Debt

Consolidated debt consisted of the following (in thousands):



	Encumbered Hotels		Interest Rate (%)		December 31,
	Encumbered Hotels		Interest Rate (%)	Maturity Date	2013		2012
Line of credit		9	LIBOR + 3.375	June 2016^(a)	$	88,000	$	56,000
Hotel mortgage debt
Mortgage debt^(b)		5	6.66	June - August 2014	63,337		65,431
Mortgage debt		1	5.81	July 2016	9,904		10,405
Mortgage debt^(b)		4	4.95	October 2022	126,220		128,066
Mortgage debt		1	4.94	October 2022	31,714		32,176
Senior notes
Senior secured notes^(c)		11	10.00	October 2014	229,190		223,586
Senior secured notes		6	6.75	June 2019	525,000		525,000
Senior secured notes		9	5.625	March 2023	525,000		525,000
Other^(d)		—	LIBOR + 1.25	May 2016	64,861		64,861
Total		46			$	1,663,226	$	1,630,525


(a)	Our $225 million line of credit can be extended for one year (to 2017), subject to satisfying certain conditions.


(b)	This debt is comprised of separate non-cross-collateralized loans each secured by a mortgage of a different hotel.


(c)	We originally issued $636 million (face amount) of these notes. After redemptions in 2011 and 2012, $234 million (face amount) of these notes were outstanding at December 31, 2013. These notes were initially sold at a discount that provided an effective yield of 12.875% before transaction costs.


(d)	This loan is related to our Knickerbocker Hotel development project and is fully secured by restricted cash and a mortgage. Because we were able to assume an existing loan when we purchased this hotel, we were not required to pay any local mortgage recording tax. This loan, which allows us to borrow up to $85 million, can be extended for one year subject to satisfying certain conditions.

In May 2012, we repaid $69.2 million in secured loans when we sold the hotels mortgaged to secure those loans.

In August 2012, we repaid a $24.9 million secured loan when we sold the hotel mortgaged to secure that loan.

In September 2012, we closed five mortgage loans thereby obtaining $160.8 million in aggregate gross proceeds. The 10‑year loans mature in 2022, bear an average fixed interest rate of 4.95% and are neither cross-collateralized nor cross-defaulting. A portion of the proceeds from the new loans was used to repay a 9.02% mortgage loan, of which $107 million was outstanding, that would otherwise mature in 2014. The repaid loan was secured by a pool of seven hotels, including four of the five hotels mortgaged to support the new loans. Also in September 2012, we repaid the remaining $60 million balance of a mortgage loan using excess proceeds from the new loans, as well as asset sale proceeds. This repaid loan, which would have otherwise matured in 2013, was secured by five properties, of which three became unencumbered (two of which were non-strategic). The repayments resulted in $11.6 million in debt extinguishment costs, primarily prepayment penalties.


10.	Debt – (continued)

In December 2012, we issued $525.0 million aggregate principal amount of 5.625% senior secured notes due 2023, significantly reducing our cost of borrowing. We used the proceeds to redeem $258.0 million in aggregate face amount of 10% senior notes due 2014 and repay a $186.5 million mortgage loan that bore interest at 8.1% with the remaining proceeds used to repay a portion of the balance on our outstanding line of credit and to pay prepayment costs and other expenses. We incurred $62.1 million of debt extinguishment charges related to these transactions for prepayment premiums, and the write-off of a pro rata portion of the related debt discount on the senior notes and deferred loan costs.

In March 2011, we established a $225.0 million secured line of credit. At the same time, we repaid a $198.3 million secured loan and a $28.8 million secured loan with a combination of $52.1 million of cash on hand and funds drawn under our new line of credit (all of which was subsequently repaid). The repaid loans would have matured in 2013 and 2012 (including extensions), respectively, and were secured by mortgages on 11 hotels. In December 2012, we amended and restated our $225.0 million secured line of credit facility. The facility now matures in June 2017 (extended from August 2015), inclusive of a one-year extension option, subject to satisfaction of certain conditions. Borrowings under the facility bear interest at LIBOR (no floor) plus 3.375% (reduced from LIBOR plus 4.5%). The unused commitment fee decreased 10 basis points to 40 basis points. The facility is secured by mortgages and related security interests on nine hotels

In October 2011, we modified the term of a CMBS mortgage loan scheduled to mature in November 2011, extending its maturity for up to two years. The average interest rate on the modified loan was LIBOR plus 2.2% and was prepayable at any time, in whole or in part, with no penalty. In conjunction with the modification, we repaid $20.0 million of the principal balance, reducing the outstanding balance to $158 million at that time. This loan was repaid in September 2012.

In November 2012, we obtained an $85.0 million construction loan to finance the redevelopment of the Knickerbocker. The balance of the loan assumed when we acquired the Knickerbocker in December 2011 ($64.9 million) was repaid with an initial draw under the construction loan. At December 31, 2013, $64.9 million was outstanding under the construction loan, secured by cash collateral and a mortgage.

Our senior notes require that we satisfy total leverage, secured leverage and interest coverage thresholds in order to: (i) incur additional indebtedness except to refinance maturing debt with replacement debt, as defined under our indentures; (ii) pay dividends in excess of the minimum distributions required to meet the REIT qualification test; (iii) repurchase capital stock; or (iv) merge. We currently exceed all minimum thresholds. These notes are guaranteed by us, and payment of our 10.00% notes are secured by a pledge of the limited partner interests in FelCor LP owned by FelCor. In addition, our senior notes are secured by a combination of first lien mortgages and related security interests and/or negative pledges on up to 26 hotels, and pledges of equity interests in certain subsidiaries of FelCor LP.

At December 31, 2013, we had consolidated secured debt totaling $1.7 billion, encumbering 46 of our consolidated hotels with a $1.6 billion aggregate net book value. Except in the case of our Senior Notes, our mortgage debt is generally recourse solely to the specific assets securing the debt. However, a violation of any of the recourse carve-out provisions, including fraud, misapplication of funds and other customary recourse carve-out provisions, could cause this debt to become fully recourse to us. Much of our hotel mortgage debt allows us to substitute collateral under certain conditions and is prepayable subject (in some instances) to various prepayment, yield maintenance or defeasance obligations.


10.	Debt – (continued)

Much of our secured debt (other than our senior notes) includes lock-box arrangements under certain circumstances. We are permitted to spend an amount required to cover our budgeted hotel operating expenses, taxes, debt service, insurance and capital expenditure reserves even if revenues are flowing through a lock-box in cases where a specified debt service coverage ratio is not met. With the exception of loans secured by two hotels, all of our consolidated hotels subject to lock-box provisions currently exceed the applicable minimum debt service coverage ratios.

To fulfill requirements under certain loans, we owned interest rate caps with aggregate notional amounts of $202.4 million as of December 31, 2012. These interest rate caps were not designated as hedges and had insignificant fair values at December 31, 2012, resulting in no significant net earnings impact. We did not have any interest rate caps outstanding as of December 31, 2013.

We reported $103.8 million, $121.6 million, and $126.0 million of interest expense for the years ended December 31, 2013, 2012, and 2011, respectively, which is net of: (i) interest income of $78,000, $138,000, and $234,000, and (ii) capitalized interest of $12.8 million, $12.9 million, and $2.2 million, respectively.

Future scheduled principal payments on debt obligations at December 31, 2013 are as follows (in thousands):



Year
2014	$	300,045
2015	3,107
2016	164,322
2017	2,810
2018	2,954
Thereafter	1,194,702
	1,667,940
Discount accretion over term	(4,714		)
	$	1,663,226