contained in this Transition Report on Form 10-KT, including Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes.
As of November 30, 2018, there were 158,733,928 and 158,125,928 shares of common stock issued and outstanding, respectively, and 608,000 shares of treasury stock.
Emergent Capital, through its consolidated and deconsolidated subsidiaries, owns a portfolio of 588 life insurance policies, also referred to as life settlements, with a fair value of $506.4 million and an aggregate death benefit of approximately $2.8 billion at November 30, 2018 .The Company primarily earns income on these policies from changes in their fair value and through death benefits. 586 of these policies, with an aggregate death benefit of approximately $2.8 billion and a fair value of approximately $505.2 million at November 30, 2018, are pledged under a $370.0 million, revolving credit agreement (the "White Eagle Revolving Credit Facility") entered into by the Company’s indirect subsidiary, White Eagle Asset Portfolio, LP ("White Eagle"). At November 30, 2018, two policies owned by the Company, with an aggregate death benefit of approximately $12.0 million and a fair value of $1.2 million, were not pledged as collateral under the White Eagle Revolving Credit Facility.
The Agreement contains standard representations and warranties related to each party, and may be terminated prior to the closing under certain circumstances. The closing of the purchase of Sherman, Clay under the Agreement (the "Purchase") is subject to a number of closing conditions, including certain regulatory approvals and obtaining financing for working capital and general corporate purposes.
During the eleven months ended November 30, 2018, the Company received approval for shares of its common stocks to be traded on the OTCQX® Best Market. Trading on the OTCQX commenced on May 29, 2018 and will continue under the ticker symbol "EMGC."
On September 7, 2018, the Board of Directors adopted resolutions to change the Company’s fiscal year end, and have the Company cause its direct and indirect subsidiaries change their fiscal year ends, from December 31 to November 30, effective immediately. The Company is filing this Transition Report on Form 10-KT in accordance with SEC rules and regulations. Our financial results for the fiscal year ended November 30, 2018 will cover transactions from January1, 2018 to November 30, 2018, while the financial results for fiscal year ended December 31, 2017 will cover the period from January1, 2017 to December 31, 2017, and the results for the eleven month transition period ending on November 30, 2018 are compared to the results of our previous twelve month fiscal year-end as of December 31, 2017.
Voluntary Petitions for Relief Under Chapter 11 and De-consolidation of Subsidiaries
On November 14, 2018 (the "Petition Date"), Lamington Road Designated Activity Company (formerly known as Lamington Road Limited), the Company’s wholly-owned indirect Irish subsidiary ("Lamington"), and White Eagle General Partner, LLC, the Company’s wholly-owned indirect Delaware subsidiary ("WEGP"), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court". Lamington is the limited partner and owns 99.99%, and WEGP is the general partner and owns 0.01%, of White Eagle. In its capacity as general partner, WEGP manages the affairs of White Eagle. The Lamington and WEGP filings are referred to as the "November Chapter 11 Cases."
The commencement of the White Eagle Chapter 11 Case would constitute a default and event of default under the terms of the Amended and Restated Indenture between the Company and Wilmington Trust, National Association, as indenture trustee (the "Senior Note Indenture") relating to the Company’s 8.5% Senior Secured Notes due 2021 (the "Senior Notes") and the Indenture between the Company and U.S. Bank, National Association, as indenture trustee (the "Convertible Note Indenture") relating to the Company’s 5.0% Senior Unsecured Convertible Notes due 2023 (the "Convertible Notes"). However, such defaults and events of default and their consequences were waived in advance of the White Eagle Chapter 11 Case by holders of all of the outstanding principal amount of the outstanding Senior Notes and by holders of a majority of the outstanding principal amount of the outstanding Convertible Notes, and consequently, the Company believes that no defaults, events of default or acceleration of the payment obligations thereunder, including principal or accrued interest, occurred under either the Senior Note Indenture or the Convertible Note Indenture.
See Note 23, "Subsequent Events," of the accompanying consolidated financial statements for further information.
As of the filing date of this Form 10-KT, we had approximately $3.3 million of cash and cash equivalents inclusive of certificates of deposit of $503,000. Our deconsolidated subsidiaries holds approximately $23.0 million in cash and cash equivalents which is restricted by the Bankruptcy Court. In considering our forecast for the next twelve months and the pending approval of the Debtors Chapter 11 reorganization plan by the Bankruptcy Court, these facts, aggregated with the current cash balance as of the filing for this Form 10-KT, create a substantial doubt of the Company’s ability to meet their financial needs. In considering the factors above, management plans to continue to operate our business and to seek Bankruptcy Court approval to continue to use cash collateral after the expiration of the initially approved twenty (20) week period.
