NOTE 12 – BORROWINGS

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

	As of September 30,				September 30,
	2011				2010
	Amount of Facility		Borrowings Outstanding		Borrowings Outstanding
Commercial finance:
Guggenheim – secured revolving facility (1)	$	110,000	$	104,607	$	−
Guggenheim – bridge financing		−		−		20,750
LEAF Funding 3 Series 2010-2 – term securitization (2)		−		71,639		−
Note payable to RCC		10,000		6,900		−
Other debt				1,554		1,724
Total commercial finance borrowings				184,700		22,474

Corporate and Real estate:
TD Bank – secured revolving credit facility (3)		8,997		7,493		14,127
TD Bank – term loan		−		1,250		−
Republic Bank – secured revolving credit facility		3,500		−		−
Total corporate borrowings				8,743		14,127
Senior Notes (4)				16,263		14,317
Note payable to RCC				1,705		2,000
Mortgage debt				10,700		12,005
Other debt				548		1,187
Total corporate and real estate borrowings				37,959		43,636

Total borrowings outstanding			$	222,659	$	66,110

(1)	Reflected net of unamortized discount of $393,000 related to the fair value of the LEAF detachable warrants issued to Guggenheim.

(2)	Face amount of the notes of $75.4 million is reflected net of unamortized discount of $3.8 million.

(3)	The amount of the facility as shown has been reduced for outstanding letters of credit of $503,000 at September 30, 2011 and $401,000 at September 30, 2010.

(4)	The outstanding Senior Notes are reflected net of an unamortized discount of $2.6 million and $4.5 million at September 30, 2011 and 2010, respectively, related to the fair value of detachable warrants issued to the note holders.

Commercial Finance Debt

In the November 2011 LCC Transaction and resulting deconsolidation of LEAF (see Note 27), the Company's commercial finance facilities will no longer be included in the Company's consolidated financial statements. The following borrowings were outstanding under the commercial finance segment as of September 30, 2011:

Guggenheim. On January 4, 2011, Guggenheim provided LEAF with a revolving warehouse credit facility with an initial availability of $50.0 million. The facility was increased to $110.0 million on April 27, 2011 with a commitment 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 Dominion Bond Rating Service-rated variable funding notes, with ratings ranging from “AAA” to “B”, for up to $110.0 million. The notes are secured and payable only from the underlying equipment leases and loans. Interest is calculated at a rate of 30-day London Interbank Offered Rate (“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 is not an obligor or a guarantor of these securities and the facility is non-recourse to the Company. The weighted average borrowings for fiscal 2011 was $40.4 million, at a weighted average borrowing rate of 4.1%, at an effective rate (inclusive of amortization of deferred financing costs and interest rate swaps) of 5.1%.

Series 2010-2 term securitization. In May 2010, LEAF Receivables Funding 3, LLC (“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, RCC contributed these notes, along with the underlying lease portfolio to LEAF. LRF3 is the sole obligator of these notes. Neither the Company or LEAF is an obligor or a guarantor of these securities and the facility is non-recourse to the Company and LEAF.

The notes were originally issued in the following classes: (i) $95.5 million of class A notes; (ii) $7.0 million of class B notes; (iii) $6.4 million of class C notes; (iv) $6.4 million of class D notes; and (v) $4.7 million of class E notes. All of the notes issued bear interest at a fixed rate of 5.0%. The class A notes mature in May 2016 and the class B through E notes mature in December 2017. The notes were recorded at their fair value and are being accreted to their face value using the effective interest method. The weighted average borrowings for fiscal 2011 was $62.5 million, at a weighted average borrowing 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 RCC − commercial finance. On July 20, 2011, RCC entered into an agreement with LEAF pursuant to which RCC agreed to provide a $10.0 million loan to LEAF, of which $6.9 million was funded as of September 30, 2011. The loan bears interest at a fixed rate of 8.0% per annum on the unpaid principal balance, payable quarterly. The loan is secured by the commercial finance assets of LEAF and LEAF's interest in LRF3. Weighted average borrowings for fiscal 2011 were $832,000. This loan was settled in the November 2011 LCC Transaction (see Note 27).

Other Debt − Commercial Finance

Mortgage. In November 2007, in conjunction with the acquisition of Dolphin Capital Corp., an equipment leasing company, the Company 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 and $1.5 million at September 30, 2011 and 2010, respectively, requires monthly payments of principal and interest of $11,000.

Capital leases. The Company has 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 and 2010 was $114,000 and $176,000, respectively.

