Debt

6 Months Ended

Jun. 30, 2021

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


					Outstanding Borrowings at
	Number of Assets Encumbered	Interest Rate	Maturity Date		June 30, 2021				December 31, 2020
Senior Notes (1)(2)(3)	—	6.00%	June 2025		$	493,397	$	495,759
Mortgage loan (4)	3	—	October 2022		—		86,775
Mortgage loan (5)	1	4.94%	October 2022		27,606		27,972
Mortgage loan (1)(6)	3	1.70%	April 2024	(7)	96,000		96,000
	7				617,003		706,506
Deferred financing costs, net					(546)		(643)
Debt, net					$	616,457	$	705,863

(1)Requires payments of interest only through maturity.

(2)The Senior Notes (as defined below) include $18.5 million and $20.9 million at June 30, 2021 and December 31, 2020, respectively, related to fair value adjustments that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.

(3)The Company has the option to redeem the Senior Notes at a price of 102.0% of face value.

(4)Includes $0.9 million at December 31, 2020 related to fair value adjustments on the mortgage loan that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers. In June 2021, the Company paid off the mortgage loan in full and paid approximately $4.3 million in termination costs.

(5)Includes $0.2 million and $0.3 million at June 30, 2021 and December 31, 2020, 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. In July 2021, the Company paid off the mortgage loan in full and paid approximately $1.3 million in termination costs.

(6)The hotels encumbered by the mortgage loan are cross-collateralized.

(7)The mortgage loan provides two one year extension options.

The 6.000% Senior Notes due 2025 (the "Senior Notes") are subject to a maximum unsecured leverage maintenance covenant, which is based on asset value that is calculated at historical cost. In addition, the Senior Notes are subject to various incurrence covenants that limit the ability of the Company to incur additional debt if these covenants are violated. Failure to meet these incurrence covenant thresholds does not, in and of itself, constitute an event of default under the Senior Notes indenture. As of June 30, 2021, the Company was in compliance with all maintenance and incurrence covenants except the interest coverage ratio. As a result, the Company is currently prohibited from incurring additional debt until such ratio becomes compliant.

Certain mortgage agreements are subject to various maintenance covenants requiring the Company to maintain a minimum debt yield or debt service coverage ratio ("DSCR"). Failure to meet the debt yield or DSCR thresholds is not an event of default, but instead triggers a cash trap event. During the cash trap event, the lender or servicer of the mortgage loan controls cash outflows until the loan is covenant compliant. In addition, certain mortgage loans have other requirements including continued operation and maintenance of the hotel property. At June 30, 2021, both mortgage loans were below the DSCR threshold and were in cash trap events. At June 30, 2021, there was approximately $3.4 million in restricted cash held by lenders due to cash trap events. This amount includes approximately $1.8 million of restricted cash held by a lender on the mortgage loan that was paid off in June 2021. Subsequent to June 30, 2021, the Company received these cash trap funds for the paid off mortgage loan.

During the three and six months ended June 30, 2021, the Company recognized $7.6 million and $15.2 million of interest expense, respectively. During the three and six months ended June 30, 2020, the Company recognized $7.8 million and $15.8 million of interest expense, respectively.