The accompanying consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern.
Our deconsolidated subsidiary, White Eagle is the owner of 586 life insurance policies with an aggregate death benefit of approximately $2.8 billion and an estimated fair value of approximately $505.2 million at November 30, 2018. White Eagle pledged its policies as collateral to secure borrowings made under the White Eagle Revolving Credit Facility, which is used, among other things, to pay premiums on the life insurance policies owned by White Eagle. Borrowings under the White Eagle Revolving Credit Facility fund the payment of premiums on the life insurance policies that have
During the eleven months ended November 30, 2018, 20 life insurance policies with face amounts totaling $93.4 million matured. The net gain on these maturities was $53.3 million. The gains related to maturities are included in income from changes in fair value of life settlement in the consolidated statement of operations for the eleven months ended November 30, 2018. All 20 policies served as collateral under the White Eagle Revolving Credit Facility. Proceeds from maturities totaling $90.8 million were received pre-petition during the eleven months ended November 30, 2018 Of this amount, approximately $64.9 million inclusive of approximately $7.8 million collected during the year ended December 31, 2017, were utilized to repay borrowings, interest and expenses under the White Eagle Revolving Credit Facility during the eleven months ended November 30, 2018, approximately $5.0 million in proceeds was received after the petition period and is included in the $28.1 million on account for White Eagle awaiting distribution through the waterfall, this amount was subsequently approved by the Bankruptcy Court to be used solely for the purposes permitted under the budget approved by the Court. See Note 23, "Subsequent Events," of the accompanying consolidated financial statements for further information.
We have elected to account for life settlements using the fair value method. The fair value of the asset is the estimated amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date. We calculate the fair value of the asset using a present value technique to estimate the fair value of its life settlements. The Company currently uses a probabilistic method of valuing life insurance policies, which the Company believes to be the preferred valuation method in the industry. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. See Note 9, "Life Settlements (Life Insurance Policies)" and Note 16, "Fair Value Measurements" for further information.
Gain/Loss on Life Settlements, Net-The Company recognizes gains or losses from life settlement contracts that the Company owns upon the signed sale agreement and/or filing of ownership forms and funds transferred to escrow.
The Company reports a business as held-for-sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the ensuing year and certain other specified criteria are met. A business classified as held-for-sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. Depreciation is not recorded on assets of a business classified as held-for-sale. Assets and liabilities related to a business classified as held-for-sale are segregated in the Consolidated Balance Sheet and major classes are separately disclosed in the notes to the Consolidated Financial Statements commencing in the period in which the business is classified as held-for-sale. The Company reports the results of operations of a business as discontinued operations if the business is classified as held-for-sale, the operations and cash flows of the business have been or will be eliminated from the ongoing operations of the Company as a result of a disposal transaction and the Company will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in Discontinued Operations in the Consolidated Statement of Operations for current and prior periods commencing in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell. During the fourth quarter of 2013, the Company sold substantially all of its structured settlements business. As a result, the Company has classified its structured settlement operating results as discontinued operations.
Lamington and its subsidiaries (White Eagle and WEGP) filing for reorganization was a reconsideration event for Emergent Capital to reevaluate whether consolidation of Lamington and its subsidiaries (White Eagle, WEGP and Lamington Road Bermuda Limited) (the deconsolidated entities) continued to be appropriate. Under ASC 810, Consolidation, specifically ASC 810-10-15, consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners, for instance, where the subsidiary is in legal reorganization or bankruptcy. Accordingly, when a subsidiary files for bankruptcy, it is appropriate for the parent to deconsolidate the subsidiary. Under ASC 810, this loss of control would likely trigger a gain or loss for the parent as the parent would remeasure its retained noncontrolling investment at fair value. We assessed the inherent uncertainties associated with the outcome of the Chapter 11 reorganization process and the anticipated duration thereof, and concluded that it was appropriate to deconsolidate Lamington and its subsidiaries effective on the Petition Date.
Upon filing for Chapter 11 and the subsequent deconsolidation, transactions with Lamington are no longer eliminated in consolidation and are treated as related party transactions for Emergent Capital. See Note 4 "Condensed and Consolidated Financial Statements For Entities in Bankruptcy" for all transactions between Emergent Capital and Lamington.
