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Senior Secured Term Loan Facilities and Warrants to Purchase Shares of Common Stock
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Senior Secured Term Loan Facilities and Warrants to Purchase Shares of Common Stock Secured Financing Agreements
To finance its loans held-for-investment, the Company has entered into a variety of secured financing arrangements with several counterparties, including repurchase facilities, an asset-specific financing facility and a term financing facility. The Company’s repurchase facilities are collateralized by loans held-for-investment and certain cash balances. Although the transactions under repurchase facilities represent committed borrowings until maturity, the respective lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets due to collateral-specific credit events, or, with respect to a limited number of the Company’s repurchase facilities, capital market events, would require the Company to fund margin calls. The Company does not typically retain similar rights for the Company to make margin calls on its underlying borrowers as a result of a determination by the Company and/or its financing counterparty that there has been a decrease in the market value of the underlying pledged collateral.
The Company’s asset-specific financing facility and term financing facility are also collateralized by loans held-for-investment. Neither facility contains mark-to-market provisions and both are generally term-matched to the underlying assets, not to exceed February 9, 2025 in the case of the term financing facility.
The following tables summarize details of the Company’s borrowings outstanding on its secured financing agreements as of December 31, 2021, and December 31, 2020:
December 31, 2021
(in thousands)
Maturity Date (1)
Amount OutstandingUnused CapacityTotal CapacityCarrying Value of CollateralWeighted Average Borrowing Rate
Repurchase facilities:
Morgan Stanley Bank (2)
June 28, 2022$230,982 $269,018 $500,000 $382,017 2.2 %
Goldman Sachs Bank USA (3)
July 13, 202381,227 168,773 250,000 111,811 2.6 %
JPMorgan Chase BankJune 28, 2022104,215 345,785 450,000 188,838 2.3 %
CitibankJanuary 9, 2023202,944 297,056 500,000 285,767 1.8 %
Wells Fargo Bank (4)
June 28, 202257,917 42,083 100,000 86,409 2.3 %
Total/Weighted Average$677,285 $1,122,715 $1,800,000 $1,054,842 
Asset-specific financings:
CIBC Bank USA
Term Matched$43,622 $106,378 $150,000 $56,129 1.8 %
Term financing facility:
Goldman Sachs Bank USA (5)
February 14, 2025$127,145 $— $127,145 $329,256 3.7 %
December 31, 2020
(in thousands)
Maturity Date (1)
Amount OutstandingUnused CapacityTotal CapacityCarrying Value of CollateralWeighted Average Borrowing Rate
Repurchase facilities:
Morgan Stanley BankJune 28, 2021$435,719 $164,281 $600,000 $657,066 2.3 %
Goldman Sachs Bank USAMay 2, 2021395,990 104,010 500,000 593,625 2.5 %
JPMorgan Chase BankJune 28, 2022361,797 88,203 450,000 536,758 2.5 %
CitibankJanuary 9, 2023386,049 113,951 500,000 504,236 1.8 %
Wells Fargo BankJune 28, 2021129,320 145,680 275,000 185,282 2.1 %
Total/Weighted Average$1,708,875 $616,125 $2,325,000 $2,476,967 
Asset-specific financings:
CIBC Bank USA
Term Matched$123,091 $26,909 $150,000 $152,929 2.5 %
____________________
(1)The facilities are set to mature on the stated maturity date, unless extended pursuant to their terms.
(2)As of December 31, 2021, the Company retained an option to increase the maximum facility capacity amount up to $600 million, subject to customary terms and conditions.
(3)As of December 31, 2021, the Company retained options to increase the maximum facility capacity amount up to $350 million, subject to customary terms and conditions.
(4)As of December 31, 2021, the Company retained options to increase the maximum facility capacity amount up to $200 million, subject to customary terms and conditions.
(5)Amount outstanding includes unamortized debt issuance costs.
