Note 4 - Financing Arrangements |
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| Debt Disclosure [Text Block] |
4. Financing Arrangements
Line of Credit
On December 31, 2025, the Company and Valley National Bank, a Tennessee banking corporation, (referred to as “Valley National Bank”) entered into a loan and security agreement (the “Loan Agreement”) for a revolving line of credit (the “Line of Credit”) for up to $15,000,000, subject to the Company’s available borrowing base. On May 22, 2026, the Loan Agreement was amended to permit the extension of credit of up to $5,000,000 to be used to satisfy Company liquidity covenants under existing repurchase agreement facilities (the “Amendment”). The available borrowing base will be equal to 100% of the amount held with the Company’s escrow agent, UMB Bank, N.A. The Company is required to pay interest on any borrowed amounts under the Line of Credit at a rate per year equal to the term secured overnight financing rate plus 2.75%.
Advances under the Line of Credit shall be repaid upon the earlier of the following: (i) 90 days from the date such advance was made or (ii) the Line of Credit maturity date. Unless extended, the Line of Credit has a maturity date of December 31, 2026. In connection with the Line of Credit, the Company paid a commitment fee to Valley National Bank of $37,500 plus the payment of Valley National Bank’s expenses associated with the Line of Credit of $31,175 in January 2026. In connection with the Amendment, the Company paid Valley National Bank’s expenses associated with the Amendment of $14,588 in June 2026. The unamortized commitment fee and deferred costs are included in “Deferred financing cost” in the Company’s consolidated balance sheets as of June 30, 2026.
The Company may prepay, without penalty, all or any part of the borrowings under the Loan Agreement at any time. Under the Loan Agreement, the Company is required to comply with certain covenants including the requirement to provide certain financial and compliance reports to Valley National Bank. As described in the Loan Agreement, the Company is required to maintain cash accounts with Valley National Bank, including to repay outstanding borrowings with proceeds from the Company’s offering as they are swept at the end of the month, as a pledge of collateral to pay down the outstanding debt to the extent there are any borrowings outstanding under the Loan Agreement.
The Company had borrowed and repaid $6,700,000 under the Line of Credit for the period ended June 30, 2026. No amounts under the Line of Credit were outstanding as of June 30, 2026. No cash collateral was pledged as of June 30, 2026.
Repurchase Agreement
On January 30, 2026, RCRED Craftsman Administrator, LLC (“Craftsman”), an indirect, wholly-owned special-purpose financing subsidiary of the Company, entered into the master repurchase agreement (together with the related transaction documents, the “Repurchase Agreement”), with Goldman Sachs Bank USA (“Goldman Sachs”), to finance the acquisition by Craftsman of eligible loans as more particularly described in the Repurchase Agreement. The Repurchase Agreement provides for asset purchases by Goldman Sachs for a maximum amount of up to $400 million. Advances under the Repurchase Agreement accrue interest at a per annum rate equal to the Term SOFR (as defined in the Repurchase Agreement) plus a price differential margin as agreed upon by Goldman Sachs and Craftsman for each transaction. The maturity date of the facility is January 30, 2028, unless extended or earlier terminated in accordance with the terms of the Repurchase Agreement. In connection with the Repurchase Agreement, the Company provided a Guaranty (the “Guaranty”), which may become full recourse to the Company upon the occurrence of certain events as described in the Guaranty. The Repurchase Agreement and the Guaranty contain representations, warranties, covenants, events of default and indemnities that are customary for agreements of their type. The Guaranty requires that the Company’s cash liquidity shall not at any time fall below (i) for the six months following January 30, 2026, $5,000,000 and (ii) thereafter, $10,000,000.
On July 16, 2026, the Company and Goldman Sachs entered into an Amended and Restated Guaranty Agreement (“Guaranty Amendment”) which amends the Guaranty Agreement (the “Guaranty Agreement”) previously entered into by such parties to provide a guaranty to the Repurchase Agreement. The Guaranty Amendment extends the period during which the Company is required to maintain a lower cash liquidity covenant under the Guaranty Agreement to eleven months following January 30, 2026.
In connection with the Repurchase Agreement, the Company incurred legal fees of $450,538. The unamortized commitment fee and deferred costs are included in “Repurchase agreement, net of deferred financing costs” in the Company’s consolidated balance sheets as of June 30, 2026.
Amounts available to be borrowed under the Repurchase Agreement are dependent upon the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the bank, mortgage finance and real estate industries. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements. If the fair value of the pledged securities increases, lenders may release collateral back to the Company. As of June 30, 2026, the Company was in compliance with all covenants.
The following table summarizes certain characteristics of the Repurchase Agreement as of June 30, 2026:
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