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Mortgage and Other Indebtedness, Net

9 Months Ended

Sep. 30, 2019

Debt of the Company

CBL has no indebtedness. Either the Operating Partnership or one of its consolidated subsidiaries, that it has a direct or indirect ownership interest in, is the borrower on all of the Company's debt. CBL is a limited guarantor of the Senior Unsecured Notes (the "Notes"), as described below, for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates.

The Company also provides a similar limited guarantee of the Operating Partnership's obligations with respect to its secured credit facility and secured term loan as of September 30, 2019.

Debt of the Operating Partnership

Net mortgage and other indebtedness consisted of the following:



	September 30, 2019			December 31, 2018
	Amount		Weighted- Average Interest Rate ⁽¹⁾	Amount		Weighted- Average Interest Rate ⁽¹⁾
Fixed-rate debt:
Non-recourse loans on operating properties	$	1,495,896	5.21%	$	1,783,097	5.33%
Senior unsecured notes due 2023 ⁽²⁾	447,775		5.25%	447,423		5.25%
Senior unsecured notes due 2024⁽³⁾	299,958		4.60%	299,953		4.60%
Senior unsecured notes due 2026 ⁽⁴⁾	617,260		5.95%	616,635		5.95%
Total fixed-rate debt	2,860,889		5.31%	3,147,108		5.37%



	September 30, 2019				December 31, 2018
	Amount			Weighted- Average Interest Rate ⁽¹⁾	Amount			Weighted- Average Interest Rate ⁽¹⁾
Variable-rate debt:
Recourse loans on operating properties	56,178			4.71%	68,607			4.97%
Construction loan	21,061			4.99%	8,172			5.25%
Secured line of credit	304,769			4.35%	—			—%
Unsecured lines of credit	—			—%	183,972			3.90%
Secured term loan	473,750			4.35%	—			—%
Unsecured term loans	—			—%	695,000			4.21%
Total variable-rate debt	855,758			4.39%	955,751			4.21%
Total fixed-rate and variable-rate debt	3,716,647			5.10%	4,102,859			5.10%
Unamortized deferred financing costs	(17,640		)		(15,963		)
Liabilities related to assets held for sale ⁽⁵⁾	—				(43,716		)
Total mortgage and other indebtedness, net	$	3,699,007			$	4,043,180


(1)	Weighted-average interest rate includes the effect of debt premiums and discounts, but excludes amortization of deferred financing costs.


(2)	The balance is net of an unamortized discount of $2,225 and $2,577 as of September 30, 2019 and December 31, 2018, respectively.


(3)	The balance is net of an unamortized discount of $42 and $47 as of September 30, 2019 and December 31, 2018, respectively.


(4)	The balance is net of an unamortized discount of $7,740 and $8,365 as of September 30, 2019 and December 31, 2018, respectively.


(5)	Represents a non-recourse mortgage loan secured by Cary Towne Center that was classified on the condensed consolidated balance sheet as liabilities related to assets held for sale as of December 31, 2018.

Senior Unsecured Notes



Description	Issued ⁽¹⁾	Amount		Interest Rate ⁽²⁾	Maturity Date⁽³⁾
2023 Notes	November 2013	$	450,000	5.25%	December 2023
2024 Notes	October 2014	300,000		4.60%	October 2024
2026 Notes	December 2016 / September 2017	625,000		5.95%	December 2026


(1)	Issued by the Operating Partnership. CBL is a limited guarantor of the Operating Partnership's obligations under the Notes as described above.

(2)

Interest is payable semiannually in arrears. The interest rate for the 2024 Notes and the 2023 Notes is subject to an increase ranging from 0.25% to 1.00% from time to time if, on or after January 1, 2016 and prior to January 1, 2020, the ratio of secured debt to total assets of the Company, as defined, is greater than 40% but less than 45%. The required ratio of secured debt to total assets for the 2026 Notes is 40% or less. As of September 30, 2019, this ratio was 34% as shown below.

(3)

The Notes are redeemable at the Operating Partnership's election, in whole or in part from time to time, on not less than 30 days and not more than 60 days' notice to the holders of the Notes to be redeemed. The 2026 Notes, the 2024 Notes and the 2023 Notes may be redeemed prior to September 15, 2026, July 15, 2024, and September 1, 2023, respectively, for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date and a make-whole premium calculated in accordance with the indenture. On or after the respective dates noted above, the Notes are redeemable for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest. If redeemed prior to the respective dates noted above, each issuance of Notes is redeemable at the treasury rate plus 0.50%, 0.35% and 0.40% for the 2026 Notes, the 2024 Notes and the 2023 Notes, respectively.

