8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 6, 2016 (March 31, 2016)

New Residential Investment Corp.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

001-35777	45-3449660
(Commission File Number)	(IRS Employer Identification No.)
1345 Avenue of the Americas, 45th Floor New York, New York	10105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (212) 479-3150

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01    Entry into a Material Definitive Agreement.

Purchase Agreement for Acquisition of Interests in SpringCastle Companies

On March 31, 2016, certain of New Residential Investment Corp.’s (the “Company”) indirect wholly owned subsidiaries, NRZ Consumer LLC (“NRZ Consumer”), NRZ SC America LLC (“NRZ SC America”), NRZ SC Credit Limited (“NRZ SC Credit”), NRZ SC Finance I LLC (“NRZ SC Finance I”), NRZ SC Finance II LLC (“NRZ SC Finance II”), NRZ SC Finance III LLC (“NRZ SC Finance III”), NRZ SC Finance IV LLC (“NRZ SC Finance IV”), NRZ SC Finance V LLC (“NRZ SC Finance V” and together with NRZ Consumer, NRZ SC America, NRZ SC Credit, NRZ SC Finance I, NRZ SC Finance II, NRZ SC Finance III and NRZ SC Finance IV, collectively, the “NRZ Buyers”), entered into a Purchase Agreement (the “Purchase Agreement”) with (i) Springleaf Finance, Inc. (“SFI”), SpringCastle Holdings, LLC (“SpringCastle Holdings”) and Springleaf Acquisition Corporation (“Springleaf Acquisition” and together with SpringCastle Holdings, the “Sellers”), each of which are direct or indirect wholly owned subsidiaries of OneMain Holdings, Inc. (“OMH”), (ii) BTO Willow Holdings II, L.P. (“BTO Willow”) and Blackstone Family Tactical Opportunities Investment Partnership - NQ - ESC L.P. (“BFTOIP” and together with BTO Willow, the “Blackstone Buyers,” and the Blackstone Buyers together with the NRZ Buyers, collectively, the “Buyers”), and (iii) solely with respect to certain limited indemnification and post-closing expense reimbursement obligations set forth therein, NRZ SC America Trust 2015-1 (“NRZ SC America Trust”), NRZ SC Credit Trust 2015-1 (“NRZ SC Credit Trust), NRZ SC Finance Trust 2015-1 (“NRZ SC Finance Trust”, and together with NRZ SC America Trust and NRZ SC Credit Trust, the “NRZ Trusts”) and BTO Willow Holdings, L.P. 

Pursuant to the Purchase Agreement, SpringCastle Holdings sold its 47% limited liability company interests in each of SpringCastle America, LLC, SpringCastle Credit, LLC and SpringCastle Finance, LLC, and Springleaf Acquisition sold its 47% limited liability company interest in SpringCastle Acquisition LLC, to the Buyers for an aggregate purchase price of $111,625,000 (the “Transaction”). SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC and SpringCastle Acquisition LLC are each referred to herein as a “SpringCastle Company” and are collectively referred to herein as the “SpringCastle Companies” or the “SpringCastle Joint Venture.” The SpringCastle Joint Venture was formed in 2013 to acquire a portfolio of consumer loans that includes unsecured loans and loans secured by subordinate residential real estate mortgages (the “SpringCastle Portfolio”) from HSBC Finance Corporation and certain of its affiliates. As of February 29, 2016, the SpringCastle Portfolio consisted of 225,355 finance receivable accounts with an unpaid principal balance of approximately $1.99 billion. The SpringCastle Portfolio constitutes the sole material asset of the the SpringCastle Joint Venture. Pursuant to the Purchase Agreement, the NRZ Buyers collectively acquired an additional 23.5% limited liability company interest in the SpringCastle Joint Venture (representing 50% of the limited liability company interests being sold by the Sellers in the Transaction) and the Blackstone Buyers acquired the other 50% of the limited liability company interests being sold in the Transaction. The Transaction closed on March 31, 2016.

