Secured Borrowings

3 Months Ended

Mar. 31, 2012

Secured Borrowings

Secured Borrowings

15.  Secured Borrowings

Pursuant to certain master repurchase agreements, ClearPoint was extended secured mortgage warehouse lines of credit in order to fund mortgage originations.  These lines of credit carry floating rates of interest and are collateralized by ClearPoint’s mortgage loans.

		March 31, 2012					December 31, 2011
(In thousands of dollars)	Current Year				Outstanding		Facility			Outstanding
Description	Expiration Date	Facility Limit			Balance		Limit			Balance
Credit Facility No. 1	April 1, 2012	$	—		$	13,137	$	75,000		$	68,756
Credit Facility No. 2	September 11, 2012	75,000			47,158		75,000			49,704
Credit Facility No. 3	September 5, 2012	100,000		(1)	55,723		100,000			92,802
		$	175,000	(2)	$	116,018	$	250,000	(2)	$	211,262
Accelerated Purchase Facility	N/A	—			1,177		50,000			2,349
Total		$	175,000		$	117,195	$	300,000		$	213,611

(1)     Effective April 30, 2012, warehouse capacity was reduced to $75.0 million.  This line can be terminated at will by the lender on 90-days’ notice.

(2)     Committed capacity under the facilities is $0.0 million and $100 million as of March 31, 2012 and December 31, 2011, respectively.

The lender to Credit Facility No. 1 and the Accelerated Purchase Facility elected not to renew Credit Facility No. 1 and instead agreed to a 120-day extension.  As of April 30, 2012, all amounts advanced under the credit facility were paid in full and, pursuant to an amendment to the master repurchase agreement, the warehouse covenants are no longer in force and ClearPoint has no further continuing reporting or notice obligations to this lender.

If ClearPoint does not sell loans it originates from funds advanced under ClearPoint’s mortgage warehouse lines of credit to investors within certain periods of time, the lenders can incrementally curtail, or reduce, such advances.  Under these circumstances, ClearPoint would be required to repay the curtailed amounts to the lenders prior to receiving any proceeds from the sale of the loan to an investor.

ClearPoint is required, among other things, to comply with certain financial covenants, including maintaining (i) a minimum tangible net worth, (ii) a maximum leverage ratio, (iii) certain levels of profits/losses, and (iv) a minimum level of liquid assets.  If ClearPoint fails to comply with these covenants, the lenders could declare the credit lines to be in default and require the payment of all amounts then outstanding under the lines.  Also, the applicable agreements contain “cross default” provisions, so that a default under one agreement triggers a default under the others.

The Company previously disclosed within Notes 15 and 29 contained within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, notices of default (along with simultaneous waivers) of certain of ClearPoint’s financial covenants relating to ClearPoint’s liquidity from October 2011 to March 2012 and certain levels of profits/losses in February 2012.

As noted above, ClearPoint is required to achieve certain profitability levels to remain in compliance under its warehouse lines.  ClearPoint has incurred losses since its acquisition and is engaged in a remediation plan, as further described in Note 21 herein, that will, at least temporarily, make it probable that ClearPoint will not achieve profitability levels that satisfy its financial covenants.  Under those circumstances, ClearPoint likely would request waivers and/or amendments with respect to these covenants.  Assuming ClearPoint is unable to right size its business in a manner that achieves profitability, and if the profitability covenants are not amended, it will breach these covenants in future periods.  If ClearPoint is unable to comply with the terms of its warehouse credit lines, these lines could be terminated, potentially resulting in the acceleration of all amounts due under the lines.