Our results of operations are discussed below in four parts: (i) our consolidated results of continuing operations, (ii) our results of deconsolidated subsidiaries (iii) results of continuing operations for 2017 compared to 2016, and (iv) our results of discontinued operations.
Net loss from continuing operations for the eleven months ended November 30, 2018 was $169.9 million as compared to a loss of $3.2 million for the year ended December 31, 2017. The following is our analysis of net loss for the eleven months ended November 30, 2018 compared to twelve months ended December 31, 2017 (in thousands).
Income included net gain on maturity of 20 life settlements of $53.3 million compared to a net gain of $35.9 million on maturity of 13 life settlements during the twelve months ended December 31, 2017.
Further, the Company has decide to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes. The Company's decision was based on a series of events leading up to the announcement on October 29, 2018, which includes AVS inability to furnish timely reports to allow the Company to blend the results to facilitate timely quarterly reporting. Market participants have expressed concerns regarding their inability to connect the new AVS model to past model. Effective November 2018, the Company discontinued its blending approach. The resulting impact is approximately $23.1 million reduction in the fair value of its life settlements.
Expense was positively impacted by change in fair of the White Eagle Revolving Credit Facility of approximately $70.9 million. The White Eagle Revolving Credit Facility incurred pre-petition gain, which is mainly attributable to lengthen the life expectancies furnished by 21st Services by 9% to determine the value of the life insurance policies pledged as collateral in the facility. This impacted the value of the debt by approximately $66.7 million. This amount is shown as a reduction to expenses on the statement of operations for the period ended November 30, 2018.
As of November 30, 2018, we owned two policies with an estimated fair value of $1.2 million compared to 608 policies with a fair value of $567.5 million at December 31, 2017, a decrease of $566.3 million due to the deconsolidation of White Eagle. As of November 30, 2018, the aggregate death benefit of these life settlements was $12.0 million.
See Note 16, "Fair Value Measurements," to the accompanying consolidated financial statements.
Outstanding debt as of November 30, 2018 included $1.2 million of 8.5% Senior Unsecured Convertible Notes, $75.8 million of 5% Senior Unsecured Convertible Notes and $35.0 million of 8.5% Senior Secured Notes.
The Company recorded $4.6 million of interest expense on the 5.0% Senior Unsecured Convertible Notes, including $3.5 million, $947,000 and $140,000 from interest, amortization of debt discount and origination costs, respectively, during the eleven months ended November 30, 2018.
The Company recorded $2.1 million of interest expense on the New Convertible Notes, including $1.6 million, $432,000 and $64,000 from interest, amortization of debt discount and origination costs, respectively, during the twelve months ended December 31, 2017.
During the twelve months ended December 31, 2017, approximately $2.0 million was recorded in loss on the extinguishment of debt for the 15.0% Senior Secured Notes, including $1.5 million and $518,000 related to prepayment penalty and write off of origination cost, respectively.
The Facility incurred pre-petition gain of approximately $70.9 million, which is mainly attributable to lengthen the life expectancies furnished by 21st Services by 9% to determine the value of the life insurance policies pledged as collateral in the facility. This impacted the value of the debt by approximately $66.7 million. This amount is shown as a reduction to expenses on the statement of operations for the period ended November 30, 2018
The decrease in SG&A expense was primarily the result of a decrease in personnel costs of $2.4 million, a decrease in legal expense of $669,000, a decrease in other SG &A of $214,000, and a decrease in insurance costs of $49,000 offset by an increase in professional fees $1.0 million.
Net loss from deconsolidated operations for the post-petition period to November 30, 2018 was $61.1 million and comprise the below:
Expense was significantly impacted by change in fair value of the White Eagle Revolving Credit Facility of approximately of approximately $53.6 million.
The change in fair value was impacted by updated life expectancies procured by the Company in respect to the insureds' lives and maturities. The updated life expectancy reports implied that in aggregate, the insureds’ health improved, therefore, lengthening their life expectancies relative to the prior life expectancies.
Change in fair value of White Eagle Revolving Credit Facility (in thousands)
The White Eagle Revolving Credit Facility is valued at November 30, 2018 using discount rates of 23.27% compared to 18.57% for the year ended December 31, 2017.
Net loss from continuing operations for the year ended December 31, 2017 was $3.2 million as compared to a loss of $49.4 million for the year ended December 31, 2016. There was no tax benefit for the year ended December 31, 2017. The following is our analysis of net loss for the period (in thousands).