The Buyers collectively paid $100,462,500 of the aggregate purchase price to Sellers on March 31, 2016, with the remaining $11,162,500 to be paid into an escrow account within 120 days following March 31, 2016. The NRZ Buyers’ obligation with respect to purchase price was, and the escrow obligation will be, 50% of the total paid, or to be paid, by the Buyers. The escrowed funds are expected to be held in escrow for a period of up to five years following March 31, 2016 and, subject to the terms of the Purchase Agreement and depending on the achievement of certain portfolio performance requirements, paid (in whole or in part) to the Sellers at the end of such five year period. Any portion of the escrowed funds that the Sellers are not entitled to receive at the end of such five year period, based on the failure to achieve certain portfolio performance requirements, will be returned to Buyers. Buyers are also entitled (but not required) to use the escrowed funds as a source of recovery for any indemnification payments to which they become entitled pursuant to the Purchase Agreement.

The Purchase Agreement includes customary representations, warranties, covenants and indemnities.

Prior to the Transaction, the NRZ Trusts collectively owned a 30% limited liability company interest in the SpringCastle Joint Venture, and affiliates of the Blackstone Buyers (such affiliates of the Blackstone Buyers together with the NRZ Trusts, the “Other Members”) collectively owned a 23% limited liability company interest in the SpringCastle Joint Venture. Following the Transaction, the NRZ Buyers, collectively with the NRZ Trusts, own 53.5% of the limited liability company interests in the SpringCastle Joint Venture and the Blackstone Buyers, collectively with their affiliates, own 46.5% of the limited liability company interests in the SpringCastle Joint Venture. The Other Members are parties to the Purchase Agreement for certain limited indemnification obligations and post-closing expense reimbursement obligations of the SpringCastle Joint Venture to the Sellers.

The Transaction was unanimously approved by a special committee composed entirely of independent directors (the “Transaction Committee”) to which the Company’s board of directors had delegated full authority to consider, negotiate and determine whether to engage in the Transaction. The Transaction Committee was advised by legal counsel Kirkland & Ellis LLP and received a fairness opinion from its financial advisor Citigroup Global Markets Inc.

The Sellers are indirect wholly owned subsidiaries of OMH. Springleaf Financial Holdings, LLC, which owned approximately 58% of OMH’s common stock at December 31, 2015, is owned primarily by a private equity fund managed by an affiliate of Fortress Investment Group LLC (“Fortress”). The Company is externally managed by an affiliate of Fortress. Mr. Wesley R. Edens, Chairman of the Board of Directors of the Company, also serves as Chairman of the Board of Directors of OMH.  Mr. Edens is also a principal of Fortress and serves as Co-Chairman of the Board of Directors of Fortress.  Mr. Michael Nierenberg, the Chief Executive Officer and President of the Company and a member of the Company’s Board of Directors, is also a Managing Director of Fortress. Mr. Douglas L. Jacobs, a member of the Board of Directors of the Company, also serves as a member of OMH’s Board of Directors and Fortress’ Board of Directors. None of Mr. Edens, Mr. Nierenberg or Mr. Jacobs was a member of the Transaction Committee.

SFI will remain as servicer of the SpringCastle Portfolio immediately following the Transaction.

Second Amended and Restated Limited Liability Company Agreements of the SpringCastle Companies

On March 31, 2016, in connection with the closing of the Transaction, each NRZ Buyer entered into a Second Amended & Restated Limited Liability Company Agreement for each SpringCastle Company in which it acquired limited liability company interests pursuant to the Transaction (each, a “Second A&R LLC Agreement” and collectively the “Second A&R LLC Agreements”). Specifically, (i) NRZ SC America LLC entered into the Second A&R LLC Agreement of SpringCastle America LLC with each of the Blackstone Buyers, NRZ SC America Trust 2015-1 and BTO Willow Holdings, L.P.; (ii) NRZ SC Credit Limited entered into the Second A&R LLC Agreement of SpringCastle Credit LLC with each of the Blackstone Buyers, NRZ SC Credit Trust 2015-1 and BTO Willow Holdings, L.P.; (iii) NRZ SC Finance I LLC, NRZ SC Finance II LLC, NRZ SC Finance III LLC, NRZ SC Finance IV LLC and NRZ SC Finance V LLC entered into the Second A&R LLC Agreement of SpringCastle Finance LLC with each of the Blackstone Buyers, NRZ SC Finance Trust 2015-1 and BTO Willow Holdings, L.P.; and (iv) NRZ Consumer LLC entered into the Second A&R LLC Agreement of SpringCastle Acquisition LLC with each of the Blackstone Buyers and BTO Willow Holdings, L.P. All of the Second A&R LLC Agreements contain substantially identical terms and conditions.

