SEC Filing Summary: Resource Capital Corp. (8-K)
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Resource Capital Corp. (NYSE: RSO) on July 13, 2011, covering events occurring on July 7, 2011. The Company, along with its wholly-owned subsidiary RCC Real Estate, Inc., entered into a material definitive agreement to establish a new short-term financing facility.
Key Financial Metrics and Obligations
- Facility Size: $10.0 million revolving credit facility.
- Lender: The Bancorp Bank.
- Interest Rate: Wall Street Journal Prime Rate plus 275 basis points.
- Penalty Rate: Prime Rate plus 775 basis points (275 + 500) if loans are not repaid within five business days.
- Maturity: The facility matures on June 30, 2012.
- Collateral: Secured by two Class A-1 notes (par value $20.0 million each) issued by Resource Real Estate Funding CDO 2006-1, Ltd.
- Borrowing Limit: Limited to 25% of the par value of the pledged notes.
Material Changes and Operational Impact
The filing discloses the creation of a direct financial obligation designed to provide "Bridge Loans." These loans enable the Borrowers to fund real estate loans to third parties prior to selling those assets into Collateralized Debt Obligation (CDO) pools. This facility addresses liquidity needs for interim financing between loan origination and securitization.
Management Commentary, Risks, and Contingencies
The agreement includes customary covenants regarding collateral valuation and restrictions on transferring pledged assets or granting additional liens. Events of default include payment defaults and breaches of representations, which would allow the Bank to accelerate loan repayment and terminate the lending commitment. The filing notes that the description of the facility is subject to the full text of the Revolving Judgment Note and Security Agreement filed as Exhibit 10.1.
Investor Verification Checklist
- Verify the current status of the pledged Class A-1 notes from Resource Real Estate Funding CDO 2006-1, Ltd.
- Review the full text of Exhibit 10.1 for specific default triggers and valuation covenants.
- Monitor the Company's ability to sell Third Party Loans to CDOs within the five-day window to avoid penalty interest rates.
- Confirm the utilization rate of the $10.0 million facility in subsequent quarterly reports.