Corporate and Real Estate Debt

TD Bank, N.A. (“TD Bank”). On March 10, 2011, the Company amended its revolving credit facility with TD Bank to extend the maturity date to August 31, 2012 from October 15, 2011, and to increase the maximum facility amount to $14.5 million, consisting of a $5.0 million term loan and a $9.5 million revolving line of credit. Additionally, the interest rate on borrowings was decreased to either (a) the prime rate of interest plus 2.25% or (b) LIBOR plus 3%, with a floor of 6%. The interest rate on borrowings until March 10, 2011 was either (a) the prime rate of interest plus 3% with a floor of 7% or (b) LIBOR plus 4.5%, with a floor of 7.5%. The Company is charged a fee of 0.5% on the unused facility amount as well as a 5.5% fee on the outstanding balance of a $503,000 letter of credit.

The facility requires that the Company repay the facility in an amount equal to 30% of the aggregate net proceeds (i.e., gross sales proceeds less reasonable and customary costs and expenses related to the sale) for certain asset sales. Included in restricted cash at September 30, 2011 is $2.2 million of proceeds from the sale of the Company's management contract for REM I. TD Bank allowed the Company to defer the repayment of the facility with these funds until October 2011, at which time the maximum facility amount of the revolver portion of the line of credit was reduced to $7.5 million.

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 1,777,371 shares of RCC common stock. Availability under the facility is limited to the lesser of (a) 75% of the net present value of future management fees to be earned or (b) the maximum revolving credit facility amount.

In November 2011, the Company amended its agreement to extend the maturity of the TD Bank facility from August 31, 2012 to August 31, 2013 and repaid the outstanding term loan in the amount of $1.3 million.

The September 30, 2011 principal balance on the secured credit facility was $7.5 million and the availability on the line was $1.5 million, as reduced for letters of credit. Weighted average borrowings for fiscal 2011 and 2010 were $10.1 million and $17.8 million, respectively, at a weighted average borrowing rate of 6.6% and 7.4%, respectively, with an effective interest rate (inclusive of amortization of deferred issuance costs) of 10.5% and 10.7%, respectively.

The term note had required monthly principal payments of $150,000 until June 2011. In June 2011, the Company completed the sale of a real estate asset, as specified in the loan agreement, and applied a $3.0 million principal payment to the term note from the proceeds of this sale as required under the agreement. As a result of this paydown, the required monthly principal payments were reduced to $50,000 beginning in July 2011. The outstanding principal balance on the term note at September 30, 2011 of $1.3 million. Weighted average borrowings 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 new $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% and matures on December 28, 2012. The loan is secured by a pledge of 700,000 shares of RCC 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 RCC shares held in the pledged account; and (b) 100% of the cash and 100% of the market value of the pledged RCC shares held in the pledged account. At September 30, 2011, there were no borrowings outstanding and availability on the Republic Bank facility was $3.2 million.

Senior Notes

On September 29, 2009, the Company sold $15.6 million of its 12% senior notes due 2012 (the “Senior Notes”) in a private placement to certain senior executives and shareholders of the Company. The Senior Notes were sold with detachable 5-year warrants which provide the purchasers the right to acquire 3,052,940 shares of the Company's common stock at an exercise price of $5.11 per share. On October 6, 2009, the Company completed the offering with the sale of an additional $3.2 million of Senior Notes and detachable warrants to purchase 637,255 shares with the same terms as the original issue. In the aggregate, the Company sold $18.8 million of Senior Notes with detachable warrants to purchase 3,690,195 shares. The Senior Notes require quarterly payments of interest in arrears beginning December 31, 2009. The notes are unsecured, senior obligations and are junior to the Company's existing and future secured indebtedness. As required by the TD Bank credit agreement, the Company paid down outstanding borrowings on the TD facility with $10.6 million of proceeds from the offering. In addition, 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.

The proceeds from the Senior Notes were allocated to the notes and the warrants based on their relative fair values. The Company used a Black-Scholes pricing model to calculate the fair value of the warrants at $5.9 million. The model included assumptions regarding the Company's dividend yield (2.3%), stock price volatility (44.1%), and risk-free interest rate (2.3%). The Company accounted for the warrants as an increase to additional paid-in capital with an offsetting discount to the Senior Notes. The discount is being amortized into interest expense over the 3-year term of the Senior Notes using the effective interest method. The effective interest rate (inclusive of the discount for the warrants) was 22.2% and 20.0% for fiscal 2011 and 2010, respectively.

