NOTE 6: INDEBTEDNESS

We maintain various forms of short-term and long-term financing arrangements. Generally, these financing agreements are collateralized by assets within securitizations. The following table summarizes our total recourse and non-recourse indebtedness as of June 30, 2013:


Description	Unpaid Principal Balance		Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	115,000	$	110,437		7.0	%	Apr. 2031
Secured credit facility		7,121		7,121		3.0	%	Dec. 2016
Junior subordinated notes, at fair value (2)		18,671		11,933		0.5	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		25,100		2.8	%	Apr. 2037
CMBS facilities		12,569		12,569		2.7	%	Oct. 2013 to Nov. 2013
Commercial mortgage facility		14,825		14,825		2.2	%	Dec. 2013

Total recourse indebtedness (3)		193,286		181,985		5.0	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		1,290,484		1,288,968		0.6	%	2045 to 2046
CDO notes payable, at fair value (2)(4)(6)		918,055		304,687		1.0	%	2037 to 2038
Loans payable on real estate		143,980		143,980		5.4	%	Sep. 2015 to Nov. 2022

Total non-recourse indebtedness		2,352,519		1,737,635		1.0	%

Total indebtedness	$	2,545,805	$	1,919,620		1.3	%

(1)	Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2016, April 2021, and April 2026.

(2)	Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(3)	Excludes senior secured notes issued by us with an aggregate principal amount equal to $90,000 with a weighted average coupon of 7.0%, which are eliminated in consolidation.

(4)	Excludes CDO notes payable purchased by us which are eliminated in consolidation.

(5)

Collateralized by $1,760,167 principal amount of commercial mortgages, mezzanine loans, other loans, and preferred equity interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6)

Collateralized by $1,035,821 principal amount of investments in securities and security-related receivables and loans, before fair value adjustments. The fair value of these investments as of June 30, 2013 was $791,642. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2012:


Description	Unpaid Principal Balance		Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	115,000	$	109,631		7.0	%	Apr. 2031
Secured credit facility		8,090		8,090		3.0	%	Dec. 2016
Junior subordinated notes, at fair value (2)		38,052		29,655		5.2	%	Oct. 2015 to Mar. 2035
Junior subordinated notes, at amortized cost		25,100		25,100		2.8	%	Apr. 2037

Total recourse indebtedness (3)		186,242		172,476		5.9	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		1,297,069		1,295,400		0.6	%	2045 to 2046
CDO notes payable, at fair value (2)(4)(6)		984,380		187,048		1.0	%	2037 to 2038
Loans payable on real estate		144,671		144,671		5.4	%	Sept. 2015 to May 2021

Total non-recourse indebtedness		2,426,120		1,627,119		1.1	%

Total indebtedness	$	2,612,362	$	1,799,595		1.4	%

(1)	Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2016, April 2021, and April 2026.

(2)	Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(3)	Excludes senior secured notes issued by us with an aggregate principal amount equal to $94,000 with a weighted average coupon of 7.0%, which are eliminated in consolidation.

(4)	Excludes CDO notes payable purchased by us which are eliminated in consolidation.

(5)

Collateralized by $1,757,789 principal amount of commercial mortgages, mezzanine loans, other loans and preferred equity interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6)

Collateralized by $1,118,346 principal amount of investments in securities and security-related receivables and loans, before fair value adjustments. The fair value of these investments as of December 31, 2012 was $849,919. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

Recourse indebtedness refers to indebtedness that is recourse to our general assets, including the loans payable on real estate that are guaranteed by us. Non-recourse indebtedness consists of indebtedness of consolidated VIEs (i.e. securitization vehicles) and loans payable on real estate which is recourse only to specific assets pledged as collateral to the lenders. The creditors of each consolidated VIE have no recourse to our general credit.

The current status or activity in our financing arrangements occurring as of or during the six-month period ended June 30, 2013 is as follows:

Recourse Indebtedness

7.0% convertible senior notes. The 7.0% Convertible Senior Notes due 2031, or the 7.0% convertible senior notes, are convertible at the option of the holder at a current conversion rate of 142.6266 common shares per $1 principal amount of 7.0% convertible senior notes (equivalent to a current conversion price of $7.01 per common share). Upon conversion of 7.0% convertible senior notes by a holder, the holder will receive cash, our common shares or a combination of cash and our common shares, at our election. We include the 7.0% convertible senior notes in earnings per share using the treasury stock method if the conversion value in excess of the par amount is considered in the money during the respective periods.

Secured credit facility. As of June 30, 2013, we have $7,121 outstanding under our secured credit facility, which is payable in December 2016 under the current terms of this facility. Our secured credit facility is secured by designated commercial mortgages and mezzanine loans.

Junior subordinated notes, at fair value. During the six-month period ended June 30, 2013, we prepaid the $19,381 junior subordinated note. After reflecting the prepayment, only the second $18,671 junior subordinated note remains outstanding.

CMBS facilities. We maintain CMBS facilities with two investment banks with total borrowing capacity of $250,000. The CMBS facilities are repurchase agreements that provide for margin calls in the event the conduit loans financed by the facilities change in value. As of June 30, 2013 we had $12,569 of outstanding borrowings under the CMBS facilities. As of June 30, 2013, $237,431 in aggregate principal amount remained available under the CMBS facilities.

Commercial mortgage facility. We maintain a commercial mortgage facility with an investment bank with total borrowing capacity of $150,000. The commercial mortgage facility is a repurchase agreement that provides for margin calls in the event the commercial mortgages financed by the facility change in value. As of June 30, 2013 we had $14,825 of outstanding borrowings under the commercial mortgage facility. As of June 30, 2013, $135,175 in aggregate principal amount remained available under the commercial mortgage facility.

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by consolidated CDO entities which are used to finance the acquisition of unsecured REIT notes, CMBS securities, commercial mortgages, mezzanine loans, and other loans in our commercial real estate portfolio. Generally, CDO notes payable are comprised of various classes of notes payable, with each class bearing interest at variable or fixed rates. Both of our CRE CDOs are meeting all of their over collateralization, or OC, and interest coverage, or IC, trigger tests as of June 30, 2013.

CDO notes payable, at fair value. Both of our Taberna consolidated CDOs are failing OC trigger tests which cause a change to the priority of payments to the debt and equity holders of the respective securitizations. Upon the failure of an OC test, the indenture of each CDO requires cash flows that would otherwise have been distributed to us as equity distributions, or in some cases interest payments on our retained CDO notes payable, be used to pay down sequentially the outstanding principal balance of the most senior note holders. The OC tests failures are due to defaulted collateral assets and credit risk securities. During the six-month period ended June 30, 2013, $66,325 of restricted cash, including cash flow that was re-directed from our retained interests in these CDOs, was used to repay the most senior holders of our CDO notes payable.