DEBT:

Swiss Debt:

At December 31, 2011, the Company had three loan facilities with a Swiss bank for a maximum of $21.8 million (20.5 million CHF) used to finance the purchase of investment securities in Switzerland. The loan facilities may be canceled immediately by either party by written notice and do not impose any financial or operational restrictions on the Company. The total Swiss borrowings bear interest at a weighted average of 3.74% and are collateralized by the Company’s Swiss investments.

Mortgage Debt:

At December 31, 2011, the Company’s total mortgage debt of $30.9 million has a weighted average interest rate of 5.44% and is due at various dates between 2012 and 2036. During 2010, the Company financed the purchase and development of real estate with $5.4 million of debt at a weighted annual interest rate of 9.6%.

Construction Financing Debt:

During the year ended December 31, 2011, Northstar entered into a credit agreement with various lenders and ING Capital, LLC. Under the agreement, the lenders committed to loan Northstar up to (i) $89.5 million pursuant to senior secured, multi-draw term loans to fund construction of the project and (ii) $10.5 million pursuant to a senior secured revolving credit facility to fund working capital upon project completion. Interest will accrue under the facility at a variable rate that is currently 5% per year. Repayment of principal and interest on the term loans will be made quarterly with a final balloon repayment of principal on the earlier of the fifth anniversary of the project construction completion date and April 15, 2018. The revolving credit facility will be available until the earlier of either the fifth anniversary of project construction completion or April 15, 2018. Repayment of the loans may be accelerated by the lenders in the event certain covenants or conditions are not met. As of December 31, 2011, Northstar had drawn $46 million under the loan and expects to borrow the remaining balance by the third quarter of 2012.

Construction Financing Covenants:

The credit agreement contains the following significant financial covenants and the Company was in compliance with each covenant at and for the year ended December 31, 2011.

1) Debt to Adjusted Capitalization Ratio: Northstar will not permit its debt to adjusted capitalization ratio as of the last day of any fiscal quarter to be more than 0.60 to 1.00. Debt to adjusted capitalization ratio is, as of any date, defined as the ratio of (a) total debt as of such date to (b) the sum of (i) total debt as of such date plus (ii) PICO Northstar, LLC's (parent company of Northstar) consolidated shareholders' equity as of such date plus (iii) an amount equal to the difference of (x) an amount equal to development expenses in an amount not to exceed $8.4 million incurred in connection with the canola seed processing plant and integrated refinery but solely to the extent such development expenses are treated as current expenses (and are not capitalized) on the financial statements of Northstar in accordance with U.S. GAAP minus (y) the amount of development expenses referenced in clause (x) above that would have been amortized as of such date in accordance with U.S. GAAP had such development expenses been capitalized and not currently expensed.

2) Debt Service Coverage Ratio: Northstar will not permit its debt service coverage ratio to be less than1.75 to 1.00 as of the last day of any fiscal quarter, beginning with the second full fiscal quarter ending after the project construction completion date, calculated for the four consecutive fiscal quarter period ending on each such date. Debt service coverage ratio is, for any period, defined as the ratio of (a) earnings before interest, taxes, depreciation and amortization (EBITDA) of Northstar and any of its subsidiaries for such period less (i) consolidated capital expenditures for such period (excluding that portion of consolidated capital expenditures that is financed by indebtedness (other than the obligations)) less (ii) permitted tax distributions with respect to such period less (iii) any other distributions made by the PICO Northstar, LLC to its members during such period to (b) debt service for such period.

3) Minimum Net Worth of Borrower: Northstar will not permit its net worth on any date to be less than $60 million. Net worth is as of any date, defined as the amount by which Northstar's total assets exceed its total liabilities, determined on a consolidated basis in accordance with U.S. GAAP.

In connection with the credit agreement, PICO entered into a standby purchase agreement with ING, under which ING has the right to cause PICO to become a lender under the credit agreement, and agreed to make further equity contributions to Northstar to cover any costs overruns in construction costs (none at December 31, 2011 and none projected). Under the original terms of the credit facility underwriting, ING had the right to require PICO to purchase up to $50 million if the facility was not fully syndicated by May 31, 2011. ING had syndicated $83.3 million of the $100 million resulting in a total commitment of up to $16.7 million due from PICO. Prior to December 31, 2011, PICO assigned its entire $16.7 million debt commitment to third parties.

Until the construction expenses are paid in full and the project construction completion date has occurred, the proceeds of the term loans shall be used solely (a) to finance construction expenses and to fund the initial deposit by Northstar into the debt service reserve account, and (b) to finance the purchase of initial canola seed inventory for processing. Thereafter, the proceeds of the term loan shall be used for general corporate purposes. The proceeds of the working capital facility loans shall not be used (i) to finance the payment of any construction expenses (ii) for the payment of any dividend or distribution, (iii) to finance inventory located in Canada having a cost basis in excess of $1 million, or (iv) to finance inventory located in any province in Canada other than Manitoba.

Northstar will not declare, pay or make any dividend or distribution (in cash, property or obligations) provided, however, that so long as (i) no event of default has occurred and is continuing, (ii) Northstar is in compliance with all financial covenants, and (iii) after giving effect to such distribution, Northstar's liquidity is not less than $3 million ,

The following is a detail of the Company’s debt at December 31, 2011 and 2010 (in thousands):



	2011		2010
Construction Financing Debt:
5% fixed payments due from 2013 - 2018	$	46,000
Swiss Debt:
4.4% fixed due in 2011			$	4,821
3.7% fixed due in 2014	13,309		13,392
3.8% fixed due in 2014	3,194		3,214
Mortgage Debt:
4% to 4.5% fixed payment due from 2011 - 2012	8,721		8,849
5% fixed payments due from 2014 - 2016	5,276
6% to 6.5% fixed payments due from 2010 - 2036	10,432		4,982
8% fixed payments due from 2010 - 2013	893		1,291
10% fixed payments due from 2012 - 2013	5,606		7,590
12% fixed payments due from 2011			1,604
	$	93,431	$	45,743

The Company’s future minimum principal debt repayments for the years ending December 31 are as follows (in thousands):



Year
2012	$	8,897
2013	17,586
2014	29,362
2015	5,979
2016	5,979
Thereafter	25,628
Total	$	93,431

The Company capitalized $2.1 million and $670,000 of interest in 2011 and 2010, respectively, related to construction and real estate development costs.