Harbinger Group Inc.
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SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 02/05/2016
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September 30, 2015
 
(As Adjusted)
 
Cost or Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Carrying Value
Corporate fixed-maturity securities, available-for-sale
$
14.1

 
$

 
$

 
$
14.1

 
$
14.1

Equity securities - held for trading
18.7

 
14.1

 

 
32.8

 
32.8

Asset-based loans
226.7

 

 

 
226.7

 
226.7

Other invested assets
5.3

 

 

 
5.3

 
5.3

Total investments
$
264.8

 
$
14.1

 
$

 
$
278.9

 
$
278.9

Asset-based Loans
As of December 31, 2015 and September 30, 2015, the Company’s portfolio of asset-based loans receivable originated by Salus and its co-lender Front Street consisted of the following:
 
December 31,
2015
 
September 30,
2015
 
 
 
(As Adjusted)
Asset-based loans, net of deferred fees, by major industry:
 
 
 
Apparel
$
55.5

 
$
66.0

Jewelry
36.3

 
36.9

Electronics
45.5

 
45.9

Manufacturing
30.4

 
32.7

Other
29.1

 
93.1

Total asset-based loans
196.8

 
274.6

Less: Allowance for credit losses
43.7

 
47.9

Total asset-based loans, net
$
153.1

 
$
226.7

The Company establishes its allowance for credit losses through a provision for credit losses based on Salus’ evaluation of the credit quality of its loan portfolio. The following table presents the activity in its allowance for credit losses for the three months ended December 31, 2015 and 2014:
 
Three months ended December 31,
 
2015
 
2014
Allowance for credit losses:
 
 
 
Balance at beginning of period
$
47.9

 
$
5.5

Provision for credit losses
7.9

 
(0.2
)
Charge-offs
(12.1
)
 

Balance at end of period
$
43.7

 
$
5.3

Credit Quality Indicators
Salus monitors credit quality as indicated by various factors and utilizes such information in its evaluation of the adequacy of the allowance for credit losses. As of December 31, 2015 and September 30, 2015, there were nine loans with a net carrying value of $94.4 and $79.8, respectively, considered delinquent by Salus and placed on non-accrual status. It is Salus’ policy to discontinue accruing interest when there is a reasonable doubt as to collectability in the normal course of business. Nonaccrual loans are considered impaired for reporting purposes and are individually evaluated for impairment.
During the three months ended December 31, 2015, the Company recognized charge-offs of $12.1. For the three months ended December 31, 2015, the Company also recorded net decreases in the allowance for credit losses of $4.2 for a total provision for credit losses of $7.9. The internal risk rating of two delinquent loans was categorized as doubtful during the three months ended December 31, 2015. Salus has assessed the adequacy of its allowance for credit losses and believes the level of allowance for credit losses to be adequate to mitigate inherent losses in the portfolio.
During the fiscal year ended September 30, 2015, the bankruptcy court overseeing the Chapter 11 proceedings of RadioShack Corp. (“RadioShack”) approved the sale of 1,743 of the company’s stores to General Wireless Inc., an affiliate of Standard General LP. Salus was the lender under RadioShack’s $250.0 term loan placed in December 2013 with a net exposure to Salus and Front Street of $93.0 and $7.0, respectively, after giving effect to a $50.0 participation by FGL and a non-qualifying participation of $100.0 held by a third party. During the fiscal year ended September 30, 2015, the $100.0 held by a third party was repaid in full

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