BORROWINGS

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



	As of December 31, 2012				September 30, 2012
	Maximum Amount of Facility		Borrowings Outstanding		Borrowings Outstanding
Credit facilities:
TD Bank – secured revolving credit facility ⁽¹⁾	$	6,997	$	—	$	—
Republic Bank – secured revolving credit facility	3,366		—		—
			—		—
Other Debt:
Senior Notes			10,000		10,000
Note payable to RSO			1,570		1,677
Mortgage debt			10,473		10,531
Other debt			567		812
Total borrowings			$	22,610	$	23,020


(1)	The amount of the facility as shown has been reduced for outstanding letters of credit of $503,000 at December 31, 2012 and September 30, 2012.

Credit Facilities

TD Bank, N.A. (“TD Bank”). On November 19, 2012, the Company amended its agreement with TD Bank 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) the London Interbank Offered Rate ("LIBOR") plus 3% and to eliminate the previous floor of 6.0%. The LIBOR rate used 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 1,969,843 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 or during the three months ended December 31, 2012 on the secured credit facility and the availability on the facility was $7.0 million, as reduced for letters of credit. Weighted average borrowings on the line of credit for the three months ended December 31, 2011 were $5.4 million at a weighted average borrowing rate of 6.0%, with an effective interest rate (inclusive of amortization of deferred issuance costs) of 10.6%. Weighted average borrowings for the term note portion of the facility (which was repaid in full by the Company in November 2011) for the three months ended December 31, 2011 were $771,000 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).

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. The Company also is charged an unused annual facility fee equal to 0.25%. In October 2012, the Company amended this facility to extend the maturity date to December 28, 2014. There were no borrowings under this facility during the three months ended December 31, 2012 and 2011 and the availability as of December 31, 2012 was $3.4 million.

Senior Notes

In December 2012, the Company modified the terms of its $10.0 million 9% Senior Notes that remained outstanding following the partial repayment referred to below to extend the maturity date from October 2013 to March 31, 2015. In connection with the modification, the Company paid a modification incentive payment equal to 1.0% of the aggregate principal amount of each note. 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 these warrants as a discount to the original notes. Upon the modification and partial repayment of the Senior Notes in November 2011, the Company expensed the remaining $2.2 million of unamortized discount. The effective interest rate (inclusive of the amortization of deferred finance fees and the discount for the warrants for fiscal 2012) for the three months ended December 31, 2012 and 2011 was 9.5% and 20.6%, 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.

Terminated and/or Transferred Facilities and Loans

Commercial Finance Debt. The Company was not an obligor or a guarantor of these facilities and these facilities were non-recourse to the Company except for the Series 2010-2 term securitization (see Note 17 for a description of the Company's obligations with respect to the Series 2010-2 term securitization). Due to the November 2011 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 Corporation ("LEAF Financial") had a short-term bridge loan with Guggenheim for borrowings up to $21.8 million. The bridge facility was repaid on 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 were required to begin when the revolving period ends. 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%.

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%.

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. In November 2011, RSO received $8.5 million from LEAF in payment of the outstanding balance and extinguished the loan.

Debt repayments

Annual principal payments on the Company’s aggregate borrowings for the next five fiscal years ending December 31, and thereafter, are as follows (in thousands):



2013	$	753
2014	198
2015	11,782
2016	224
2017	240
Thereafter	9,413
	$	22,610

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 December 31, 2012.