cash. In addition, the Former Manager was entitled to receive annual incentive compensation calculated in accordance with the Management Agreement.

In addition to the management fee and incentive compensation, Rithm Capital was responsible for reimbursing the Former Manager for certain expenses paid by the Former Manager on behalf of Rithm Capital.

On May 19, 2020, the Company entered into a three-year senior secured term loan facility agreement in the principal amount of $600.0 million and also issued common stock purchase warrants providing the lenders with the right to acquire up to 43.4 million shares of the Company’s common stock, par value $0.01 per share. Approximately 48% of the lenders and recipients of the warrants are funds managed by an affiliate of the Former Manager. In September 2020, the Company used the net proceeds from a private debt offering, together with cash on hand, to fully retire all of the outstanding principal balance on the term loan facility. On September 16, 2022, all of the warrants held by funds managed by an affiliate of the Former Manager were exercised on a cashless basis resulting in the issuance of 6.9 million shares of the Company’s common stock. See Notes 18 and 21 to the Company’s Consolidated Financial Statements for further details.

On June 30, 2021, the Company entered into a senior credit agreement and a senior subordinated credit agreement whereby the Company, and the other lenders party thereto, made term loans to an entity affiliated with funds managed by an affiliate of the Former Manager. The senior loan bears cash interest at a fixed rate equal to 10.5% per annum and the senior subordinated loan bears paid-in-kind interest at a rate equal to 16.0% per annum, subject to certain adjustments as set forth in the respective credit agreements. As of September 30, 2022, the principal balance of the Company’s portion of the senior loan and the senior subordinated loan was $104.0 million and $60.9 million, respectively.
The following table summarizes Due to affiliates:
September 30, 2022December 31, 2021
Management fees$— $17,188 
Expense reimbursements and other— 631 
Total$— $17,819 
 
The following table summarizes affiliate fees and expenses:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Management fees $— $24,315 $46,174 $66,682 
Expense reimbursements(A)
— 125 229 375 
Total$— $24,440 $46,403 $67,057 
(A)Included in General and Administrative expenses in the Consolidated Statements of Income.