The parties entered into the Second A&R LLC Agreements (i) to reflect the withdrawal of SpringCastle Holdings and Springleaf Acquisition as members of the SpringCastle Companies and the admission of certain new members of the SpringCastle Companies in connection with the Transaction, (ii) to provide the terms and conditions for management of the SpringCastle Companies and (iii) otherwise to set forth the respective rights and obligations of the members of the SpringCastle Companies.

Each Second A&R LLC Agreement designates one of the NRZ Buyers that is a party thereto as managing member of the applicable SpringCastle Company. Pursuant to each Second A&R LLC Agreement, the managing member has the exclusive power and authority to manage the business and affairs of the applicable SpringCastle Company, subject to the rights of the members to approve specified significant actions of the Company outside of the ordinary course of business and certain affiliate transactions, and subject to the other terms, conditions and limitations set forth in the Second A&R LLC Agreements.

Each Second A&R LLC Agreement contains certain customary restrictions on the members’ ability to transfer their interests in the applicable SpringCastle Company. Each Second A&R LLC Agreement also contains customary representations and warranties and terms and conditions governing, among other things, confidentiality, exculpation and indemnification of the members, capital contributions, maintenance of capital accounts and allocations and distributions of profits and losses.

In support of a previous financing transaction involving the NRZ Buyers, the NRZ Buyers transferred the limited liability company interests in the SpringCastle Companies then held by them to the NRZ Trusts. In connection with such transfer, the NRZ Buyers retained contractual rights to exercise certain of the NRZ Trusts’ rights as members of the SpringCastle Companies. These contractual rights are subject to forfeiture in the event of certain circumstances following a default under the financing transaction. The NRZ Buyers are depositors into the NRZ Trusts and are beneficiaries of the NRZ Trusts, but their interests in the NRZ Trusts are encumbered in favor of the financing described in this paragraph.

Item 2.01    Completion of Acquisition or Disposition of Assets

The information required by this Item 2.01 is set forth under Item 1.01 above, and is incorporated into this Item 2.01 by reference.

Item 2.03    Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The SpringCastle Portfolio collateralizes various classes of notes (the “2014-A Notes”) issued in a private placement on October 3, 2014 (the “SpringCastle Securitization”), by three subsidiaries of the SpringCastle Joint Venture, namely, SpringCastle America Funding, LLC (“SC America Funding”), SpringCastle Credit Funding, LLC (“SC Credit Funding”), and SpringCastle Finance Funding, LLC (“SC Finance Funding”) (each, a “Co-Issuer” and collectively, the “Co-Issuers”). SpringCastle America, LLC holds a 100% equity interest in SC America Funding, SpringCastle Credit, LLC holds a 100% equity interest in SC Credit Funding and SpringCastle Finance, LLC holds a 100% equity interest in SC Finance Funding. On March 31, 2016, upon the completion of the Transaction, the 2014-A Notes were consolidated on the Company’s balance sheet.

