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Long-term Debt

12 Months Ended

Dec. 31, 2011

Note 14. Long-term Debt

Carrying value and fair value of long-term debt by type were as follows:

	Successor Company
	December 31, 2011				December 31, 2010
(dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value

Senior debt	$	12,898,871	$	11,763,815	$	14,996,532	$	15,106,692
Junior subordinated debt	171,522		140,000		171,502		164,500
Total	$	13,070,393	$	11,903,815	$	15,168,034	$	15,271,192

Weighted average interest expense rates on long-term debt by type were as follows:

	Successor Company				Predecessor Company
	Year Ended December 31, 2011		One Month Ended December 31, 2010		Eleven Months Ended November 30, 2010		Year Ended December 31, 2009

Senior debt	8.62	%	9.20	%	5.97	%	5.03	%
Junior subordinated debt	12.26		12.26		6.17		6.18

Total	8.77	%	9.34	%	6.10	%	5.05	%

	Successor Company
	December 31, 2011		December 31, 2010

Senior debt	8.28	%	9.20	%
Junior subordinated debt	12.26		12.26

Total	8.44	%	9.34	%

Principal maturities of long-term debt (excluding projected securitization repayments by period) by type of debt at December 31, 2011 were as follows:

												Junior
(dollars in thousands)	Retail Notes		Medium Term Notes		Euro Denominated Notes (a)		Secured Term Loan (b) (c)			Securitizations		Subordinated Debt (Hybrid Debt)			Total
Interest rates (d)	4.00% — 9.00%		4.88% - 6.90%		3.25% — 4.13%		5.50		%	4.05% - 5.75%		6.00		%

First quarter 2012	$	5,956	$	—	$	—	$	—		$	—	$	—		$	5,956
Second quarter 2012	14,130		—		—		—			—		—			14,130
Third quarter 2012	20,118		1,000,000		—		—			—		—			1,020,118
Fourth quarter 2012	42,909		1,000,000		—		—			—		—			1,042,909
2012	83,113		2,000,000		—		—			—		—			2,083,113
2013	157,469		500,000		1,269,500		—			—		—			1,926,969
2014	363,690		—		—		—			—		—			363,690
2015	48,226		750,000		—		—			—		—			798,226
2016-2067	—		3,675,000		—		3,750,000			—		350,000			7,775,000
Securitizations (e)	—		—		—		—			1,367,659		—			1,367,659
Total principal maturities	$	652,498	$	6,925,000	$	1,269,500	$	3,750,000		$	1,367,659	$	350,000		$	14,314,657

Total carrying amount	$	587,219	$	5,999,325	$	1,158,223	$	3,768,257		$	1,385,847	$	171,522		$	13,070,393

(a) Euro denominated notes include two Euro 500 million note issuances, shown here at the U.S. dollar equivalent at time of issuance.

(b) Issued by wholly-owned Company subsidiaries.

(d) The interest rates shown are the range of contractual rates in effect at December 31, 2011, which exclude the effects of the associated derivative instruments used in hedge accounting relationships, if applicable.

(e) Securitizations are not included in above maturities by period due to their variable monthly repayments.

In April 2010, Springleaf Financial Funding Company, a wholly-owned subsidiary of SLFC, entered into and fully drew down a $3.0 billion, five-year term loan pursuant to a Credit Agreement among Springleaf Financial Funding Company, SLFC, and most of the consumer finance operating subsidiaries of SLFC (collectively, the Subsidiary Guarantors), and a syndicate of lenders, various agents, and Bank of America, N.A, as administrative agent.

In May 2011, the $3.0 billion term loan was refinanced to increase total borrowing to $3.75 billion with a new six-year term, significantly improved advance rates, and lower borrowing costs. Any portion of the term loan that is repaid (whether at or prior to maturity) will permanently reduce the principal amount outstanding and may not be reborrowed.

