Note 9. Debt

All debt is incurred by the Operating Partnership. The Parent does not have any indebtedness, but guarantees the unsecured debt of the Operating Partnership.

The following table summarizes our debt at December 31 (dollars in thousands):

	2015					2014
	Weighted Average Interest Rate (1)			Amount Outstanding (2)		Weighted Average Interest Rate (1)			Amount Outstanding
Credit facilities		-	%	$	-		-	%	$	-
Senior notes (3)		3.3	%		6,516,392		3.7	%		6,046,965
Exchangeable senior notes (4)	-				-		3.7	%		456,373
Term loans		2.1	%		2,100,009		1.4	%		568,037
Other debt (5)		6.2	%		15,448		6.2	%		16,087
Secured mortgage debt (6)		5.1	%		1,172,473		6.1	%		1,042,628
Secured mortgage debt of consolidated entities (7)		2.9	%		1,822,509		2.5	%		1,206,887
Totals		3.2	%	$	11,626,831		3.7	%	$	9,336,977

(1)	These interest rates represent the effective interest rates (including amortization of the noncash premiums, discounts or debt issuance costs) at the end of the period for the debt outstanding.

(2)	Included in the outstanding balances are borrowings denominated in non-U.S. currency, principally: euro ($3.4 billion), Japanese yen ($1.1 billion) and Canadian dollar ($0.4 million).

(3)	Notes are due January 2018 to June 2026 and effective interest rates range from 1.5% to 7.6% at December 31, 2015.

(4)	As explained below, this debt was paid off in 2015.

(5)

The balance at December 31, 2015, represents primarily assessment bonds with varying effective interest rates from 4.5% to 7.9% that are due June 2019 to September 2033. The assessment bonds are issued by municipalities and guaranteed by us as a means of financing infrastructure and secured by assessments (similar to property taxes) on various underlying real estate properties with an aggregate undepreciated cost of $780.3 million at December 31, 2015.

(6)	Debt is due May 2016 to December 2025 and effective interest rates range from 0.6% to 7.7% at December 31, 2015. The debt is secured by 175 real estate properties with an aggregate undepreciated cost of $2.9 billion at December 31, 2015.

(7)	Debt is due October 2016 to December 2027 and effective interest rates range from 1.9% to 5.3% at December 31, 2015. The debt is secured by 220 real estate properties with an aggregate undepreciated cost of $3.2 billion at December 31, 2015.

Credit Facilities

We have a global senior credit facility (the “Global Facility”), under which we may draw in U.S. dollars, euro, Japanese yen, British pounds sterling and Canadian dollars on a revolving basis up to $2.3 billion at December 31, 2015 (subject to currency fluctuations). The Global Facility is scheduled to mature on July 11, 2017; however, we may extend the maturity date twice, by six months each, subject to satisfaction of certain conditions and payment of extension fees. Pricing under the Global Facility, including the spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the Operating Partnership. The Global Facility contains customary representations, covenants and defaults (including a cross-acceleration to other recourse indebtedness of more than $50.0 million).

We also have a ¥45 billion ($373.8 million at December 31, 2015) Japanese yen revolver (the “Revolver”) with the ability to increase to ¥56.5 billion ($469.3 million at December 31, 2015) subject to obtaining additional lender commitments. Pricing under the Revolver was consistent with the Global Facility at December 31, 2015. The Revolver contains certain customary representations, covenants and defaults that are substantially the same as the corresponding provisions of the Global Facility.

We refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities.” The following table summarizes information about our Credit Facilities at December 31 (in millions):

	2015			2014			2013
For the years ended December 31:
Weighted average daily interest rate		1.1	%		1.1	%		1.7	%
Weighted average daily borrowings	$	261		$	182		$	789
Maximum borrowings outstanding at any month-end	$	942		$	742		$	1,325
At December 31:
Aggregate lender – commitments	$	2,662		$	2,742		$	2,451
Less:
Borrowings outstanding		-			-			726
Outstanding letters of credit		32			35			73
Current availability	$	2,630		$	2,707		$	1,652

Senior Notes

The senior notes are unsecured and our obligations are effectively subordinated in certain respects to any of our debt that is secured by a lien on real property, to the extent of the value of such real property. The senior notes require interest payments be made quarterly, semi-annually or annually. All of the senior notes are redeemable at any time at our option, subject to certain prepayment penalties. Such repurchase and other terms are governed by the provisions of indenture agreements, various note purchase agreements or trust deeds.