The 2014-A Notes comprise the following classes of asset-backed notes:  $1,601,280,000 initial principal amount of Class A notes with a coupon of 2.7% and a stated maturity date in May 2023 (the “Class A Notes”); $427,000,000 initial principal amount of Class B notes with a coupon of 4.61% and a stated maturity date in October 2027 (the “Class B Notes”); $331,200,000 initial principal amount of Class C  notes with a coupon of 5.59% and a stated maturity date in October 2033 (the “Class C Notes”); $199,810,000 initial principal amount  of Class D notes with a coupon of 6.82% and a stated maturity date in April 2034 (the “Class D Notes”); and $61,580,000 initial principal amount of Class E notes with a coupon of 6.82% and a stated maturity date in April 2035 (the “Class E Notes”). The Co-Issuers, at their option, may redeem the 2014-A Notes in whole on any payment date on or after the payment date that occurred in October 2015. With respect to any redemption of 2014-A Notes occurring on or after the payment date occurring in October 2015 but prior to the payment date in October 2016, the redemption price for any class of 2014-A Notes shall be the sum of (i) 100% of the outstanding principal balance of the 2014-A Notes of the applicable class to be redeemed, plus (ii) in the case of Class A Notes, Class B Notes, Class C Notes or Class D Notes, the applicable Specified Call Premium Amount (as defined below) for such 2014-A Notes, plus (iii) accrued and unpaid interest and fees in respect of such 2014-A Notes. With respect to any redemption of 2014-A Notes occurring on or after the payment date occurring in October 2016, the redemption price for any class of 2014-A Notes shall be the sum of (i) 100% of the outstanding principal balance of the 2014-A Notes of the applicable class to be redeemed, plus (ii) accrued and unpaid interest and fees in respect of such 2014-A Notes. The “Specified Call Premium Amount” on any payment date for any class of 2014-A Notes shall mean (i) in the case of Class A Notes, an amount equal to 1.00% of the outstanding principal balance of the Class A Notes to be redeemed and (ii) in the case of the Class B Notes, the Class C Notes and the Class D Notes, an amount equal to (a) the product of (1) with respect to the Class B Notes, 0.75%, with respect to the Class C Notes, 1.00% and with respect to the Class D Notes, 2.00%, times (2) the outstanding principal balance of the 2014-A Notes of such class to be redeemed on such payment date, times (3) the number of days, computed on a 30/360 basis, from and including such payment date to but excluding the payment date occurring in October 2016, divided by (b) 360.

As of February 29, 2016, the outstanding principal balances of the 2014-A Notes were, in the case of the Class A Notes, $850,200,257.95, in the case of the Class B Notes, $427,000,000.00, in the case of the Class C Notes, $331,200,000.00, in the case of the Class D Notes, $199,810,000.00 and the case of the Class E Notes, $61,580,000.00.

The 2014-A Notes were issued pursuant to an Indenture dated as of October 3, 2014 among the Co-Issuers, SFI, as servicer, Wilmington Trust, National Association, as loan trustee, Wells Fargo Bank, National Association, as paying agent and note registrar, and U.S Bank National Association, as indenture trustee (the “Indenture”). The Indenture contains customary early amortization events and events of default, which, if triggered, may result in the acceleration of the obligation to pay principal and interest on the 2014-A Notes. Other than for breaches of certain loan-level representations and warranties with respect to the underlying assets, the obligations of the Co-Issuers to make payments on the 2014-A Notes under the Indenture are obligations solely of the Co-Issuers, and none of the Company or the SpringCastle Companies has any liability therefor.

Pursuant to the Purchase Agreement, SFI continues to act as servicer in respect of the SpringCastle Securitization.

Item 9.01     Financial Statements and Exhibits.

(a) Financial statements of the businesses acquired

(1)

The Audited Combined Financial Statements of SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC and SpringCastle Acquisition, LLC for the year ended December 31, 2015 were filed on the Company’s Annual Report on Form 10-K on February 26, 2016 as Exhibit 99.1 and are incorporated in this Item 9.01(a) by reference.

(b) Pro forma financial information

The unaudited pro forma combined financial information of the Company as of and for the year ended December 31, 2015 and the notes thereto are attached as Exhibit 99.1 to this Form 8-K and are incorporated in this Item 9.01(b) by reference.

(d) Exhibits

Exhibit  Number	Description
99.1	Unaudited pro forma combined financial information of the Company as of and for the year ended December 31, 2015, and the related notes thereto.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NEW RESIDENTIAL INVESTMENT CORP.

(Registrant)

/s/ Nicola Santoro, Jr.

Nicola Santoro, Jr.

Chief Financial Officer

Date: April 6, 2016

EXHIBIT INDEX

Exhibit  Number	Description
99.1	Unaudited pro forma combined financial information of the Company as of and for the year ended December 31, 2015, and the related notes thereto.