The term loan is guaranteed by SLFC and by the Subsidiary Guarantors. In addition, other SLFC operating subsidiaries that from time to time meet certain criteria will be required to become Subsidiary Guarantors. The term loan is secured by a first priority pledge of the stock of Springleaf Financial Funding Company that was limited at the transaction date, in accordance with existing SLFC debt agreements, to approximately 10% of SLFC’s consolidated net worth.

As a result of the refinancing of SLFC’s secured term loan on May 10, 2011, certain creditors involved in the syndicate of lenders of the original loan remained in the syndicate of lenders of the refinanced loan (remaining creditors), while certain creditors involved in the original syndicate of lenders were no longer included in the syndicate of lenders of the refinanced loan (extinguished creditors). Since none of the remaining creditors’ balances exceeded the 10 percent cash flow test, we accounted for this refinancing transaction as a modification of the secured term loan.

We recorded a $10.7 million gain on the early extinguishment of the original loan, which represented the pro rata amount of the unamortized balance of the fair value adjustment on the debt no longer payable to the extinguished creditors. We deferred the remaining $20.1 million of the fair value adjustment on the debt for the remaining creditors, which was recognized on our balance sheet and is amortized over the new term using the interest rate method.

Springleaf Financial Funding Company used the proceeds from the term loan to make intercompany loans to the Subsidiary Guarantors. The intercompany loans are secured by a first priority security interest in eligible loan receivables, according to pre-determined eligibility requirements and in accordance with a borrowing base formula. The Subsidiary Guarantors used proceeds of the loans to pay down their intercompany loans from SLFC. SLFC used the payments from Subsidiary Guarantors to, among other things, repay debt and fund operations.

The debt agreements to which SLFC and its subsidiaries are a party include standard terms and conditions, including covenants and representations and warranties. These agreements also contain certain restrictions, including restrictions on the ability to create senior liens on property and assets in connection with any new debt financings and restrictions on the intercompany transfer of funds from certain subsidiaries to SLFC or SLFI, except for those funds needed for debt payments and operating expenses. SLFC subsidiaries that borrow funds through the $3.75 billion secured term loan are also required to pledge eligible finance receivables to support their borrowing under the secured term loan.

None of our debt agreements require SLFC or any subsidiary to meet or maintain any specific financial targets or ratios, except the requirement to maintain a certain level of pledged finance receivables under the secured term loan.

Under our debt agreements, certain events, including non-payment of principal or interest, bankruptcy or insolvency, or a breach of a covenant or a representation or warranty may constitute an event of default and trigger an acceleration of payments. In some cases, an event of default or acceleration of payments under one debt agreement may constitute a cross-default under other debt agreements resulting in an acceleration of payments under the other agreements.

As of December 31, 2011, we were in compliance with all of the covenants under our debt agreements.

Under the hybrid debt, SLFC, upon the occurrence of a mandatory trigger event, is required to defer interest payments to the junior subordinated debt holders (and not make dividend payments to SLFI) unless SLFC obtains non-debt capital funding in an amount equal to all accrued and unpaid interest on the hybrid debt otherwise payable on the next interest payment date and pays such amount to the junior subordinated debt holders. A mandatory trigger event occurs if SLFC’s (1) tangible equity to tangible managed assets is less than 5.5% or (2) average fixed charge ratio is not more than 1.10x for the trailing four quarters (where the fixed charge ratio equals earnings excluding income taxes, interest expense, extraordinary items, goodwill impairment, and any amounts related to discontinued operations, divided by the sum of interest expense and any preferred dividends).

Based upon SLFC’s financial results for the twelve months ended September 30, 2011, a mandatory trigger event occurred under SLFC’s hybrid debt with respect to the hybrid debt’s semi-annual payment due in January 2012 due to the average fixed charge ratio being less than 0.76x (while the equity to assets ratio was 9.17%). During January 2012, SLFC received from SLFI the non-debt capital funding necessary to satisfy, and subsequently paid, the January 2012 interest payments required by SLFC’s hybrid debt.