BORROWINGS

The credit facilities and other debt of the Company and related borrowings outstanding are as follows (in thousands):



	As of September 30, 2012				September 30, 2011
	Maximum Amount of Facility		Borrowings Outstanding		Borrowings Outstanding
Corporate and Real Estate:
TD Bank – secured revolving credit facility ⁽¹⁾	$	6,997	$	—	$	7,493
TD Bank – term loan	—		—		1,250
Republic Bank – secured revolving credit facility	3,500		—		—
			—		8,743
Senior Notes ⁽²⁾			10,000		16,263
Note payable to RSO			1,677		1,705
Mortgage debt			10,531		10,700
Other debt			812		548
Total corporate and real estate borrowings			23,020		37,959
Commercial Finance debt			—		184,700
Total borrowings outstanding			$	23,020	$	222,659


(1)	The amount of the facility as shown has been reduced for outstanding letters of credit of $503,000 at September 30, 2012 and 2011.


(2)	The September 30, 2011 balance shown is net of an unamortized discount of $2.6 million related to the fair value of detachable warrants issued to the note holders. In conjunction with the refinancing of the Senior Notes in November 2011, the remaining unamortized discount was charged off to Loss on Extinguishment of Debt in the consolidated statements of operations.

Corporate and Real Estate Debt

TD Bank, N.A. (“TD Bank”). On November 19, 2012, the Company amended its agreement to extend the maturity of the TD Bank facility to December 31, 2014, to set the interest rate on borrowings as either (a) the prime rate of interest plus 2.25% or (b) London Interbank Offered Rate ("LIBOR") plus 3% and to eliminate the previous floor of 6.0%. The LIBOR rate varies from one to six months depending upon the period of the borrowing at the Company's election. The Company is charged an annual fee of 0.5% on the unused facility amount as well as a 5.25% fee on the $503,000 of outstanding letters of credit.

Borrowings are secured by a first priority security interest in certain of the Company's assets and the guarantees of certain subsidiaries, including (i) the present and future fees and investment income earned in connection with the management of, and investments in, sponsored CDO issuers, (ii) a pledge of 18,972 shares of TBBK common stock, and (iii) the pledge of 1,935,337 shares of RSO common stock. Availability under the facility is limited to the lesser of (a) 75% of the net present value of future RSO base management fees to be earned or (b) the maximum revolving credit facility amount.

There were no borrowings outstanding as of September 30, 2012 on the secured credit facility and the availability on the revolving line of credit portion of the facility was $7.0 million, as reduced for letters of credit. During fiscal 2012, the Company repaid the outstanding term loan portion of the credit facility in the amount of $1.3 million. Weighted average borrowings on the line of credit for fiscal 2012 and 2011 were $3.7 million and $10.1 million, respectively, at a weighted average borrowing rate of 6.0% and 6.6%, respectively, with an effective interest rate (inclusive of amortization of deferred issuance costs) of 12.0% and 10.5%, respectively. Weighted average borrowings for the term note for fiscal 2012 were $194,000 at a weighted average borrowing rate of 6.0% and an effective interest rate of 38.2% (reflecting the accelerated amortization of deferred finance costs). Weighted average borrowings for the term note for fiscal 2011 were $1.7 million, at a weighted average borrowing rate of 6.0%, with an effective interest rate (inclusive of amortization of deferred issuance costs) of 12.9%.

Republic First Bank (“Republic Bank”). In February 2011, the Company entered into a $3.5 million revolving credit facility with Republic Bank. The facility bears interest at the prime rate of interest plus 1% with a floor of 4.5%. The loan is secured by a pledge of 700,000 shares of RSO stock and a first priority security interest in certain real estate collateral located in Philadelphia, Pennsylvania. Availability under this facility is limited to the lesser of (a) the sum of (i) 25% of the appraised value of the real estate, based upon the most recent appraisal delivered to the bank and (ii) 100% of the cash and 75% of the market value of the pledged RSO shares held in the pledged account; and (b) 100% of the cash and 100% of the market value of the pledged RSO shares held in the pledged account. In January 2012, the Company amended this facility to extend the maturity date from December 28, 2012 to December 1, 2013 and to add an unused annual facility fee equal to 0.25%. In October 2012, the Company further amended this facility to extend the maturity date to December 28, 2014. There were no borrowings under this facility during fiscal 2012 and 2011 and the availability as of September 30, 2012 was $3.5 million.