EX-99.1

EXHIBIT 99.1

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined balance sheet as of December 31, 2015 and the unaudited pro forma combined statement of income for the year ended December 31, 2015 are based on (i) the audited consolidated financial statements of New Residential Investment Corp., or the Company, as of and for the year ended December 31, 2015 and (ii) the audited combined financial statements of SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC and SpringCastle Acquisition, LLC (collectively “SpringCastle”) as of and for the year ended December 31, 2015, each incorporated by reference in this filing.

The unaudited pro forma combined balance sheet as of December 31, 2015 gives effect to the Company’s acquisition of a controlling financial interest in SpringCastle (“SpringCastle Transaction”) as if it had occurred on December 31, 2015. The unaudited pro forma combined statement of income for the year ended December 31, 2015 gives effect to the SpringCastle Transaction as if it had occurred on January 1, 2015.

The historical financial information has been adjusted in the unaudited pro forma combined financial information to give effect to pro forma events that are (i) directly attributable to the SpringCastle Transaction, (ii) factually supportable and, (iii) with respect to the unaudited pro forma combined statement of income, are expected to have a continuing impact on the combined results. However, such adjustments are estimates based on certain assumptions and may not prove to be accurate. Information regarding these adjustments is subject to risks and uncertainties that could cause actual results to differ materially from our unaudited pro forma combined financial information.

The unaudited pro forma combined financial information and accompanying notes present the impact of the Company’s acquisition of a controlling financial interest, and therefore, consolidation of all of the assets and related liabilities of SpringCastle. Following the SpringCastle Transaction, in the opinion of management, all adjustments necessary to reflect the effects of the transactions described in the notes to the unaudited pro forma combined balance sheet and unaudited pro forma combined statement of income have been included and are based upon available information and assumptions that we believe are reasonable.

The unaudited pro forma combined financial information is provided for informational and illustrative purposes only and should be read in conjunction with the Notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 incorporated by reference in this filing, as well as the audited combined financial statements of SpringCastle incorporated by reference in this filing. Information regarding these adjustments is subject to risks and uncertainties that could cause actual results to differ materially from our unaudited pro forma combined financial information. The unaudited pro forma combined financial information does not contain any significant commitments and contingencies and does not purport to reflect our results of operations or financial condition had the SpringCastle Transaction occurred at an earlier date. The unaudited pro forma combined financial information also should not be considered representative of our future financial condition or results of operations.

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UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 2015

(dollars in thousands, except share and per share data)

	Historical New Residential Investment Corp. As of December 31, 2015		Historical SpringCastle As of December 31, 2015			Pro Forma Adjustments As of December 31, 2015				Pro Forma Combined As of December 31, 2015
Assets
Investments in:
Excess mortgage servicing rights, at fair value	$	1,581,517								$	1,581,517
Excess mortgage servicing rights, equity method investees, at fair value	217,221									217,221
Servicer advances, at fair value	7,426,794									7,426,794
Real estate securities, available-for-sale	2,501,881									2,501,881
Residential mortgage loans, held-for-investment	330,178									330,178
Residential mortgage loans, held-for-sale	776,681									776,681
Real estate owned	50,574									50,574
Consumer loans, held-for-investment	—		1,698,130			386,066			A	2,084,196
Consumer loans, equity method investees	—									—
Cash and cash equivalents	249,936		1,066			(50,231		)	A, B	200,771
Restricted cash	94,702		69,255						A	163,957
Derivative assets	2,689									2,689
Trade receivable	1,538,481									1,538,481
Deferred tax asset, net	185,311									185,311
Other assets	236,757		148						A	236,905
	$	15,192,722	$	1,768,599		$	335,835			$	17,297,156
Liabilities and Equity
Liabilities
Repurchase agreements	$	4,043,054								$	4,043,054
Notes and bonds payable	7,249,568		1,912,267			(742		)	A, C	9,161,093
Trades payable	725,672									725,672
Due to affiliates	23,785		529			(529		)	A, C	23,785
Dividends payable	106,017									106,017
Accrued expenses and other liabilities	58,046		5,111			6,110			A, B	69,267
	12,206,142		1,917,907			4,839				14,128,888
Equity
Common Stock, $0.01 par value, 2,000,000,000 shares authorized, 230,471,202 issued and outstanding at December 31, 2015	2,304									2,304
Additional paid-in capital	2,640,893									2,640,893
Retained earnings - Gain on Remeasurement	—					71,250			D	71,250
Retained earnings	148,800		(149,308		)	149,308			E	148,800
Accumulated other comprehensive income, net of tax	3,936									3,936
Total New Residential stockholders' equity	2,795,933		(149,308		)	220,558				2,867,183
Noncontrolling interests in equity of consolidated subsidiaries	190,647					110,438			F	301,085
Total Equity	2,986,580		(149,308		)	330,996				3,168,268
	$	15,192,722	$	1,768,599		$	335,835			$	17,297,156

