7. LOAN PARTICIPATIONS SOLD

The financing of a loan by the non-recourse sale of a senior interest in the loan through a participation agreement generally does not qualify as a sale under GAAP. Therefore, in the instance of such sales, we present the whole loan as an asset and the loan participation sold as a liability on our consolidated balance sheet until the loan is repaid. The obligation to pay principal and interest on these liabilities is generally based on the performance of the related loan obligation. The gross presentation of loan participations sold does not impact stockholders’ equity or net income.

The following table details statistics for our loan participations sold ($ in thousands):


	September 30, 2016
Loan Participations Sold	Count	Principal Balance		Book Value		Wtd. Avg. Yield/Cost⁽¹⁾			Guarantee⁽²⁾		Wtd. Avg. Term
Total loan	2	$	495,912	$	492,133		L+4.51	%		n/a	Sep. 2019
Senior participation⁽³⁾⁽⁴⁾	2		411,427		409,654		L+2.71	%	$	31,123	Sep. 2019

	December 31, 2015
Loan Participations Sold	Count	Principal Balance		Book Value		Wtd. Avg. Yield/Cost⁽¹⁾			Guarantee⁽²⁾		Wtd. Avg. Term
Total loan	3	$	608,554	$	604,321		L+4.15	%		n/a	Nov. 2018
Senior participation⁽³⁾⁽⁴⁾	3		498,992		497,032		L+2.49	%	$	35,558	Nov. 2018

(1)

Our floating rate loans and related liabilities were indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred fees / financing costs.

(2)	Other than one instance where we entered into a related guarantee agreement for £24.0 million ($31.1 million as of September 30, 2016), our loan participations sold are non-recourse to us.

(3)

During the three and nine months ended September 30, 2016, we recorded $3.4 million and $10.7 million, respectively, of interest expense related to our loan participations sold, of which $3.2 million and $10.3 million was paid in cash. During the three and nine months ended September 30, 2015, we recorded $5.2 million and $14.4 million, respectively, of interest expense related to our loan participations sold, of which $4.5 million and $13.2 million was paid in cash.

(4)	The difference between principal balance and book value of loan participations sold is due to deferred financing costs of $1.8 million and $2.0 million as of September 30, 2016 and December 31, 2015, respectively.