Debt Obligations

12 Months Ended

Dec. 31, 2011

Mortgage Loan: In April 2004, Lexicon purchased its existing laboratory and office buildings and animal facilities in The Woodlands, Texas with proceeds from a $34.0 million third-party mortgage financing and $20.8 million in cash. The mortgage loan has a ten-year term with a 20-year amortization and bears interest at a fixed rate of 8.23%. The mortgage had a principal balance of $24.9 million as of December 31, 2011. Net proceeds from the sale of the building as discussed in Note 6, "Property and Equipment," were used to pay down the mortgage principal in June 2011 in the amount of $2.4 million. The buildings and land that serve as collateral for the mortgage loan are included in property and equipment at $58.9 million and $2.7 million, respectively, before accumulated depreciation, as of December 31, 2011.

The fair value of Lexicon’s mortgage loan approximates its carrying value. The fair value of Lexicon’s mortgage loan is estimated using discounted cash flow analysis, based on the Company’s estimated current incremental borrowing rate.

UBS Credit Line: In January 2009, Lexicon entered into a credit line agreement with UBS Bank USA that provided an uncommitted, demand, revolving line of credit. Lexicon entered into the credit line in connection with its acceptance of an offer from UBS AG, the investment bank that sold Lexicon its auction rate securities, providing Lexicon with rights to require UBS to purchase its auction rate securities at par value during the period from June 30, 2010 through July 2, 2012. On June 30, 2010, Lexicon exercised its rights and UBS purchased Lexicon's remaining $23.6 million of auction rate securities at par value on July 1, 2010. The credit line was secured only by these auction rate securities and advances under the credit line were made on a "no net cost" basis, meaning that the interest paid by Lexicon on advances did not exceed the interest or dividends paid to Lexicon by the issuer of the auction rate securities. The interest rate paid on the line of credit was less than the Company's estimated current incremental borrowing rate. On July 1, 2010, Lexicon repaid its remaining $16.0 million outstanding under this credit line with the proceeds from the UBS purchase of Lexicon's auction rate securities.

The following table includes the aggregate future principal payments of the Company’s long-term debt as of December 31, 2011:



	For the Year Ending December 31
	(in thousands)
2012	$	1,443
2013	1,574
2014	21,877
Total debt	24,894
Less current portion	(1,443		)
Total long-term debt	$	23,451

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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