Long-Term Debt and Credit Arrangements (in thousands)



December 31,	2011		2010
Senior notes payable	$	216,666	$	225,000
Mortgages payable	32,670		55,300
Other notes payable	1,250		170
Total debt	250,586		280,470
Less current maturities	32,173		38,119
Total long-term debt	$	218,413	$	242,351

The aggregate minimum principal maturities of long-term debt for each of the five years following December 31, 2011 are as follows: 2012 - $32.2 million; 2013 - $18.3 million; none in 2014; 2015 - $40.0 million; 2016 - $40.0 million; and $120.1 million thereafter.

Senior Notes Payable

As of December 31, 2011, senior notes payable in the amount of $16.7 million were due to a group of institutional holders in nine equal annual installments which began in 2005 and bear interest at 6.96% per annum. The most significant covenants under the terms of the related agreement require the maintenance of a minimum Consolidated Net Worth, the calculations and terms of which are defined by the related agreement. As of December 31, 2011 and pursuant to the definitions in the note agreement, our Consolidated Net Worth was $799.2 million, which exceeded the minimum of $686.5 million.

In addition, as of December 31, 2011, senior notes payable in the amount of $200.0 million were due to a second group of institutional holders in five equal annual installments beginning in 2015 and bear interest at 6.11% per annum. The most significant covenants under the terms of the related agreement require the maintenance of a minimum Consolidated Net Worth, the calculations and terms of which are defined by the related agreement. As of December 31, 2011 and pursuant to the definitions in the note agreement, our Consolidated Net Worth was $799.2 million, which exceeded the minimum of $697.4 million.

Real Estate Mortgages

A significant portion of our real estate held for development and sale is subject to mortgage indebtedness. These notes are collateralized by the properties purchased and bear interest at 3.75% to 7.0% per annum with principal and interest payable in installments through 2013. The carrying amount of properties pledged as collateral was approximately $64.6 million at December 31, 2011. All of this indebtedness is non-recourse to Granite, but is recourse to the real estate entities that incurred the indebtedness. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entities to pay down portions of the debt. During the year ended December 31, 2011, we provided additional funding of $8.4 million to our real estate entities to either pay off or refinance certain real estate loans. As of December 31, 2011, the principal amount of debt of our real estate entities secured by mortgages was $32.5 million, of which $22.6 million was included in current liabilities and $9.9 million was included in long-term liabilities on our consolidated balance sheet.

Credit Agreement

We have a $100.0 million committed secured revolving credit facility, with a sub-limit for letters of credit of $50.0 million (the “Credit Agreement”), which expires on June 22, 2013. Borrowings under the Credit Agreement bear interest at LIBOR plus an applicable margin. LIBOR varies based on the applicable loan term. The applicable margin is based upon certain financial ratios calculated quarterly and was 2.75% at December 31, 2011. Accordingly, the effective interest rate was between 3.05% and 3.88% at December 31, 2011. Our obligations under the Credit Agreement are guaranteed by certain of our subsidiaries and are secured by first priority liens on substantially all of the assets of Granite Construction Incorporated and our subsidiaries that are guarantors or co-borrowers under the Credit Agreement, excluding any owned or leased real property subject to an existing mortgage. At December 31, 2011, there were no revolving loans outstanding under the Credit Agreement, but there were standby letters of credit totaling approximately $4.2 million. The letters of credit will expire between March 2012 and October 2012. These letters of credit will be replaced upon expiration.

The most significant restrictive covenants under the terms of our Credit Agreement require the maintenance of a minimum Consolidated Tangible Net Worth, a minimum Consolidated Interest Coverage Ratio and a maximum Adjusted Consolidated Leverage Ratio. The calculations and terms of such covenants are defined by Amendment No. 1 of the Credit Agreement filed as Exhibit 10.1 to our Form 8-K filed December 30, 2010. As of December 31, 2011 and pursuant to the definitions in the Credit Agreement, our Consolidated Tangible Net Worth was $757.7 million, which exceeded the minimum of $665.8 million, the Consolidated Interest Coverage Ratio was 10.06, which exceeded the minimum of 4.00 and the Adjusted Consolidated Leverage Ratio was 1.42, which did not exceed the maximum of 3.75. The maximum Adjusted Consolidated Leverage Ratio remains at 3.75 through the quarter ending March 31, 2012 and subsequently decreases in 0.25 increments until reaching 3.00 for the quarter ending March 31, 2013.

Covenants and Events of Default

Our debt and credit agreements require us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described above. Our failure to comply with any of these covenants, or to pay principal, interest or other amounts when due thereunder, would constitute an event of default under the applicable agreements. Under certain circumstances, the occurrence of an event of default under one of our debt or credit agreements (or the acceleration of the maturity of the indebtedness under one of our agreements) may constitute an event of default under one or more of our other debt or credit agreements. Default under our debt and credit agreements could result in (1) us no longer being entitled to borrow under the agreements, (2) termination of the agreements, (3) the requirement that any letters of credit under the agreements be cash collateralized, (4) acceleration of the maturity of outstanding indebtedness under the agreements and/or (5) foreclosure on any collateral securing the obligations under the agreements.

As of December 31, 2011, we were in compliance with the covenants contained in our senior note agreements and Credit Agreement.

Except as noted below, as of December 31, 2011, we were in compliance with the covenants contained in our debt agreements related to our consolidated real estate entities, and we are not aware of any material non-compliance by any of our unconsolidated entities with the covenants contained in their debt agreements. As of December 31, 2011, one of our unconsolidated real estate entities was in default under debt agreements as a result of its failure to make a timely required principal and interest payment. This default has subsequently been cured. The affected loans are non-recourse to Granite and these defaults do not result in cross-defaults under other debt agreements under which Granite is the obligor; however, there is recourse to the real estate entity that incurred the debt.