At December 31, 2021, and December 31, 2020, the Company’s borrowings outstanding on its secured financing facilities had contractual maturities as follows:
December 31, 2021
(dollars in thousands)Repurchase FacilitiesAsset-Specific Financings
Term Financing Facility (1)
Total Amount Outstanding
2022$393,114 $43,622 $— $436,736 
2023284,171 — — 284,171 
2024— — — — 
2025— — 127,145 127,145 
2026— — — — 
Thereafter— — — — 
Total$677,285 $43,622 $127,145 $848,052 

December 31, 2020
(dollars in thousands)Repurchase FacilitiesAsset-Specific Financings
Term Financing Facility (1)
Total Amount Outstanding
2021$961,030 82,768 $— $1,043,798 
2022361,797 40,323 — 402,120 
2023386,048 — — 386,048 
2024— — — — 
2025— — — — 
Thereafter— — — — 
Total$1,708,875 $123,091 $— $1,831,966 
__________________
(1)Amount outstanding includes unamortized debt issuance costs.

The following table summarizes certain characteristics of the Company’s repurchase facilities and counterparty concentration at December 31, 2021, and December 31, 2020:
December 31, 2021December 31, 2020
(dollars in thousands)Amount Outstanding
Net Counterparty Exposure (1)
Percent of EquityWeighted Average Years to MaturityAmount Outstanding
Net Counterparty Exposure (1)
Percent of EquityWeighted Average Years to Maturity
Morgan Stanley Bank$230,982 $155,446 15 %0.49$435,719 $230,815 25 %0.49
JPMorgan Chase Bank104,215 87,103 9 %0.49361,797 187,282 20 %1.50
Goldman Sachs Bank USA81,227 31,852 3 %1.53395,990 203,297 22 %0.33
Citibank202,944 85,631 8 %1.02386,049 124,913 13 %2.02
Wells Fargo Bank57,917 29,320 3 %0.49129,320 57,483 6 %0.49
Total$677,285 $389,352 $1,708,875 $803,790 
____________________
(1)Represents the excess of the carrying amount or market value of the loans held-for-investment pledged as collateral for repurchase facilities, including accrued interest plus any cash on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.
The Company does not anticipate any defaults by its financing counterparties, although there can be no assurance that one or more defaults will not occur.
Financial Covenants
The Company is subject to a variety of financial covenants under its secured financing agreements. The following represent the most restrictive financial covenants across the agreements as of December 31, 2021:
•Unrestricted cash cannot be less than the greater of $30.0 million and 5.0% of recourse indebtedness. As of December 31, 2021, the Company’s unrestricted cash was $191.9 million, while 5.0% of the Company’s recourse indebtedness was $31.6 million.
•Tangible net worth must be greater than the sum of (i) 75.0% of the Company’s tangible net worth as of June 28, 2017, and (ii) 75.0% of net cash proceeds of the Company’s equity issuances after June 28, 2017, which calculates to $865.7 million. As of December 31, 2021, the Company’s tangible net worth was $1.1 billion
•Target asset leverage ratio cannot exceed 77.5% and total leverage ratio cannot exceed 80.0%. As of December 31, 2021, the Company’s target asset leverage ratio was 66.5% and the Company’s total leverage ratio was 73.8%.
•Minimum interest coverage must be greater than 1.5:1.0. As of December 31, 2021, the Company’s minimum interest coverage was 1.8:1.0
The Company may also be subject to additional financial covenants in connection with various other agreements it enters into in the normal course of our business. The Company intends to continue to operate in a manner which complies with all of its financial covenants.
Senior Secured Term Loan Facilities and Warrants to Purchase Shares of Common Stock
Senior Secured Term Loan Facilities
On September 25, 2020, the Company, as a guarantor, and certain of its subsidiaries, as borrowers, entered into a five-year senior secured term loan credit agreement with certain investment vehicles managed by Pacific Investment Management Company LLC, or PIMCO, providing for up to $300.0 million of senior secured term loan facilities. On September 28, 2020, the Company borrowed $225.0 million under the initial term loan facility. The Company chose not to borrow the remaining $75.0 million of commitments under the senior secured term loan facilities, which were available to it on a delayed draw basis until September 25, 2021. Interest on the outstanding loans under the senior secured term loan facilities is payable quarterly in arrears and accrues at the rate of (i) 8.00% per annum for any period for which accrued interest is paid in cash or (ii) 9.00% per annum for any period for which the borrowers elect to pay up to 50% of accrued interest in kind by adding such interest to the principal amount of the loans. The senior secured term loan facilities will mature on September 25, 2025.
