LONG-TERM DEBT

Our outstanding long-term debt is shown below:



	As of December 31,
(in thousands)	2016			2015
FPU secured first mortgage bonds:
9.08% bond, due June 1, 2022	$	7,978		$	7,973
Uncollateralized Senior Notes:
6.64% note, due October 31, 2017	2,727			5,455
5.50% note, due October 12, 2020	8,000			10,000
5.93% note, due October 31, 2023	21,000			24,000
5.68% note, due June 30, 2026	29,000			29,000
6.43% note, due May 2, 2028	7,000			7,000
3.73% note, due December 16, 2028	20,000			20,000
3.88% note, due May 15, 2029	50,000			50,000
Promissory notes	168			238
Capital lease obligation	3,471			4,824
Less: debt issuance costs	(291		)	(333		)
Total long-term debt	149,053			158,157
Less: current maturities	(12,099		)	(9,151		)
Total long-term debt, net of current maturities	$	136,954		$	149,006

Annual maturities and principal repayments of long-term debt, excluding the capital lease obligation, are as follows: $12,099 for 2017; $9,421 for 2018; $11,245 for 2019; $15,600 for 2020; $13,600 for 2021 and $87,400 thereafter. See Note 14, Lease Obligations, for future payments related to the capital lease obligation.

Shelf Agreement

In October 2015, we entered into a Shelf Agreement with Prudential. Under the terms of the Shelf Agreement, we may request that Prudential purchase, through October 2018, up to $150.0 million of our Shelf Notes at a fixed interest rate and with a maturity date not to exceed twenty years from the date of issuance. Prudential is under no obligation to purchase any of the Shelf Notes. The interest rate and terms of payment of any series of Shelf Notes will be determined at the time of purchase. We currently anticipate the proceeds from the sale of any series of Shelf Notes will be used for general corporate purposes, including refinancing of short-term borrowing and/or repayment of outstanding indebtedness and financing capital expenditures on future projects; however, actual use of such proceeds will be determined at the time of a purchase and each request for purchase with respect to a series of Shelf Notes will specify the exact use of the proceeds.

The Shelf Agreement sets forth certain business covenants to which we are subject when any Shelf Note is outstanding, including covenants that limit or restrict us and our subsidiaries from incurring indebtedness and incurring liens and encumbrances on any of our property.

In May 2016, we submitted a request that Prudential purchase $70.0 million of 3.25 percent Shelf Notes under the Shelf Agreement, which was accepted and confirmed by Prudential. The proceeds received from the issuances of the Shelf Notes will be used to reduce short-term borrowings under our revolving credit facility, lines of credit and/or to fund capital expenditures. The closing of the sale and issuance of the Shelf Notes is expected to occur on or before April 28, 2017.

Secured First Mortgage Bonds

We guaranteed FPU’s first mortgage bonds, which are secured by a lien covering all of FPU’s property. FPU’s first mortgage bonds contain a restriction that limits the payment of dividends by FPU. It provides that FPU cannot make dividends or other restricted payments in excess of the sum of $2.5 million plus FPU’s consolidated net income accrued on and after January 1, 1992. As of December 31, 2016, FPU’s cumulative net income base was $128.5 million, offset by restricted payments of $37.6 million, leaving $90.9 million of cumulative net income for FPU free of restrictions pursuant to this covenant.

The dividend restrictions by FPU’s first mortgage bonds resulted in approximately $45.0 million of the net assets of our consolidated subsidiaries being restricted at December 31, 2016. This represents approximately 10 percent of our consolidated net assets. Other than the dividend restrictions by FPU’s first mortgage bonds, there are no legal, contractual or regulatory restrictions on the net assets of our subsidiaries.

Uncollateralized Senior Notes

All of our uncollateralized Senior Notes require periodic principal and interest payments as specified in each note. They also contain various restrictions. The most stringent restrictions state that we must maintain equity of at least 40 percent of total capitalization, and the fixed charge coverage ratio must be at least 1.2 times. The most recent Senior Notes issued in December 2013 also contain a restriction that we must maintain an aggregate net book value in our regulated business assets of at least 50 percent of our consolidated total assets. Failure to comply with those covenants could result in accelerated due dates and/or termination of the Senior Note agreements.

Certain Chesapeake Utilities' uncollateralized Senior Notes contain a “restricted payments” covenant as defined in the respective note agreements. The most restrictive covenants of this type are included within the 6.64 percent, 5.50 percent and 5.93 percent Senior Notes, due October 31, 2017, October 12, 2020 and October 31, 2023, respectively. The covenant provides that we cannot pay or declare any dividends or make any other restricted payments in excess of the sum of $10.0 million, plus our consolidated net income accrued on and after January 1, 2003. As of December 31, 2016, the cumulative consolidated net income base was $329.4 million, offset by restricted payments of $157.1 million, leaving $172.3 million of cumulative net income free of restrictions.

As of December 31, 2016, we are in compliance with all of our debt covenants.