See notes to unaudited pro forma combined financial information

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UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2015

(dollars in thousands, except share and per share data)

	Historical New Residential Investment Corp. for the Year Ended December 31, 2015			Historical SpringCastle for the Year Ended December 31, 2015		Pro Forma Adjustments for the Year Ended December 31, 2015				Pro Forma Combined for the Year Ended December 31, 2015
Interest income	$	645,072		$	455,478	$	(91,578	)	G	$	1,008,972
Interest expense	274,013			87,000		(1,790		)	H	359,223
Net Interest Income	371,059			368,478		(89,788		)		649,749
Impairment
Other-than-temporary impairment (“OTTI”) on securities	$	5,788		$	—	$	—			$	5,788
Valuation and loss provision on loans	18,596			67,936		—				86,532
	24,384			67,936		—				92,320
Net interest income after impairment	346,675			300,542		(89,788		)		557,429
Other Income
Change in fair value of investments in excess mortgage servicing rights	38,643			—		—				38,643
Change in fair value of investments in excess mortgage servicing rights, equity method investees	31,160			—		—				31,160
Change in fair value of investments in servicer advances	(57,491		)	—		—				(57,491		)
Earnings from investments in consumer loans, equity method investees	—			—		—				—
Gain on consumer loans investment	43,954			—		(43,954		)	I	—
Gain on settlement of investments, net	(17,207		)	—		—				(17,207		)
Other income	2,970			—		—				2,970
	42,029			—		(43,954		)		(1,925		)
Operating Expenses
General and administrative expenses	61,862			—		7,531			J	69,393
Management fee to affiliate	33,475			—		—				33,475
Incentive compensation to affiliate	16,017			—		9,140			K	25,157
Loan servicing expense	6,469			52,731		—				59,200
Other expense	—			7,531		(7,531		)	J	—
	117,823			60,262		9,140				187,225
Income (Loss) Before Income Taxes	270,881			240,280		(142,882		)		368,279
Income tax expense (benefit)	(11,001		)	—		—			L	(11,001		)
Net Income (Loss)	$	281,882		$	240,280	$	(142,882	)		$	379,280
Noncontrolling interests in Income of Consolidated Subsidiaries	$	13,246		$	—	$	69,979		M	$	83,225
Net Income (Loss) Attributable to Common Stockholders	$	268,636		$	240,280	$	(212,861	)		$	296,055
Net Income Per Share of Common Stock
Basic	$	1.34								$	1.47
Diluted	$	1.32								$	1.46
Weighted Average Number of Shares of Common Stock Outstanding
Basic	200,739,809									200,739,809
Diluted	202,907,605									202,907,605

See notes to unaudited pro forma combined financial information

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

SpringCastle Transaction

On March 31, 2016, the Company and BTO Willow Holdings II, L.P. and Blackstone Family Tactical Opportunities Investment Partnership - NQ - ESC L.P. (together, the “Blackstone Buyers”) entered into a purchase agreement (the “Purchase Agreement”) with certain wholly owned subsidiaries of OneMain Holdings, Inc. (the “Sellers”), pursuant to which the Company and the Blackstone Buyers (collectively, the “Buyers”) each acquired an additional equity ownership of 23.5% in SpringCastle for an aggregate purchase price of $111.6 million, including $11.2 million of contingent consideration to be paid into an escrow account within 120 days following March 31, 2016. Such contingent consideration is expected to be held in escrow for a period of up to five years following March 31, 2016, and, subject to the terms of the Purchase Agreement and depending on whether certain portfolio performance requirements are satisfied, paid to the Sellers or returned to the Buyers at the end of such five year period. The Company’s portion of the aggregate purchase price is $55.8 million including $5.6 million of contingent consideration.

