Item 8.01 Other Events
On December 20, 2010, Newcastle Investment Corp. (the "Company") completed a series of transactions whereby the Company, together with one or more of its wholly owned subsidiaries, repurchased approximately $257 million current principal balance of Newcastle CDO VI Class I-MM notes at a price of 67.5% of par. The purchased notes represent all of the outstanding Class I-MM notes of Newcastle CDO VI (the "notes"). The Company purchased the notes using a combination of restricted cash, unrestricted cash and proceeds from a new repurchase facility, entered into in connection with the purchase of a portion of the notes. The repurchase facility has an initial outstanding balance of approximately $19 million, a one-year term, bears interest at a rate of LIBOR + 1.50% and is secured by $47 million current principal balance of the notes. Although the repurchase facility contains mark to market provisions that require margin to be posted in the event that the value of the notes decreases, the recourse to the Company is limited to twenty-five percent of the then-outstanding balance of the repurchase facility, which will initially be $4.75 million.
As of December 20, 2010, the Company had a total of $168 million of cash to invest, comprised of $26 million of unrestricted cash and $142 million of restricted cash for CDO reinvestment.
In accordance with GAAP, the Company will record an $82 million gain on the extinguishment of debt.