Senior Notes

In November 2011, the Company redeemed $8.8 million million of its Senior Notes for cash and modified the terms of the remaining $10.0 million of notes to reduce the interest rate to 9% from 12% and to extend the maturity to October 2013. The detachable 5-year warrants to purchase 3,690,195 shares of common stock issued with the original notes remain outstanding. The Company accounted for the warrants as a discount to the original Senior Notes. Upon the modification and partial repayment of the Senior Notes, the Company expensed the remaining $2.2 million of unamortized discount. The effective interest rate (inclusive of the discount for the warrants) for fiscal 2012 and 2011 was 13.2% and 22.2%, respectively. Until all of the Senior Notes are paid in full, retired or repurchased, the Company cannot declare or pay future quarterly cash dividends in excess of $0.03 per share without the prior approval of all of the holders of the Senior Notes unless basic earnings per common share from continuing operations from the preceding fiscal quarter exceed $0.25 per share.

Note payable to RSO − Real Estate

In January 2010, RSO advanced $2.0 million to the Company under an 8% promissory note that matures on January 14, 2015. Interest is payable quarterly in arrears and requires principal repayments upon the receipt of distributions from one of the Company’s real estate investment funds. The principal balance of the note was $1.7 million at September 30, 2012 and 2011, respectively.

Other Debt - Real Estate and Corporate

Real estate − mortgage. In August 2011, the Company obtained a $10.7 million mortgage for its hotel property in Savannah, Georgia. The 6.36% fixed rate mortgage, which matures in September 2021, requires monthly principal and interest payments of $71,331. The principal balance as of September 30, 2012 and 2011 was $10.5 million and $10.7 million, respectively.

Corporate − term notes. In August 2012, the Company entered into two term notes totaling $546,000 to finance the payment of various insurance policy premiums. The notes are secured by the return premiums, dividend payments and certain loss payments of the insurance policies and require 9 monthly principal and interest payments of $61,508. The principal balance outstanding at September 30, 2012 was $487,000.

Corporate - capital lease. In December 2011, the Company entered into a capital lease for the purchase of computer equipment at an interest rate of 7.2%. The two-year lease requires monthly payments of $22,697. The principal balance of the lease at September 30, 2012 was $325,000.

Terminated and/or Transferred Facilities and Loans

Commercial Finance Debt. Due to the November 2011 LEAF Transaction and resulting deconsolidation of LEAF, the Company's commercial finance debt is no longer included in the Company's consolidated financial statements.

Securitization of leases and loans. On October 28, 2011, LEAF completed a $105.0 million securitization. A subsidiary of LEAF issued eight classes of notes which are asset-backed debt, secured and payable by certain assets of LEAF. The notes included interest rates ranging from 0.4% to 5.5%, rated by both Dominion Bond Rating Service, Inc. (“DBRS”) and Moody's Investors Services, Inc., and mature from October 2012 to March 2019. The weighted average borrowings for the period from October 1 to November 16, 2011 were $42.7 million, at a weighted average borrowing rate of 2.6% and an effective interest rate (inclusive of amortization of deferred financing costs and interest rate swaps) of 5.6%.

Guggenheim Securities LLC (“Guggenheim”). At December 31, 2010, LEAF Financial had a short-term bridge loan with Guggenheim for borrowings up to $21.8 million. The bridge facility was repaid in January 4, 2011 and terminated on February 28, 2011. Beginning in January 2011, Guggenheim provided LEAF with a revolving warehouse credit facility with availability up to $110.0 million and committed to further expand the borrowing limit to $150.0 million. LEAF, through its wholly-owned subsidiary, issued to Guggenheim, as initial purchaser, six classes of DBRS-rated variable funding notes, with ratings ranging from “AAA” to “B”, for up to $110.0 million. The notes were secured and payable only from the underlying equipment leases and loans. Interest was calculated at a rate of 30-day LIBOR plus a margin rate applicable to each class of notes. The revolving period of the facility ends on December 31, 2012 and the stated maturity of the notes is December 15, 2020, unless there is a mutual agreement to extend. Principal payments on the notes are required to begin when the revolving period ends. The Company was not an obligor or a guarantor of these securities and the facility was non-recourse to the Company. The weighted average borrowings for the period from October 1 to November 16, 2011 (prior to the LEAF deconsolidation) were $68.8 million, at a weighted average borrowing rate of 4.2% and an effective interest rate of 5.1%. The weighted average borrowings for fiscal 2011 were $40.4 million, at a weighted average rate of 4.1% and an effective interest rate (inclusive of amortization of deferred financing costs and interest rate swaps) of 5.1% . The weighted average borrowings on the bridge loan for fiscal 2011 was $8.7 million, at a weighted average rate of 6.8% and an effective interest rate of 9.2%.