Total expenses from continuing operations for the year ended December 31, 2017 were mainly comprised of interest expense of $16.8 million on the White Eagle Revolving Credit Facility; $9.2 million on the 8.5% Convertible Notes; $2.1 million on the 5% Convertible Notes; $2.8 million on the 15% Senior Secured Notes; $1.4 million on the 8.5% Senior Secured Notes, $2.0 million loss on extinguishment of debt, and a change in the fair value of the White Eagle Revolving Credit Facility of$4.5 million.
Of these 608 policies owned as of December 31, 2017, 530 were previously premium financed and are valued using discount rates that range from 15.00% - 21.00%. The remaining 78 policies are valued using discount rates that range from 14.50% -17.50%. See Note 16, "Fair Value Measurements"," to the accompanying consolidated financial statements.
Outstanding debt for the year ended December 31, 2017 includes $329.0 million of outstanding principal on the White Eagle Revolving Credit Facility, $1.2 million of 8.5% Convertible Notes, $75.8 million of 5% Convertible Notes and $35.0 million of 8.5% Senior Secured Notes.
The Company recorded $2.1 million of interest expense on the 5.0% Convertible Notes, including $1.6 million, $432,000 and $64,000 from interest, amortization of debt discount and origination costs, respectively. The 5% Convertible Notes originated in 2017 and, therefore, there was no related interest expense during the year ended December 31, 2016.
The Company recorded approximately $1.4 million of interest expense on the 8.5% Senior Secured Notes, which includes $1.3 million of interest and $98,000 of amortizing debt issuance costs. The 8.5% Senior Secured Notes originated in 2017 and, therefore, there was no related interest expense during the year ended December 31, 2017.
Interest expense on the 8.5% Convertible Notes totaled $9.7 million of interest expense on the 8.5% Convertible Notes, including $6.0 million, $3.2 million and $480,000 from interest, amortizing debt discounts and origination costs, respectively for the year ended December 31, 2016.
The Company recorded approximately $4.0 million of interest expense on the 15% Senior Secured Notes, which includes $3.7 million of interest and $356,000 of amortizing debt issuance costs, during the year ended December 31, 2016.
During the year ended December 31, 2017, the fair value of the White Eagle Revolving Credit Facility was impacted by increased borrowings, the lengthening of life expectancies of certain insureds' underlying policies pledged under the White Eagle Revolving Credit Facility and a slight increase in the discount rate used to value the facility.
During the year ended December 31, 2016, the Company changed its valuation technique by adopting the 2015 VBT, smoker and gender distinct tables, to determine the value of the life insurance policies pledged as collateral in the facility. The resulting impact was a positive change in fair value of the White Eagle Revolving Credit Facility of approximately $14.7 million. This amount is shown as a reduction to our expenses on the statement of operations for the year ended December 31, 2016.
The White Eagle Revolving Credit Facility is valued at December 31, 2017 using discount rates of 18.57% compared to 18.50% for the year ended December 31, 2016.
The decrease in SG&A expense was primarily the result of a decrease in legal expense of $2.7 million, a decrease in professional fees of $2.6 million, a decrease in personnel costs of $1.0 million, a decrease other SG &A of $259,000 and a decrease in insurance costs of $52,000.
On August 3, 2017 and August 11, 2017, as a reduction in force, the Company reduced its headcount from 20 employees to 12 employees, included in this reduction in force were two of the Company’s executive officers. During the year ended December 31, 2017, the Company recognized a onetime severance cost of approximately $1.0 million related to this reduction, which amounts are being paid over a period of twelve months.
Net loss from our discontinued structured settlement operations for the eleven months ended November 30, 2018 was $29,000 as compared to a net loss of $271,000 for the twelve months ended December 31, 2017. Total income from our discontinued structured settlement operations was $17,000 compared to $33,000 for the eleven months ended November 30, 2018 and twelve months ended December 31, 2017, respectively.
Our consolidated financial statements have been prepared assuming the realization of assets and the satisfaction of liabilities in the normal course of business, as well as continued compliance with the covenants contained in the indentures governing our 8.5% Convertible Notes, 5% Convertible Notes, 8.5% Senior Secured Notes and other financing arrangements.
