As of September 30, 2019, we have entered into two credit agreements (collectively, as amended, the “Credit Agreements”): (1) the 2018 Credit Agreement, which, as described in more detail below, includes (a) the $400 million 2018 Revolving Facility, and (b) the $300 million 2018 Term Loan Facility, and (2) the $250 million 2014 7-Year Term Loan. The 2018 Term Loan Facility and the 2014 7-Year Term Loan are collectively referred to as the “Term Loans.”

As of September 30, 2019, we had borrowed the full $550.0 million available under the Term Loans in the aggregate, and $213.0 million was borrowed under the 2018 Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of September 30, 2019 is net of $2.0 million of unamortized debt issuance costs. Following recent property sales, the net operating income (“NOI”) from our remaining unencumbered properties is at a level such that pursuant to the Unencumbered Debt Yield covenant (as described below), the maximum unsecured amount that was available for us to borrow under the 2018 Revolving Facility as of September 30, 2019 was $80.7 million.

Amounts borrowed under the Credit Agreements, either under the 2018 Revolving Facility or the Term Loans, which may be either LIBOR Loans or Base Rate Loans, bear interest at the rate specified below per annum, depending on our leverage, unless and until we receive an investment grade credit rating and provide notice to the Administrative Agent, as defined therein (the “Rating Date”), after which alternative rates would apply, as described in the Credit Agreements. In determining our leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is (a) 6.50% for each property having an average sales per square foot of more than $500 for the most recent period of 12 consecutive months, and (b) 7.50% for any other property. The 2018 Revolving Facility is subject to a facility fee, which depends on leverage and was 0.55% as of September 30, 2019, which is recorded in interest expense in the consolidated statements of operations.

		Applicable Margin
Level	Ratio of Total Liabilities to Gross Asset Value	Revolving Loans that are LIBOR Loans			Revolving Loans that are Base Rate Loans			Term Loans that are LIBOR Loans			Term Loans that are Base Rate Loans
1	Less than 0.450 to 1.00		1.20	%		0.20	%		1.35	%		0.35	%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00		1.25	%		0.25	%		1.45	%		0.45	%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00		1.30	%		0.30	%		1.60	%		0.60	%
4	Equal to or greater than 0.550 to 1.00 ⁽¹⁾		1.55	%		0.55	%		1.90	%		0.90	%

The Credit Agreements contain certain affirmative and negative covenants, including, without limitation, requirements that PREIT maintain, on a consolidated basis: (1) Minimum Tangible Net Worth of $1,463.2 million, plus 75% of the Net Proceeds of all Equity Issuances effected at any time after March 31, 2018; (2) maximum ratio of Total Liabilities to Gross Asset Value of 0.60:1, provided that it will not be a Default if the ratio exceeds 0.60:1 but does not exceed 0.625:1 for more than two consecutive quarters on more than two occasions during the term; (3) minimum ratio of Adjusted EBITDA to Fixed Charges of 1.50:1; (4) minimum Unencumbered Debt Yield of (a) 11.0% through and including June 30, 2020, (b) 11.25% any time after June 30, 2020 through and including June 30, 2021, and (c) 11.50% any time thereafter; (5) minimum Unencumbered NOI to Unsecured Interest Expense of 1.75:1; (6) maximum ratio of Secured Indebtedness to Gross Asset Value of 0.60:1; and (7) Distributions may not exceed (a) with respect to our preferred shares, the amounts required by the terms of the preferred shares, and (b) with respect to our common shares, the greater of (i) 95.0% of Funds From Operations (FFO), and (ii) 110% of REIT taxable income for a fiscal year. The covenants and restrictions in the Credit Agreements limit our ability to incur additional indebtedness, grant liens on assets and enter into negative pledge agreements, merge, consolidate or sell all or substantially all of its assets, and enter into transactions with affiliates. The Credit Agreements are subject to customary events of default and are cross-defaulted with one another.

As of September 30, 2019, the Borrower was in compliance with all financial covenants in the Credit Agreements.

We may prepay the amounts due under the Credit Agreements at any time without premium or penalty, subject to reimbursement obligations for the lenders’ breakage costs for LIBOR borrowings.

Upon the expiration of any applicable cure period following an event of default (except with respect to bankruptcy as described in the next sentence), the lenders may declare all of the obligations in connection with the Credit Agreements immediately due and payable.

Upon the occurrence of a voluntary or involuntary bankruptcy proceeding of PREIT, PALP, PRI, any material subsidiary, any subsidiary that owns or leases an Unencumbered Property or certain other subsidiaries, all outstanding amounts would automatically become immediately due and payable.

Interest expense, deferred financing fee amortization and accelerated financing costs, if any, related to the Credit Agreements for the three and nine months ended September 30, 2019 and 2018 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands of dollars)	2019		2018		2019		2018
Revolving Facilities⁽¹⁾
Interest expense	$	2,082	$	392	$	5,143	$	1,006
Deferred financing amortization		274		274		822		778
Term Loans⁽²⁾
Interest expense		5,212		4,525		15,477		13,310
Deferred financing amortization		191		188		570		569
Accelerated financing costs		-		-		-		363

The aggregate carrying values and estimated fair values of mortgage loans based on interest rates and market conditions at September 30, 2019 and December 31, 2018 were as follows:

	September 30, 2019				December 31, 2018
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Mortgage loans⁽¹⁾	$	904.6	$	890.1	$	1,047.9	$	1,002.3

In March 2019, we defeased a $58.5 million mortgage loan including accrued interest, secured by Capital City Mall in Camp Hill, Pennsylvania using funds from our 2018 Revolving Facility and the balance from available working capital. We recorded a loss on debt extinguishment of $4.8 million in March 2019 in connection with this defeasance.

As discussed in Note 2, in September 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. In connection with the conveyance, $7.5 million of cash and escrow balances were transferred to the lender.

In April 2019, we received a notice from the servicer of the Cumberland Mall mortgage of a cash sweep event due to the failure of an anchor tenant to renew for a full term. We satisfied this requirement in August 2019.

We follow established risk management policies designed to limit our interest rate risk on our interest bearing liabilities, as further discussed in Note 7.