Debt

The Company's debt consisted of the following (in thousands):



					Outstanding Borrowings at
	Number of Assets Encumbered	Interest Rate	Maturity Date		December 31, 2018		December 31, 2017
Senior secured notes (1)(2)(3)	—	5.63%	—		$	—	$	552,669
Senior unsecured notes (1)(2)(4)	—	6.00%	June 2025		505,322		510,047
Mortgage loan (5)	3	4.95%	October 2022		91,737		120,893
Mortgage loan (6)	1	4.94%	October 2022		29,569		30,323
Mortgage loan (1)(7)	—	LIBOR + 3.00%	—	(8)	—		85,404
	4				626,628		1,299,336
Deferred financing costs, net					—		(231		)
Debt, net					$	626,628	$	1,299,105


(1)	Requires payments of interest only through maturity.


(2)	The senior secured notes include $28.7 million at December 31, 2017, and the senior unsecured notes include $30.3 million and $35.1 million at December 31, 2018 and 2017, respectively, related to fair value adjustments that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.

(3)

On March 9, 2018, the Company completed the early redemption of the senior secured notes in full for an aggregate amount of approximately $539.0 million, which included the redemption price of 102.813% for the outstanding principal amount. The Company recognized a gain of approximately $12.9 million on the early redemption, which is included in gain (loss) on extinguishment of indebtedness, net in the accompanying consolidated statements of operations and comprehensive income (loss).


(4)	The Company has the option to redeem the senior unsecured notes beginning June 1, 2020 at a price of 103.0% of face value.


(5)	Includes $1.9 million and $3.0 million at December 31, 2018 and 2017, respectively, related to fair value adjustments on the mortgage loans that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.


(6)	Includes $0.6 million and $0.7 million at December 31, 2018 and 2017, respectively, related to a fair value adjustment on the mortgage loan that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.


(7)	Includes $0.4 million at December 31, 2017 related to a fair value adjustment on the mortgage loan that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.

(8)

On November 5, 2018, RLJ LP paid off the mortgage loan in full. In connection with the mortgage loan payoff, the Company's consolidated joint venture entered into an $85.0 million related party mortgage loan with RLJ LP, which is included in related party debt in the accompanying consolidated balance sheets. The related party mortgage loan has an interest rate of LIBOR + 3.00% and a maturity date of November 9, 2023. The related party mortgage loan requires payments of interest only through maturity. The hotel property owned by the Company's consolidated joint venture is encumbered by the related party mortgage loan.

The senior unsecured notes and the senior secured notes (collectively, the "Senior Notes") contain certain financial covenants relating to the Company's total leverage ratio, secured leverage ratio, and interest coverage ratio. If an event of default exists, the Company is not permitted to (i) incur additional indebtedness, except to refinance maturing debt with replacement debt, as defined under our indentures; (ii) pay dividends in excess of the minimum distributions required to qualify as a REIT; (iii) repurchase capital stock; or (iv) merge. As of December 31, 2018 and 2017, the Company was in compliance with all financial covenants.

The indenture governing the senior unsecured notes places a limitation on the Company’s ability to sell its hotel properties. As a result of the Company’s sale of certain hotel properties during the year ended December 31, 2018, the Company will need to take certain actions in order to comply with the applicable covenant in the indenture. The applicable covenant will require the Company to, within the 24-month period specified in the indenture, either (i) pay down senior indebtedness, (ii) acquire new hotel properties, or (iii) consummate a tender offer for an aggregate principal amount of the senior unsecured notes equal to the amount of Excess Proceeds (as defined in the indenture) from the hotel property sales in 2018. The Company plans to comply with the applicable covenant by conducting a tender offer for at least the required principal amount of the senior unsecured notes at a purchase price of at least 100% of the principal amount of such notes during the year ended December 31, 2019.

Certain mortgage agreements are subject to customary financial covenants. The Company was in compliance with all financial covenants at December 31, 2018 and 2017.

Interest Expense

During the year ended December 31, 2018, the Company recognized $37.9 million of interest expense. In addition, the Company also recognized $0.7 million of interest expense related to its related party loan with RLJ LP.

During the Successor period of September 1, 2017 through December 31, 2017, the Company recognized $19.3 million of interest expense. During the Predecessor period of January 1, 2017 through August 31, 2017, the Company recognized $51.7 million of interest expense, which is net of capitalized interest of $1.1 million.

During the Predecessor year ended December 31, 2016, the Company recognized $78.2 million of interest expense, which is net of capitalized interest of $1.0 million.

Future Minimum Principal Payments

As of December 31, 2018, the future minimum principal payments (which includes the $85.0 million related party mortgage loan with RLJ LP) were as follows (in thousands):



2019	$	2,357
2020	2,670
2021	2,824
2022	110,997
2023	85,000
Thereafter	475,000
Total (1)	$	678,848


(1)	Excludes a total of $32.8 million related to fair value adjustments on debt.