Notes Payable to Banks and Other Debt Obligations

3 Months Ended

Mar. 31, 2012

Notes Payable to Banks and Other Debt Obligations

Notes Payable to Banks and Other Debt Obligations

(8)  Notes Payable to Banks and Other Debt Obligations

The Company’s notes payable and other debt obligations at March 31, 2012 and December 31, 2011 consisted of the following (dollars in thousands):

		March 31,		December 31,
Description	Terms and Conditions	2012		2011
Bank of Scotland reducing note facility, net of unamortized discount [1] [2]	Secured by substantially all assets and subsidiaries of FC Commercial (excluding FH Partners) and guaranteed by First City, matures December 2014	$	80,209	$	86,579
BOS (USA) reducing note facility ($25.0 million term note) [1]	Secured by all assets of FLBG2, matures December 2014	—		—
Bank of America term note [1]	Secured by all assets of FH Partners, matures December 2014	45,142		49,228
WFCF $25.0 million revolving loan facility [3]	Secured by assets of ABL and guaranteed by FirstCity up to $5.0 million, matures January 2015	17,190		21,405
Non-recourse bank notes payable of various U.S. Portfolio Entities	Secured by assets (primarily Portfolio Assets) of the underlying entities, various maturities through October 2015	15,636		18,113
Non-recourse bank notes payable of consolidated railroad subsidiaries	Secured by assets of the subsidiaries, various maturities through March 2016	5,350		5,156
Non-recourse bank note payable of real estate investment entity [4]	Secured by real estate property owned by the entity	—		7,361
Other notes and debt obligations		1,777		2,094
Total notes payable and other debt obligations		$	165,304	$	189,936

[1]In December 2011, FirstCity entered into a debt refinancing arrangement with Bank of Scotland that resulted in the amendment and restatement of the Reducing Note Facility (“BoS Facility A”) and a new loan agreement with BOS (USA) (“BoS Facility B”). In connection with this debt refinancing arrangement, FirstCity also obtained a new credit facility with Bank of America. This debt refinancing transaction was accounted for as a debt extinguishment and, as such, BoS Facility A and BoS Facility B were initially recorded at their estimated fair values of $91.6 million and $-0-, respectively, in December 2011.

[2]The unamortized discount on this loan facility at March 31, 2012 and December 31, 2011 was $2.5 million and $3.1 million, respectively. Also, the carrying value of this loan facility included $12.4 million and $13.2 million denominated in Euros at March 31, 2012 and December 31, 2011, respectively (see Note 10).

[3]This revolving loan facility was amended and restated on January 31, 2012 (see discussion below).

[4]FirstCity de-recognized this note payable from its consolidated balance sheet in March 2012 upon acquisition of the underlying real estate property by the creditor and legal release from the obligation in a foreclosure transaction (see Note 4 for additional information). This non-cash activity did not have a material impact on the Company’s results of operations for the three-month period ended March 31, 2012.

Wells Fargo Capital Finance (American Business Lending, Inc.)

On January 31, 2012, American Business Lending, Inc. (“ABL”), a FirstCity wholly-owned subsidiary, and Wells Fargo Capital Finance (“WFCF”) entered into an Amended and Restated Loan Agreement (“WFCF Credit Facility”) that amended and restated the existing $25.0 million loan facility agreement, as amended. The WFCF Credit Facility is a $25 million revolving loan facility that provides funding for ABL to finance and acquire SBA 7(a) loans, and is secured by substantially all of ABL’s assets. The primary terms and conditions of the WFCF Credit Facility are as follows:

·Provides for maximum outstanding borrowings of up to $25.0 million (Maximum Credit Line);

·Provides for a borrowing base for originating loans based on the amount by which the sum of (i) ABL-originated SBA guaranteed loans (up to 100%) and non-guaranteed loans (60%-80%) plus (ii) certain previously-purchased performing loans (up to 80%), exceeds the aggregate amount, if any, of loan reserves established by ABL and/or WFCF on the borrowing base loans;

·Outstanding borrowings bear interest at alternate annual rates equal to (i) LIBOR rate plus 3.50% for LIBOR rate loans; (ii) base rate (higher of LIBOR rate or Wells Fargo  prime rate) plus 0.75% for base rate loans; or (iii) base rate plus 0.75% otherwise;

·Provides for a prepayment fee in the event of ABL’s termination of the Credit Agreement equal to 3.0% of the Maximum Credit Line if prepayment is made on or before January 31, 2013, or 2.0% of the Maximum Credit Line if prepayment is made between January 31, 2013 and January 30, 2015; and

·Provides for an initial maturity date of January 31, 2015 (which may be extended upon agreement by WFCF and ABL).

In connection with the WFCF Credit Facility, FirstCity reaffirmed its limited guaranty in favor of WFCF with respect to ABL’s obligations. As such, FirstCity continues to provide WFCF with an unconditional limited guaranty for all of ABL’s obligations under the WFCF Credit Facility up to a maximum amount of $5.0 million plus enforcement costs.

The WFCF Credit Facility includes covenants that are customary for a loan facility of this type, including maximum capital expenditure levels and financial covenants related to minimum tangible net worth levels, maximum indebtedness to tangible net worth ratio, maximum delinquent and defaulted loan levels, maximum loan charge-off levels, and minimum net interest coverage levels.

In addition, the WFCF Credit Facility contains representations and warranties of ABL that are typical for a loan facility of this type. The WFCF Credit Facility also contains customary events of default, including but not limited to, failure to make required payments; failure to comply with certain agreements or covenants; change of control; certain events of bankruptcy and insolvency; and failure to pay certain judgments. In the event that an event of default occurs and is continuing, WFCF may accelerate the indebtedness under this loan facility. At March 31, 2012, ABL was in compliance with all covenants or other requirements set forth in the WFCF Credit Facility.