NOTE 6 – LONG-TERM DEBT

At December 31, 2015 and 2014, the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):

	December 31,
	2015			2014

Senior secured debt due March 5, 2016 (1) Interest accrues at 8% per annum	$	39,910		$	34,735
Senior secured debt due June 30, 2017 (1) Interest accrues at 8% per annum		11,905			10,986
Convertible note instrument due March 5, 2018 Interest accrues at 7% per annum		4,018			60,455
Convertible note instrument due March 5, 2020 Interest accrues at 7% per annum		59,804
Other loans		193			28
Debt discount, net of accumulated accretion		(7,564	)		(1,809	)
		108,266			104,395

Less current portion		48			11

	$	108,218		$	104,384

(1)

As further discussed below, the Company extended the due date related to its senior secured debt from March 5, 2016 to September 28, 2017.

The carrying value of the Company’s debt, before discount, approximates fair value. The fair value of the Company’s debt (Level 2) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company for similar debt instruments of comparable maturities by its lenders.

Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2015, are as follows:

Year Ending December 31	($ in thousands)

2016	$	39,959
2017		11,950
2018		4,059
2019		43
2020		59,819
	$	115,830

In November 2015, the Company entered into a First Amendment to the Credit Agreement (“First Amendment”) with its senior lenders which granted it the right to extend the maturity date of the first tranche of its Senior Secured Debt (“First Mortgage”) from March 2016 to June 2017, which is concurrent with the existing due date of the second tranche of the Senior Secured Debt. In consideration of this right, the Company paid its senior lenders an amendment fee of $2.25 million in additional debt.

On February 8, 2016, the Company entered into a Second Amendment to the Credit Agreement with its senior lenders to (i) provide for the application of $10.5 million of a $12 million payment pursuant to the Amended and Restated Fenner Valley Farm Lease which satisfied the repayment condition of the First Amendment to extend the maturity date; (ii) to require Cadiz to pay 50% of all future quarterly interest payments in cash, rather than in accretion to principal, beginning with the quarterly interest payment due June 5, 2016; and (iii) to provide for certain related matters. On February 25, 2016, the Company exercised its right to extend the maturity date of its First Mortgage and, at that time, incurred an additional extension fee of $2.25 million which is to be paid at the election of the lenders in either additional debt or Cadiz common stock at a predetermined price. On March 4, 2016, the Company entered into a Third Amendment to the Credit Agreement which provides the lenders an additional 90 days to make the election to receive the extension fee in additional debt or Cadiz common stock in exchange for extending the due date of its Senior Secured Debt from June 30, 2017 to September 28, 2017. Interest on the Senior Secured Debt will continue to accrue at 8%.

Also in November 2015, the Company entered into agreements with 94% of its convertible note holders to exchange their outstanding convertible notes, which were due in March 2018 (“2018 Convertible Notes”), for substantially similar convertible notes now due in March 2020 (“2020 Convertible Notes”). In exchange for this maturity extension, the conversion rate on the 2020 Convertible Notes was reduced from $8.05 to $6.75 of accreted principal amount per share. As a result, the change in fair value of the instrument’s conversion feature increased by $5.2 million. This amount was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital. Such debt discount is accreted to the redemption value of the instrument over the new term of the loan as additional interest expense. Furthermore, approximately $400 thousand of remaining unamortized deferred financing costs associated with the 2018 Convertible Notes that were previously recorded is now being amortized over the new term of the 2020 Convertible Notes.

In 2015, approximately $1.0 million in 2018 Convertible Notes were converted by certain of the Company’s lenders. As a result, 126,633 shares of common stock were issued to the lenders.

Both the Senior Secured Debt and the convertible notes contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit the Company’s ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person. However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on the Company’s ability to issue additional common stock to fund future working capital needs. The debt covenants were negotiated by the parties with a view towards the Company’s operating and financial condition as it existed at the time the agreements were executed. At December 31, 2015, the Company was in compliance with its debt covenants.