NOTE 11. Debt

Bank Line of Credit and Term Loans

On March 31, 2014, the Company amended its unsecured revolving line of credit facility (the “Facility”) with a syndicate of banks, which was scheduled to mature in March 2016, increasing the borrowing capacity by $500 million to $2 billion. The amended Facility matures on March 31, 2018, with a one-year committed extension option. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends upon the Company’s credit ratings. The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings. Based on the Company’s credit ratings at December 31, 2014, the margin on the Facility was 0.925%, and the facility fee was 0.15%. The Facility also includes a feature that will allow the Company to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments from existing lenders or new lending institutions. At December 31, 2014, the Company had $839 million (includes £355 million) outstanding under this Facility with a weighted average effective interest rate of 1.60%.

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 million ($214 million at December 31, 2014) four-year unsecured term loan (the “2012 Term Loan”). Based on the Company’s credit ratings at December 31, 2014, the 2012 Term Loan accrues interest at a rate of GBP LIBOR plus 1.20%. Concurrent with the closing of the 2012 Term Loan, the Company entered into a four-year interest rate swap contract that fixes the interest rate of the 2012 Term Loan at 1.81%, subject to adjustments based on the Company’s credit ratings. The 2012 Term Loan contains a one-year committed extension option.

On January 12, 2015, the Company entered into a credit agreement with a syndicate of banks for a £220 million ($333 million) four-year unsecured term loan (the “2015 Term Loan”) that accrues interest at a rate of GBP LIBOR plus 0.975%, subject to adjustments based on the Company’s credit ratings. Concurrently, the Company entered into a three-year interest rate swap agreement that effectively fixes the rate of the 2015 Term Loan at 1.79%. Proceeds from the 2015 Term Loan were used to repay £220 million of the £355 million outstanding balance on the Facility that the Company used to fund the aforementioned November 2014 U.K. debt investment (the 2012 and 2015 Term Loans are collectively, the “Term Loans”).

The Facility and Term Loans contain certain financial restrictions and other customary requirements, including cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreements, (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Secured Debt to Consolidated Total Asset Value to 30%, (iii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 60% and (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times. The Facility and Term Loans also require a Minimum Consolidated Tangible Net Worth of $9.5 billion at December 31, 2014 (applicable to the Facility and 2012 Term Loan). At December 31, 2014, the Company was in compliance with each of these restrictions and requirements of the Facility and 2012 Term Loan.

Senior Unsecured Notes

At December 31, 2014, the Company had senior unsecured notes outstanding with an aggregate principal balance of $7.6 billion. At December 31, 2014, interest rates on the notes ranged from 2.79% to 6.99% with a weighted average effective rate of 4.95% and a weighted average maturity of six years. Discounts and premiums are amortized to interest expense over the term of the related senior unsecured notes. The senior unsecured notes contain certain covenants including limitations on debt, cross-acceleration provisions and other customary terms. As of December 31, 2014, the Company believes it was in compliance with these covenants.

On January 21, 2015, the Company issued $600 million of 3.40% senior unsecured notes due 2025. The notes were priced at 99.185% of the principal amount with an effective yield-to-maturity of 3.497%; net proceeds from this offering were $591 million. A portion of the proceeds from these senior notes was used to repay the entire $105 million U.S. dollar amount outstanding on the Facility as of the closing date.

On August 14, 2014, the Company issued $800 million of 3.875% senior unsecured notes due 2024. The notes were priced at 99.63% of the principal amount with an effective yield-to-maturity of 3.92%; net proceeds from this offering were $792 million.

On February 12, 2014, the Company issued $350 million of 4.20% senior unsecured notes due 2024. The notes were priced at 99.537% of the principal amount with an effective yield-to-maturity of 4.257%; net proceeds from this offering were $346 million.

On February 1, 2014, the Company repaid $400 million of maturing senior unsecured notes, which accrued interest at a rate of 2.7%. The senior unsecured notes were repaid with a portion of the proceeds from the Company’s November 2013 bond offering.

On December 16, 2013, the Company repaid $400 million of maturing senior unsecured notes, which accrued interest at a rate of 5.65%. The senior unsecured notes were repaid with a portion of the proceeds from the Company’s November 2013 bond offering.

On November 12, 2013, the Company issued $800 million of 4.25% senior unsecured notes due in 2023. The notes were priced at 99.540% of the principal amount with an effective yield-to-maturity of 4.307%; net proceeds from this offering were $789 million.

On February 28, 2013, the Company repaid $150 million of maturing 5.625% senior unsecured notes.

Mortgage Debt

At December 31, 2014, the Company had $1 billion in aggregate principal amount of mortgage debt outstanding that was secured by 70 healthcare facilities (including redevelopment properties) that had a carrying value of $1.3 billion. At December 31, 2014, interest rates on the mortgage debt ranged from 0.44% to 8.41% with a weighted average effective interest rate of 6.16% and a weighted average maturity of three years.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into or terminate material leases. Some of the mortgage debt is also cross-collateralized by multiple assets and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at December 31, 2014 (dollars in thousands):


					Senior Unsecured Notes				Mortgage Debt
	Line of						Interest				Interest
Year	Credit(1)(2)		Term Loan(3)		Amount		Rate		Amount		Rate		Total(4)
2015	$	—	$	—	$	400,000	6.57	%	$	40,628	3.58	%	$	440,628
2016		—		213,610		900,000	5.10	%		292,222	6.87	%		1,405,832
2017		—		—		750,000	6.02	%		581,891	6.07	%		1,331,891
2018		838,516		—		600,000	6.82	%		6,583	5.90	%		1,445,099
2019		—		—		450,000	3.96	%		2,072	—			452,072
Thereafter		—		—		4,550,000	4.45	%		63,170	4.99	%		4,613,170
		838,516		213,610		7,650,000	4.95	%		986,566	6.16	%		9,688,692
Discounts, net		—		—		(23,806)				(2,135)				(25,941)
	$	838,516	$	213,610	$	7,626,194			$	984,431			$	9,662,751

(1)

Includes £355 million translated into U.S. dollars as of December 31, 2014.

(2)

In January 2015, the Company repaid all but £135 million outstanding under the Facility primarily with proceeds from the January 2015 senior unsecured notes issuance and term loan.

(3)

Represents £137 million translated into U.S. dollars.

(4)

Excludes $97 million of other debt that represents Life Care Bonds and Demand Notes that have no scheduled maturities.

Other Debt

At December 31, 2014, the Company had $71 million of non-interest bearing life care bonds at two of its continuing care retirement communities and non-interest bearing occupancy fee deposits at two of its senior housing facilities, all of which were payable to certain residents of the facilities (collectively, “Life Care Bonds”). The Life Care Bonds are generally refundable to the residents upon the termination of the contract or upon the successful resale of the unit.

In conjunction with the Brookdale Transaction, on August 29, 2014, the Company borrowed $26 million from the CCRC JV in the form of on-demand notes (“Demand Notes”). The Demand Notes bear interest at a rate of 4.5%. See additional information regarding the Brookdale Transaction in Note 3.