The loans outstanding under the term loan facilities are non-amortizing and may be voluntarily repaid, in whole or in part, at any time, subject to certain prepayment premiums if they are repaid prior to September 25, 2023.
On December 9, 2021, the Company prepaid $75.0 million of borrowings under the senior secured term loan facilities, resulting in a total payment of approximately $79.9 million, inclusive of the principal amount, prepayment penalty and accrued interest. As a result of this repayment, the Company realized a charge on early extinguishment of debt of approximately $(8.9) million, or $(0.17) per share, comprised of the prepayment penalty and a pro-rata charge-off of unamortized discount including transaction costs.
Subsequent to December 31, 2021, on February 16, 2022, the Company prepaid an additional $50.0 million of borrowings under the senior secured term loan facilities, resulting in a total payment of approximately $53.0 million, inclusive of the principal amount, prepayment penalty and accrued interest. As a result of this repayment, the Company realized a charge on early extinguishment of debt of approximately $(5.8) million, or $(0.11) per basic share, comprised of the prepayment penalty and a pro-rata charge-off of unamortized discount including transaction costs.
Warrants to Purchase Shares of Common Stock
In connection with the senior secured term loan facilities, on September 25, 2020, the Company issued warrants to purchase up to 6.066 million shares of the Company’s common stock, $0.01 par value per share to certain investment vehicles managed by PIMCO.
On September 25, 2021, the warrantholders forfeited unvested warrants exercisable for 1,516,455 shares of common stock because the Company chose not to borrow the $75.0 million of delayed draw commitments available under the senior secured term loan facilities. On September 30, 2021, the Company settled warrants to purchase approximately 1.06 million shares of common stock at an exercise price of $6.47 per share of common stock for a net cash amount of approximately $7.5 million. On October 4, 2021, the Company settled the remaining warrants to purchase approximately 3.49 million shares of common stock at an exercise price of $6.47 per share of common stock for a net cash amount of approximately $24.7 million. The Company currently has no warrants outstanding.
The Company retained third party valuation experts to assist with estimating the fair value of the warrants on the issuance date. Based on the warrants’ fair value relative to the fair value of the senior secured term loan facilities, approximately $4.5 million of the $225.0 million of gross proceeds was allocated to the warrants, creating a corresponding senior secured term loan facilities discount in the same amount. The Company elected the accreted redemption value method whereby this discount will be accreted over five years using the effective interest method, resulting in an increase in the carrying value of the senior secured term loan facilities.
The table below summarizes the net carrying amount of the senior secured term loan facilities:
Year Ended December 31,
(in thousands)20212020
Principal outstanding$150,000 $225,000 
Less: Unamortized debt discount and issuance costs(10,120)(18,552)
Net carrying value$139,880 $206,448 
The senior secured term loan credit agreement contains various affirmative and negative covenants, which are applicable to the Company, the borrowers and their respective subsidiaries, including limitations (subject to exceptions) on their ability to: (i) incur indebtedness; (ii) incur liens on their assets; (iii) consummate certain fundamental changes; (iv) dispose of all or any part of their assets; (v) pay dividends or other distributions with respect to their equity interests; (vi) make investments; (vii) enter into transactions with their affiliates; (viii) modify the terms of the Company’s existing convertible notes, any refinancings thereof or any subordinated or junior lien indebtedness, or prepay any such indebtedness; and (ix) enter into certain burdensome agreements.
The senior secured term loan credit agreement also contains financial covenants that are substantially similar to the financial covenants under the Company’s repurchase facilities, asset-specific financing facility and term financing facility. If the Company fails to meet or satisfy any of the covenants in accordance with the senior secured term loan credit agreement and is unable to obtain a waiver or other suitable relief from the lenders, the Company would be in default and the Company’s lenders could elect to declare outstanding amounts due and payable. The Company was in compliance with all of its financial covenants as of December 31, 2021.