Series 2010-2 term securitization. In May 2010, LEAF Receivables Funding 3, LLC, a subsidiary of LEAF (“LRF3”), issued $120.0 million of equipment contract-backed notes (“Series 2010-2”) to provide financing for leases and loans. In the connection with the formation of LEAF in January 2011, RSO contributed the Series 2010-2 notes, along with the underlying lease portfolio, to LEAF. LRF3 is the sole obligor on these notes. The weighted average borrowings for the period from October 1 to November 16, 2011 were $70.1 million at a weighted average borrowing rate of 5.1% and an effective interest rate of 8.5%. The weighted average borrowings during fiscal 2011 were $62.5 million, at a weighted average rate of 5.4%, with an effective interest rate (inclusive of amortization of debt discount and deferred issuance costs) of 8.7% .

Note payable to RSO − commercial finance. On July 20, 2011, RSO entered into an agreement with LEAF pursuant to which RSO agreed to provide a $10.0 million loan to LEAF, of which $6.9 million was funded as of September 30, 2011, with additional funding of $3.1 million prior to the November 16, 2011 deconsolidation. The loan bore interest at a fixed rate of 8.0% per annum on the unpaid principal balance, payable quarterly. The loan was secured by the commercial finance assets of LEAF and LEAF's interest in LRF3. Weighted average borrowings for fiscal 2011 were $832,000. In the November 2011 LEAF Transaction, RSO received $8.5 million from LEAF in payment of the outstanding balance and extinguished the loan.

Mortgage. In November 2007, in conjunction with the acquisition of an equipment leasing company, LEAF entered into a $1.5 million first mortgage due December 2037 on an office building in Moberly, Missouri. The 8% mortgage, with an outstanding balance of $1.4 million at September 30, 2011, required monthly payments of principal and interest of $11,000.

Capital leases. LEAF had entered into various capital leases for the purchase of equipment at interest rates ranging from 5.1% to 7.4% and terms ranging from three to five years. The principal balance of these leases at September 30, 2011 was $114,000.

Corporate Debt − term notes. In August and September 2011, the Company entered into two term notes totaling $615,000 to finance the payment of various insurance policy premiums. The notes were secured by the return premiums, dividend payments and certain loss payments of the insurance policies and required nine monthly principal and interest payments of $69,773 and were fully repaid in May 2012.

In August 2010, the Company entered into two term notes totaling $901,000 to finance the payment of various insurance policy premiums. The notes required nine monthly principal and interest payments of $102,200 and were fully repaid in May 2011.

In September 2008, the Company entered into a three-year unsecured term note for $473,000 to finance the purchase of software. The loan, which required 36 monthly principal and interest payments of $14,200, matured and was fully repaid in September 2011.

Capital leases. The Company had entered into various capital leases for the purchase of equipment at interest rates ranging from 6.9% to 7.2% and terms ranging from two years to three years. The leases matured and were paid in full during fiscal 2011.

Debt repayments

Annual principal payments on the Company’s aggregate borrowings for the next five fiscal years ending September 30, and thereafter, are as follows (in thousands):



2013	$	904
2014	10,284
2015	1,884
2016	219
2017	235
Thereafter	9,494
	$	23,020

Covenants

The TD Bank credit facility is subject to certain financial covenants, which are customary for the type and size of the facility, including debt service coverage and debt to equity ratios. The debt to equity ratio restricts the amount of recourse debt the Company can incur based on a ratio of recourse debt to net worth.

The mortgage on the Company's hotel property contains financial covenants related to the net worth and liquid assets of the Company. Although non-recourse in nature, the loan is subject to limited standard exceptions (or “carveouts”) which the Company has guaranteed. These carveouts will expire as the loan is paid down over the next ten years. The Company has control over the operations of the underlying property, which mitigates the potential risk associated with these carveouts and, accordingly, no liabilities for these obligations have been recorded in the consolidated financial statements. To date, the Company has not been required to make any carveout payments.

The Company was in compliance with all of its financial debt covenants as of September 30, 2012.