In connection with the SpringCastle Transaction, the Company assumed the role of Managing Member charged with managing the business and affairs of SpringCastle, which resulted in the Company owning a controlling financial interest in SpringCastle. The Company’s act of obtaining control triggered the application of the acquisition model in Accounting Standard Codification (“ASC”) No. 805, including the fair value recognition of all net assets over which control has been obtained and the remeasurement of any previously held noncontrolling interest.

Based on the guidance in ASC No. 805, the Company has consolidated all of the assets and the related liabilities of SpringCastle assuming a gross purchase price of $237.5 million. This gross purchase price is representative of the fair value, measured in accordance with ASC No. 820, of 100% of the net assets of SpringCastle, which was used to derive the $111.6 million purchase price for an aggregate 47.0% of the equity ownership acquired in the SpringCastle Transaction.

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial statements of the Company and SpringCastle. Accordingly, the assets acquired and liabilities assumed are recorded at their acquisition date fair values. Such acquisition value was not materially different from the purchase price paid in consideration of acquiring substantially all of the assets and assuming the related liabilities of SpringCastle in accordance with ASC No. 805.

The major assets acquired and liabilities assumed from SpringCastle include Consumer Loans of $2,084.2 million and Bonds Payable of $1,911.5 million.

Consumer Loans

The fair value of Consumer Loans acquired of $2,084.2 million was estimated based on a discounted cash flow model that includes assumptions that are inherently subjective and unobservable. Significant inputs used in the valuations include expectations of conditional repayment rates, constant default rates, delinquency rates, loss severity and discount rates that market participants would use in determining the fair values of consumer mortgage loans. The Company’s fair value was corroborated by a fair value opinion from an independent third party.

Bonds Payable

The fair value of Bonds Payable assumed of $1,911.5 million is based on an internal discounted cash flow model supported by multiple broker quotations. The fair value of Bonds Payable is most significantly impacted by the market yield based on the interest rate and credit sensitivities of the underlying pools of collateral, which is incorporated into both the internal model and the broker quotations.

Preliminary Purchase Price Allocation

At this time, the Company has not finalized a detailed valuation of the assets acquired and liabilities assumed as part of the SpringCastle Transaction, and, accordingly, the unaudited pro forma combined financial information was prepared using a preliminary allocation of the estimated or actual purchase prices based on assumptions and estimates, which are subject to material changes. Additionally, the Company has not yet completed all of the analysis necessary to identify additional items that could significantly impact the purchase

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price allocation or the assumptions and adjustments made in preparation of this unaudited pro forma combined financial information. The SpringCastle Transaction accounting will be completed within the required measurement period in accordance with the accounting guidance on business combinations, but in no event later than one year following the completion of the SpringCastle Transaction.

Upon completion of a final detailed valuation analysis, there may be additional increases or decreases to the recorded book values of assets and liabilities associated with the SpringCastle Transaction, including, but not limited to, commitments and contingencies that will give rise to future expenses that are not reflected in this unaudited pro forma combined financial information. Accordingly, once the necessary analyses is completed and the final purchase price and purchase price allocation is determined, actual results may differ materially from the information presented in this unaudited pro forma combined financial information.

The unaudited pro forma combined financial information does not contain any significant commitments and contingencies based upon the preliminary valuation discussed herein. The results of any additional facts and circumstances that materialize subsequent to the preparation of this unaudited pro forma combined financial information may differ materially from the information presented herein.

Conformity of Accounting Policies

Certain assets and liabilities and related processes of SpringCastle are expected to be integrated with those of the Company. This integration includes a review by the Company of SpringCastle’s accounting policies. As a result of that review, the Company may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. At this time, the Company is not aware of any differences that would have a material impact on the combined financial statements.