Senior Secured Credit Facility

In January 2019, the Company entered into a new $1,185,000 senior secured credit facility, which included a fully-funded $500,000 term loan and a revolving line of credit with a borrowing capacity of $685,000. The facility replaced all of the Company's prior unsecured bank facilities, which included three unsecured term loans with an aggregate balance of $695,000 and three unsecured revolving lines of credit with an aggregate capacity of $1,100,000. At closing, the Company utilized the line of credit to reduce the principal balance of the unsecured term loan from $695,000 to $500,000. The facility matures in July 2023 and bears interest at a variable rate of LIBOR plus 2.25%. The facility had an interest rate of 4.35% at September 30, 2019. The Operating Partnership is required to pay an annual facility fee, to be paid quarterly, which ranges from 0.25% to 0.35%, based on the unused capacity of the line of credit. The principal balance on the term loan will be reduced by $35,000 per year in quarterly installments. At September 30, 2019, the secured line of credit had an outstanding balance of $304,769 and the secured term loan had an outstanding balance of $473,750.

The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties.” The terms of the Notes provide that, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered into a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement.

Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership's condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to this quarterly report on Form 10-Q for ease of reference.

Financial Covenants and Restrictions

The agreements for the Notes and the senior secured credit facility contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum unencumbered asset and interest ratios, maximum secured indebtedness ratios, maximum total indebtedness ratios and limitations on cash flow distributions. The Company believes that it was in compliance with all financial covenants and restrictions at September 30, 2019.

The following presents the Company's compliance with key covenant ratios, as defined, of the Notes and the senior secured credit facility as of September 30, 2019:



Ratio	Required	Actual
Total debt to total assets	< 60%	53%
Secured debt to total assets	< 40%⁽¹⁾	34%
Total unencumbered assets to unsecured debt	> 150%	169%
Consolidated income available for debt service to annual debt service charge	> 1.5x	2.4x


(1)	Secured debt to total assets must be less than 40% for the 2026 Notes. Secured debt to total assets must be less than 45% for the 2023 Notes and the 2024 Notes until January 1, 2020, after which the required ratio will be reduced to 40%.

The agreements for the Notes and senior secured credit facility described above contain default provisions customary for transactions of this nature (with applicable customary grace periods). Additionally, any default in the payment of any recourse indebtedness greater than or equal to $50,000 of the Operating Partnership will constitute an event of default under the Notes.

Mortgages on Operating Properties

2019 Financings

In April 2019, the loan secured by Volusia Mall was refinanced to increase the principal balance to $50,000. In addition, the maturity date was extended to April 2024 and the fixed interest rate was reduced from 8.00% to 4.56%. The net proceeds from the new loan were used to retire the $41,000 existing loan.

In May 2019, the Company exercised an option to extend the loan secured by The Outlet Shoppes at Laredo to May 2021. In conjunction with the amendment, a payment of $10,800 was made to reduce the outstanding balance of the loan to $43,000. The noncontrolling interest partner in the joint venture funded its 35% share of the $10,800 payment.

2019 Loan Repayments



Date	Property	Interest Rate at Repayment Date	Scheduled Maturity Date	Principal Balance Repaid
April	Honey Creek Mall ⁽¹⁾	8.00%	July 2019	$	23,539


(1)	The Company retired the loan using proceeds from the refinancing of the loan secured by Volusia Mall as well as proceeds from the sale of Honey Creek Mall.

2019 Dispositions

The following is a summary of the Company's 2019 dispositions for which the fixed-rate loan secured by the mall was extinguished:



Transfer Date		Interest Rate at Repayment Date	Scheduled Maturity Date	Balance of Non-recourse Debt		Gain on Extinguishment of Debt
Transfer Date	Property	Interest Rate at Repayment Date	Scheduled Maturity Date	Balance of Non-recourse Debt		Gain on Extinguishment of Debt
January	Acadiana Mall ⁽¹⁾	5.67%	April 2017	$	119,760	$	61,795
January	Cary Towne Center ⁽²⁾	4.00%	June 2018	43,716		9,927
				$	163,476	$	71,722


(1)	The Company transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property.


(2)	The Company sold the mall for $31,500 and the net proceeds from the sale were used to satisfy a portion of the loan secured by the mall. The remaining principal balance was forgiven.

Scheduled Principal Payments

As of September 30, 2019, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including construction loans and lines of credit, are as follows:



2019 ⁽¹⁾	$	117,948
2020	246,342
2021	551,962
2022	469,036
2023	1,189,130
2024	404,496
Thereafter	747,740
	3,726,654
Unamortized discounts	(10,007		)
Unamortized deferred financing costs	(17,640		)
Total mortgage and other indebtedness, net	$	3,699,007


(1)	Reflects payments for the fiscal period October 1, 2019 through December 31, 2019.

Of the $117,948 of scheduled principal payments in 2019, $97,323 relates to the maturing principal balance of three operating property loans.

The Company’s mortgage and other indebtedness had a weighted-average maturity of 4.0 years as of September 30, 2019 and 3.7 years as of December 31, 2018.