Cash Collateral may be used solely for the purposes permitted under the budget approved by the Court. Assuming no policy maturities, as of November 30, 2018, we expect to pay $105.6 million and $163,000 in premiums during 2019 on the 586 policies that have been pledged under the White Eagle Revolving Credit Facility and the two policies not pledged, respectively; however, any future cost of insurance increases may cause our projected premium payments to significantly increase. Additionally, at November 30, 2018, we had $75.8 million, $35.0 million and $1.2 million and in aggregate principal amount of outstanding 5% Convertible Notes, 8.5% Senior Secured Notes and 8.5% Convertible Notes, which accrue interest at 5.0%, 8.5%, and 8.5%, respectively. Interest on the 5.0% Convertible Notes and the 8.5% Convertible Notes are due semi-annually while interest on the 8.5% Senior Secured Notes is due quarterly.
On December 13, 2018, White Eagle filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Chapter 11 case is being administered under case number 18-12808 (the "White Eagle Chapter 11 Case").
The commencement of the White Eagle Chapter 11 Case, together with the related Chapter 11 cases for Lamington and WEGP filed on November 14, 2018 (collectively with the White Eagle Chapter 11 Case, the "Chapter 11 Cases", constitutes an event of default under White Eagle’s revolving credit facility (the "Credit Facility"), resulting in the principal and accrued interest due from White Eagle thereunder becoming immediately due and payable. Lamington and WEGP have pledged their respective interests in White Eagle to secure its obligations under the Credit Facility. Any efforts by LNV Corporation, the lender under the Credit Facility ("LNV"), or CLMG Corp., the administrative agent under the Credit Facility ("CLMG"), to enforce repayment by White Eagle and/or such pledges by Lamington and WEGP of their respective interests in White Eagle in connection with the Credit Facility are automatically stayed as a result of the commencement of the Chapter 11 Cases and LNV’s and CLMG’s rights of enforcement in respect of the Credit Facility are subject to the applicable provisions of the Bankruptcy Code. The previously announced Standstill Agreement among White Eagle, LNV and CLMG expired prior to the filing of the White Eagle Chapter 11 Case.
On January 25, 2019, the Company, White Eagle, Lamington, and WEGP , the "Plaintiffs"), filed suit (the "Suit") against LNV Corporation ("LNV"), Silver Point Capital L.P. ("Silver Point") and GWG Holdings, Inc. ("GWG" and, with LNV and Sliver Point, the "Defendants") in the United States Bankruptcy Court for the District of Delaware (the "Court"), where the Suit will be administered together with the previously filed and announced petitions for relief under Chapter 11 of the United States Bankruptcy Code of White Eagle, Lamington and WEGP (the "Chapter 11 Cases" and White Eagle, Lamington and WEGP, the "Debtors"). LNV, a subsidiary of Beal Bank ("Beal"), is the lender under White Eagle’s outstanding revolving credit facility (the "Credit Facility").
In connection with the White Eagle Chapter 11 Case, on January 15, 2019, the Court authorized the Debtors to use the proceeds of pre-petition cash collateral for a period of twenty (20) weeks (the "Cash Collateral'). The Cash Collateral may be used solely for the purposes permitted under the budget approved by the Court, including (i) to provide working capital needs of the Debtors and general corporate purposes of the Debtors, (ii) to make the payments or fund amounts otherwise permitted in the final order that authorized such uses and such budget, (iii) to fund amounts necessary to pay certain fees; and (iv) to fund amounts necessary to pay certain professional fees in accordance with such Budget.
At November 30, 2018, there was $35.0 million in aggregate principal amount of the Company’s 8.5% Senior Secured Notes due 2021 outstanding (the "8.5% Senior Secured Notes"). For a description of the 8.5% Senior Secured Notes see Note 13, "8.5% Senior Secured Notes," of the accompanying consolidated financial statements for further information.
In connection with the Transaction Closing, the Note Purchase Investors and the Senior Secured Note Holders representing 100% of the aggregate outstanding principal amount of the Company’s 15.0% Senior Secured Notes entered into the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, the Note Purchase Investors purchased 100% of the 15% Senior Secured Notes held by each Senior Secured Note Holder for an aggregate purchase price equal to the face amount of such purchased 15.0% Senior Secured Notes. The Note Purchase Agreement contained customary representations, warranties, and covenants.
