Assets and Liabilities of Consolidated CLOs

12 Months Ended

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Assets and Liabilities of Consolidated CLOs

Assets and Liabilities of Consolidated CLOs

The term CLO generally refers to a special purpose vehicle that owns a portfolio of investments and issues various tranches of debt and subordinated note securities to finance the purchase of those investments. The investment activities of a CLO are governed by extensive investment guidelines, generally contained within a CLO’s indenture and other governing documents which limit, among other things, the CLO’s exposure to any single industry or obligor and provide that the CLO’s assets satisfy certain ratings requirements. Most CLOs have a defined investment period during which they are allowed to make investments and reinvest capital as it becomes available. The CLOs are considered variable interest entities (VIE).

The assets of each of the CLOs, including cash and cash equivalents, are held solely as collateral to satisfy the obligations of the CLOs. The Company does not own and has no right to the benefits from, nor does it bear the risks associated with, the assets held by the CLOs, beyond its direct investments in, and investment advisory fees generated from, the CLOs. If the Company were to liquidate, the assets of the CLOs would not be available to its general creditors, and as a result, the Company does not consider these assets available for the benefit of its investors. Additionally, the investors in the CLOs have no recourse to the Company’s general assets for the debt issued by the CLOs. Therefore, this debt is not the Company’s obligation. The Company consolidates entities when it is determined to be the primary beneficiary under current VIE accounting guidance.

The table below represents the assets and liabilities of the consolidated CLOs that are included in the Company’s Consolidated Balance Sheets as of the dates indicated:

	As of
	December 31, 2016		December 31, 2015
Assets:
Cash and cash equivalents	$	45,589	$	38,716
Loans, at fair value (1)	928,240		680,784
Other assets	15,666		9,312
Total assets of consolidated CLOs	$	989,495	$	728,812
Liabilities:
Debt	$	912,034	$	683,827
Other liabilities and accrued expenses	19,935		14,489
Total liabilities of consolidated CLOs	$	931,969	$	698,316
Net	$	57,526	$	30,496

(1) The unpaid principal balance for these loans is $952,225 and $727,357 and the difference between their fair value and UPB is $23,985 and $46,573 at December 31, 2016 and December 31, 2015, respectively.

The Company’s beneficial interests and maximum exposure to loss related to the consolidated CLOs are limited to (i) ownership in the subordinated notes and related participations in management fees of the CLOs and (ii) accrued management fees. Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative results in the net amount of the CLOs shown above to be equivalent to the beneficial interests retained by the Company as illustrated in the below table:

Beneficial interests:	As of
	December 31, 2016		December 31, 2015
Subordinated notes and related participations in management fees	$	56,820	$	29,857
Accrued management fees	706		639
Total beneficial interests	$	57,526	$	30,496

The following table represents revenue and expenses of the consolidated CLOs included in the Company’s Consolidated Statements of Operations for the periods indicated:

	Year Ended December 31,
	2016		2015			2014
Income:
Net realized and unrealized gains (losses)	$	1,865	$	(27,569	)	$	(15,797	)
Interest income	51,712		51,182			80,478
Total revenue	53,577		23,613			$	64,681
Expenses:
Interest expense	31,033		29,143			$	43,639
Other expense	2,290		1,359			1,517
Total expense	33,323		30,502			45,156
Net income (loss) attributable to consolidated CLOs	$	20,254	$	(6,889	)	$	19,525

As summarized in the table below, the application of the measurement alternative results in the consolidated net income summarized above to be equivalent to the Company’s own economic interests in the CLOs which are eliminated upon consolidation:

Economic interests:	Year Ended December 31,
	2016		2015			2014
Distributions received and realized and unrealized gains (losses) on the subordinated notes held by the Company, net	$	17,335	$	(11,020	)	$	7,755
Management fee income	2,919		4,131			11,770
Total economic interests	$	20,254	$	(6,889	)	$	19,525