In November 2011, the Company redeemed $8.8 million of the existing notes for cash and modified $10.0 million of notes to a reduced interest rate of 9% and extended the maturity to October 2013.

Note payable to RCC − Real Estate

In January 2010, RCC 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 and $2.0 million at September 30, 2011 and 2010, 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, 2011 was $10.7 million.

Corporate − 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 are secured by the return premiums, dividend payments and certain loss payments of the insurance policies and require nine monthly principal and interest payments of $69,773. The principal balance outstanding at September 30, 2011 was $548,000.

Terminated and/or Transferred Facilities and Loans

Commercial finance – bridge financing. LEAF Financial had a short-term bridge loan with Guggenheim for borrowings up to $21.8 million. The bridge facility was repaid with proceeds from the January 4, 2011 revolving warehouse credit facility and terminated on February 28, 2011. The loan was in the form of a series of notes. The weighted average borrowings for the years ended September 30, 2011 and 2010 were $8.7 million and $1.6 million, respectively, at weighted average borrowing rates of 6.8% and 4.0%, respectively, and effective interest rates (inclusive amortization of deferred finance fees) of 9.2% and 8.2%, respectively.

Commercial finance − PNC Bank, N.A. (“PNC Bank”). LEAF Financial had a revolving warehouse credit facility with a group of banks led by PNC Bank. Amendments to the credit facility during fiscal 2010 reduced the maximum borrowing capacity from $150.0 million to $100.0 million as of March 24, 2010. In May 2010, the loan was fully repaid and the line was terminated. The interest rate on base rate borrowings was the base rate plus 4%, and on LIBOR based borrowings was LIBOR plus 5%. The base rate was the highest of (i) the prime rate, (ii) the federal funds rate plus 0.5%, or (iii) LIBOR plus 1%. Weighted average borrowings for fiscal 2010 were $77.0 million at a weighted average borrowing rate of 5.0%, with an effective interest rate (inclusive of amortization of deferred finance fees) of 7.7%.

Commercial finance − secured note. The Company had a 6.9% note with Sovereign Bank with a principal balance of $92,000 at September 30, 2010. The note, which required monthly payments of principal and interest of $18,800 over five years, matured and was fully repaid in February 2011.

Real estate – mortgages.

In June 2006, the Company obtained a $12.5 million 7.1% mortgage for its hotel property in Savannah, Georgia. The mortgage, which had an original maturity date of July 6, 2011, was extended to August 6, 2011, and required monthly payments of principal and interest of $84,200. On August 5, 2011, the Company refinanced this mortgage.

In January 2010, the Company received full payment of a loan from an entity which had previously consolidated as a VIE. Due to the repayment, the VIE was deconsolidated, thereby eliminating a $1.1 million mortgage held by the VIE from the Company's consolidated balance sheets.

Corporate – term notes. 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 August and September 2009, the Company entered into three term notes totaling $971,000 to finance the payment of various insurance policies. The loans, which required nine monthly principal and interest payments of $110,600, were fully repaid in May 2010.

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 principal balance of these leases at September 30, 2010 and $219,000. The leases matured and were paid in full during fiscal 2011.

Corporate − Sovereign Bank secured revolving credit facility. In July 1999, the Company entered into a revolving credit facility with Sovereign Bank. Upon the maturity of the facility on February 28, 2010, the Company repaid the remaining balance and the facility was terminated. The interest charged on outstanding borrowings was at the prime rate. Weighted average borrowings for fiscal 2010 were $234,000 at an effective interest rate of 3.0%.

Financial fund management − secured note. In June 2006, the Company borrowed $1.5 million from JP Morgan under a promissory note for the purchase of its equity investment in a CDO issuer the Company sponsored and manages. The note, which required quarterly payments of principal and interest at LIBOR plus 1.0%, was fully repaid in July 2010.

Debt repayments

Annual principal payments on the Company's aggregate borrowings, excluding LEAF subsequent to its anticipated deconsolidation in November 2011 (see Note 27), for the next five fiscal years ending September 30, and thereafter, are as follows (in thousands):

2012	$	10,787
2013		7,675
2014		10,194
2015		1,912
2016		219
Thereafter		9,729
	$	40,516

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 hotel mortgage, which is guaranteed by the Company, contains financial covenants related to the net worth and liquid assets of the Company.

The Guggenheim commercial finance secured revolving credit facility is subject to certain financial covenants including average cumulative net loss percentage as well as delinquency and default, senior leverage, and interest coverage ratios.

The Company was in compliance with all of its debt covenants as of September 30, 2011.