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Pro Forma Adjustments for the Unaudited Pro Forma Combined Balance Sheet as of December 31, 2015

A. In accordance with ASC No. 805, the Company has performed a preliminary allocation of the purchase price to SpringCastle’s assets and liabilities in the accompanying unaudited pro forma combined financial information based on estimates. The final allocation of purchase price may differ materially from the pro forma amounts included herein. The preliminary allocation of the purchase consideration is as follows (in millions):

	Purchase Price Allocation			Historical SpringCastle As of December 31, 2015		Fair Value Adjustment
Consumer loans, held-for-investment	$	2,084.1		$	1,698.1	$	386.0
Restricted cash	69.3			69.3		—
Cash and cash equivalents	1.1			1.1		—
Other assets	0.1			0.1		—
Total assets acquired	$	2,154.6		$	1,768.6	$	386.0
Bonds payable	$	1,911.5		$	1,912.3	$	(0.8	)
Accounts payable and accrued expenses	5.6			5.6		—
Total liabilities assumed	$	1,917.1		$	1,917.9	$	(0.8	)
Estimated fair value of net assets acquired	$	237.5	*

* Represents the aggregate fair value of the Company’s preexisting interest of 30.0%, additional interest acquired on March 31, 2016 of 23.5%, and the noncontrolling interest of 46.5%.

B. Reflects the Company’s payment of the cash portion of the purchase price of $50.2 million and an accrual for the 10.0% purchase price holdback of $5.6 million within Accrued expenses and other liabilities for a 23.5% interest in accordance with the Purchase Agreement.

C. Certain amounts in the historical balance sheet of SpringCastle have been eliminated or reclassified to conform to the Company’s presentation and the details of these reclassifications are as follows:

• Historical Bonds Payable carrying value of $1,912.3 million included $4.7 million of deferred financing costs and original issue discount that were eliminated by the Company’s fair value adjustment to the assumed debt; and,

• Due to affiliates of $0.5 million has been reclassified to Accounts payable and accrued expenses.

D. In accordance withASC No. 805-10-25-10, the Company remeasured its previously held equity investment in SpringCastle of 30.0% and recognized a $71.3 million gain reflected in retained earnings.

E. Reflects the elimination of SpringCastle historical retained earnings.

F. Reflects the recognition of the non-controlling interest of 46.5% held by Blackstone Buyers in SpringCastle.

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Pro Forma Adjustments for the Unaudited Pro Forma Combined Statement of Income for the year ended December 31, 2015

G. The adjustment to interest income reflects the net accretion of the Company’s purchase discount or premium and accretable yield for the consumer loan portfolios accounted for under ASC No. 310-20 and ASC No. 310-30, respectively, had the portfolios been acquired by the Company as of January 1, 2015.

H. The net adjustment to interest expense of $1.8 million reflects 1) the elimination of historical SpringCastle amortization of deferred financing costs and original issue discount of $2.5 million and 2) the amortization of $0.7 million of the Company’s debt discount at acquisition using the interest method in accordance with ASC No. 310-20, had the Bonds Payable been assumed by the Company as of January 1, 2015.

I. Reflects the elimination of the Company’s gain on consumer loans investment representing its historical share of SpringCastle’s cumulative earnings that exceeded cumulative cash distributions. Given the SpringCastle Transaction and the Company’s consolidation of SpringCastle’s assets and liabilities, these gains are replaced with interest income and interest expense on the underlying assets and liabilities as described in G and H above.

J. Certain amounts in the historical statement of income of SpringCastle have been reclassified to conform to the Company’s presentation and the details of these reclassifications are as follows:

• Other expense of $7.5 million to General and administrative expenses.

K. The adjustment to Incentive compensation to affiliate relates to the pro forma adjustments to the statement of income.

L. Noproforma adjustment for income tax expense has been reflected in the pro forma statement of income because incremental income allocable to taxable subsidiaries is minimal on a pro forma basis.

M. Reflects the recognition of the noncontrolling interest in income of SpringCastle as a consolidated subsidiary.

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