On January 10, 2018, the Company dissolved Red Falcon Trust, an indirect subsidiary of the Company ("Red Falcon"). On the same date, the Company also commenced the process of appointing a liquidator to liquidate Blue Heron Designated Activity Company, a direct subsidiary of the Company ("Blue Heron"). The completion of liquidation formalities of Blue Heron under Irish law is expected to take several months. Both Red Falcon and Blue Heron were inactive subsidiaries of the Company.
The Company had pledged 65% of the equity and certain other assets of Blue Heron in favor of the secured parties under the Amended and Restated Senior Secured Indenture. In connection with liquidation of Blue Heron, the Company and Wilmington Trust, National Association, as trustee under the Amended and Restated Senior Secured Indenture (the "Trustee"), entered into (i) the First Supplemental Indenture (the "First Supplemental Indenture"), dated as of January 10, 2018, to implement certain amendments to the Indenture and (ii) the Amendment to Pledge and Security Agreement ("Pledge and Security Amendment"), dated as of January 10, 2018, to implement certain amendments to the Pledge and Security Agreement ("Pledge and Security Agreement"), dated as of March 11, 2016, between the Company and Trustee. The First Supplemental Indenture and the Pledge and Security Amendment amend the Indenture and Pledge and Security Agreement, respectively, to: (i) remove from the assets pledged to the secured parties under the Amended and Restated Senior Secured Indenture, 65% of the equity and certain other assets of Blue Heron; and (ii) reflect the pledge by the Company, in favor of the secured parties under the Indenture, of the promissory note dated as of December 29, 2016 in the principal sum of $69.6 million issued by OLIPP IV, LLC to Blue Heron and subsequently assigned to the Company.
On December 28, 2018, the Company received a commitment letter (the "Commitment Letter") from Ironsides Partners LLC, an entity affiliated with Robert Knapp, a member of the Board, for an aggregate investment, at the Company’s election, of up to $2.0 million principal amount of 8.5% Senior Secured Notes for an aggregate purchase price of up to $1.5 million no later than January 31, 2019. The Commitment Letter contains certain conditions precedent to Ironsides’ obligations to purchase such Senior Notes.
See Note 23, "Subsequent Events" of the notes to Consolidated Financial Statements.
The following table summarizes our cash flows, which includes both continuing and discontinued operations, from operating, investing and financing activities for the years ended November 30, 2018, 2017 and 2016 (in thousands):
During the eleven months ended November 30, 2018, operating activities used cash of $41.2 million. Our net loss of $170.0 million was adjusted for the following: change in fair value of investment in deconsolidated subsidiaries of approximately $150.9 million, attributable to the deconsolidation of Lamington and its subsidiaries due to the Chapter 11 cases. White Eagle Revolving Credit Facility financing costs and fees of $927,000, which represent fees associated with the White Eagle Revolving Credit Facility withheld by the lender and added to the outstanding loan balance, amortization of discount and deferred cost for the 5% Convertible Notes of $1.1 million, amortization of discount and deferred cost for the 8.5% Senior Secured Notes of $244,000, amortization of discount and deferred cost for the 8.5% Convertible Notes of $76,000, stock based compensation of $562,000, change in fair value of life settlement gains of $46.9 million that is mainly attributable to maturities of 20 policies; change in fair value of White Eagle Revolving Credit Facility gain of $70.9 million that is mainly attributable to increased borrowings, the lengthening of life expectancies of certain insureds underlying policies pledged as collateral in the facility and an increase in the discount rates, and a net negative change in the components of operating assets and liabilities of $10,000. This $10,000 change in operating assets and liabilities is partially attributable to a $316,000 decrease in interest payable on the 5.0% Convertible Notes, a $1.0 million decrease in other liabilities, offset by a $877,000 increase in accounts payable and accrued expenses, and a $496,000 increase in interest payable on the 8.5% Senior Secured Noted.
Net cash provided by financing activities for the year ended December 31, 2017 was $92.4 million and included $86.4 million of borrowings from the White Eagle Revolving Credit Facility; $19.2 million from issuance of common stock, $5.0 million of borrowings from the 8.5% Senior Secured Notes and $2.8 million of borrowings from the 15% Promissory Note. These were offset by $19.6 million in repayment of borrowings under the White Eagle Revolving Credit Facility and $1.3 million in payment of recapitalization transaction cost.
The following table summarizes our contractual obligations as of November 30, 2018 (in thousands):
Includes $3.7 million related to outstanding interest due for the White Eagle Revolving Credit Facility.
The financial statements required by this Item are included in Item 15 of this Transition Report on Form 10-KT and are presented beginning on page.