7. LOAN PARTICIPATIONS SOLD, NET

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 tables detail our loan participations sold ($ in thousands):


	December 31, 2017
Loan Participations Sold	Count		Principal Balance		Book Value		Yield/Cost⁽¹⁾			Guarantee⁽²⁾		Term
Total loan		1	$	141,119	$	138,907		L+5.94	%		n/a		Feb. 2022
Senior participation⁽³⁾		1		80,706		80,415		L+4.14	%		n/a		Feb. 2022

	December 31, 2016
Loan Participations Sold	Count		Principal Balance		Book Value		Yield/Cost⁽¹⁾			Guarantee⁽²⁾		Term
Total loan		1	$	419,560	$	416,233		L+4.48	%		n/a		Dec. 2019
Senior participation⁽³⁾⁽⁴⁾		1		349,633		348,077		L+2.72	%	$	29,616		Dec. 2019

(1)

Our floating rate loans and related liabilities are 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)	As of December 31, 2017, our loan participation sold was non-recourse to us. As of December 31, 2016, our loan participation was subject to a related guarantee agreement for £24.0 million ($29.6 million as of December 31, 2016).

(3)	During the years ended December 31, 2017 and 2016, we recorded $10.1 million and $13.7 million, respectively, of interest expense related to our loan participations sold, of which $8.4 million and $13.1 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 $291,000 and $1.6 million as of December 31, 2017 and December 31, 2016, respectively.