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These excerpts taken from the WEN 10-K filed Mar 14, 2008. Revolving
Warehouse Facility
On March 10,
2006, the Company entered into an up to $300.0 million (amended to $375.0
million in February 2007) three year revolving warehouse funding agreement (the
“Facility”) with Wachovia Capital Markets, LLC (“Wachovia”), subject to annual
renewal. Financing under the Facility is secured by assets ranging from large
syndicated bank loans to subordinated notes and preferred stock. Advance rates
under the Facility vary by asset type and are subject to certain compliance
criteria. The Facility is available to two bankruptcy remote special purpose
vehicles (DWFC, LLC and Deerfield Triarc TRS (Bahamas) Ltd.) and the debt holder
has full recourse to these entities for the repayment of the outstandings under
the Facility, which totaled $120.9 million as of December 31, 2007. As of
December 31, 2007 and 2006, $1.5 million and zero of cash owned by these
entities is considered restricted.
As of
December 31, 2007 and 2006, the Company had $73.4 million and $261.0 million of
debt outstanding under the Facility, respectively. The Company incurred $1.2
million of debt issuance costs that are being amortized into interest expense
over the term of the Facility. The annual interest rate for the Facility is
based on short-term commercial paper rates as defined in the warehouse funding
agreement, plus 0.75% for large syndicated loans and plus 0.90% for all other
loans, resulting in a weighted average rate of 6.60% as of December 31, 2007.
The Facility also includes commitment and unused line fees of $1.8 million and
$0.2 million, respectively, that the Company recognizes in interest
expense.
On February
7, 2007, the Company amended the Facility to increase its size from $300.0
million to $375.0 million. The Company paid a one-time fee of $75,000 to
Wachovia in connection with this facility expansion. On April 6, 2007, the
Company amended the term of the Facility to change the annual renewal date to
April 8, 2008. The renewal is a unilateral decision by the financial
institutions party to the Facility. In the case of non-renewal, the Company will
be unable to undertake additional borrowings under the Facility and may be
required to use all principal, interest and other distributions on the assets
purchased under the Facility to repay all borrowings thereunder. The Company is
in discussions with Wachovia regarding a renewal, but cannot, at this time,
predict the outcome of those discussions. There is a possibility that the
Company may trigger a termination event under the Facility sometime in 2008,
which would give Wachovia the right to liquidate the assets under the Facility
in an amount necessary to repay all outstanding borrowings
thereunder.
The Facility
is subject to several non-financial covenants, including those which relate to
compliance with laws, maintenance of service agreements, protection of
collateral and various notification requirements. If
- 31 -
DEERFIELD CAPITAL CORP. AND ITS
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Deerfield
Capital LLC (“DC LLC”) fails to maintain stockholders’ equity of $240.0 million,
in addition to other remedies available to the financial institutions party to
the Facility, the Company will be unable to undertake additional borrowings
under the Facility and the amounts outstanding under the Facility may become
immediately due and payable. Failure to meet these requirements could result in
reductions of advances from the Facility or more severe default remedies,
including acceleration of the outstanding indebtedness.
On July 17,
2007, the Company closed the DFR MM CLO transaction. As a result of this
securitization, $213.2 million of debt was paid down on the
Facility.
Effective
August 3, 2007, the Company received a waiver for a technical default that
occurred in July 2007 because the historical charge-off ratio of the loan
portfolio in the Facility exceeded the threshold required by the Facility. The
waiver provided for a six month forbearance on the default that occurred such
that the Company was considered to be in compliance with the historical
charge-off ration. The forbearance period of six months has ended and as of
December 31, 2007 the Company was in compliance with the historical charge-off
ratio and all other portfolio performance thresholds required by the Facility.
See “Minimum Net Worth Covenant” below for further discussion.
Revolving Warehouse Facility On March 10, 2006, the Company entered into an up to $300.0 million (amended to $375.0 million in February 2007) three year revolving warehouse funding agreement (the “Facility”) with Wachovia Capital Markets, LLC (“Wachovia”), subject to annual renewal. Financing under the Facility is secured by assets ranging from large syndicated bank loans to subordinated notes and preferred stock. Advance rates under the Facility vary by asset type and are subject to certain compliance criteria. The Facility is available to two bankruptcy remote special purpose vehicles (DWFC, LLC and Deerfield Triarc TRS (Bahamas) Ltd.) and the debt holder has full recourse to these entities for the repayment of the outstandings under the Facility, which totaled $120.9 million as of December 31, 2007. As of December 31, 2007 and 2006, $1.5 million and zero of cash owned by these entities is considered restricted. As of December 31, 2007 and 2006, the Company had $73.4 million and $261.0 million of debt outstanding under the Facility, respectively. The Company incurred $1.2 million of debt issuance costs that are being amortized into interest expense over the term of the Facility. The annual interest rate for the Facility is based on short-term commercial paper rates as defined in the warehouse funding agreement, plus 0.75% for large syndicated loans and plus 0.90% for all other loans, resulting in a weighted average rate of 6.60% as of December 31, 2007. The Facility also includes commitment and unused line fees of $1.8 million and $0.2 million, respectively, that the Company recognizes in interest expense. On February 7, 2007, the Company amended the Facility to increase its size from $300.0 million to $375.0 million. The Company paid a one-time fee of $75,000 to Wachovia in connection with this facility expansion. On April 6, 2007, the Company amended the term of the Facility to change the annual renewal date to April 8, 2008. The renewal is a unilateral decision by the financial institutions party to the Facility. In the case of non-renewal, the Company will be unable to undertake additional borrowings under the Facility and may be required to use all principal, interest and other distributions on the assets purchased under the Facility to repay all borrowings thereunder. The Company is in discussions with Wachovia regarding a renewal, but cannot, at this time, predict the outcome of those discussions. There is a possibility that the Company may trigger a termination event under the Facility sometime in 2008, which would give Wachovia the right to liquidate the assets under the Facility in an amount necessary to repay all outstanding borrowings thereunder. The Facility is subject to several non-financial covenants, including those which relate to compliance with laws, maintenance of service agreements, protection of collateral and various notification requirements. If - 31 - DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Deerfield Capital LLC (“DC LLC”) fails to maintain stockholders’ equity of $240.0 million, in addition to other remedies available to the financial institutions party to the Facility, the Company will be unable to undertake additional borrowings under the Facility and the amounts outstanding under the Facility may become immediately due and payable. Failure to meet these requirements could result in reductions of advances from the Facility or more severe default remedies, including acceleration of the outstanding indebtedness. On July 17, 2007, the Company closed the DFR MM CLO transaction. As a result of this securitization, $213.2 million of debt was paid down on the Facility. Effective August 3, 2007, the Company received a waiver for a technical default that occurred in July 2007 because the historical charge-off ratio of the loan portfolio in the Facility exceeded the threshold required by the Facility. The waiver provided for a six month forbearance on the default that occurred such that the Company was considered to be in compliance with the historical charge-off ration. The forbearance period of six months has ended and as of December 31, 2007 the Company was in compliance with the historical charge-off ratio and all other portfolio performance thresholds required by the Facility. See “Minimum Net Worth Covenant” below for further discussion. | EXCERPTS ON THIS PAGE:
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