During the years ended December 31 we issued the following senior notes (dollars and euros in thousands):

2015	Principal Amount				Stated Interest Rate		Effective Interest Rate		Maturity Date
May 2015 (1)	€	700,000	$	785,470		1.4%		1.5%	May 2021
October 2015			$	750,000		3.8%		4.0%	November 2025

2014
February 2014 (1)	€	700,000	$	959,420		3.4%		3.5%	February 2024
June 2014 (1)	€	500,000	$	680,550		3.0%		3.1%	June 2026
October 2014 (1)	€	600,000	$	756,420		1.4%		1.4%	October 2020

(1)	This debt is denominated in euro and the exchange rate used to calculate into U.S. dollar was the effective rate at the date of the transaction.

Exchangeable Senior Notes

Our exchangeable senior notes were issued by the Operating Partnership and were exchangeable into common stock of the Parent. The accounting for the exchangeable senior notes required us to separate the fair value of the derivative instrument (exchange feature) from the debt instrument and account for it separately as a derivative. At December 31, 2014, we adjusted the derivative instrument to fair value, which was reflected in Other Liabilities. During the reporting periods, any adjustments to the fair value of the derivative were recorded in earnings as Foreign Currency and Derivative Gains (Losses) and Related Amortization, Net. The derivative on the debt instrument was amortized over the remaining term of the exchangeable notes. During March 2015, the holders of the exchangeable notes exchanged $459.8 million of their notes for 11.9 million shares of common stock of the Parent and $0.2 million of their notes for cash.

The fair value of the derivative associated with the exchangeable debt was a liability of $51.3 million at December 31, 2014. The fair value of the exchange option was $43.0 million immediately before the exchange in March 2015. When the debt was exchanged into common stock, the value of the derivative associated with the debt was reclassified to Additional Paid-In Capital. We recognized unrealized gains of $8.3 million during the first quarter of 2015 and unrealized losses of $10.3 million and $1.2 million for the years ended December 31, 2014 and 2013, respectively, on the change in fair value of the derivative instrument associated with the exchangeable debt.

Term Loans

The following table summarizes our outstanding term loans at December 31, (dollars in thousands):

Term Loan	Borrowing Currency	Initial Borrowing Date	Lender Commitment at 2015				Balance Outstanding at 2015			Balance Outstanding at 2014			Interest Rate	Maturity Date
			Local		USD		USD			USD
2014 Yen Term Loan (1)	JPY	May 2014	¥	40,916,000	$	339,858	$	339,858		$	342,051		LIBOR plus 1.20%	May 2021
Euro Term Loan (2)	USD, EUR, JPY and GBP	June 2014	€	500,000	$	561,879		561,879			230,679		LIBOR plus 0.98%	June 2017
Senior Term Loan (3) (4)	USD	May 2015			$	400,000		400,000			-		LIBOR plus 1.00%	May 2016
2015 Yen Term Loan (4)	JPY	June 2015	¥	65,000,000	$	539,906		539,906			-		LIBOR plus 1.10%	June 2022
2015 Canadian Term Loan	CAD	December 2015	$	371,925	$	267,872		267,872			-		CDOR rate plus 1.50%	February 2023
Subtotal								2,109,515			572,730
Unamortized debt issuance costs, net								(9,506	)		(4,693	)
Totals							$	2,100,009		$	568,037

(1)	We may increase the borrowings to ¥51.1 billion ($424.4 million at December 31, 2015), subject to obtaining additional lender commitments.

(2)

We may increase the borrowings up to €1.0 billion ($1.1 billion at December 31, 2015), subject to obtaining additional lender commitments. We may pay down and reborrow on this term loan. We may extend the maturity date twice, by one year each, subject to the satisfaction of certain conditions and payment of an extension fee). During 2015, we borrowed an additional €240 million ($272.6 million). During the second quarter of 2015, we paid off the entire euro balance and subsequently borrowed $561.9 million in connection with the KTR transaction.

(3)

We may extend the maturity date by one year, subject to the satisfaction of certain conditions and the payment of an extension fee. The Senior Term Loan contains customary representations, covenants and defaults (including cross payment default and cross-acceleration to other recourse indebtedness of more than $100.0 million). We initially borrowed $1.0 billion under this agreement.

(4)	We entered into these term loans in connection with the KTR acquisition.

Secured Mortgage Debt and Secured Mortgage Debt of Consolidated Entities

During 2015, we assumed secured mortgage debt valued at $1.0 billion, which included debt assumed with the KTR acquisition, and includes premiums of $39.6 million. The debt has stated interest rates ranging from 2.6% to 7.6% (effective interest rates ranging from 1.9% to 4.0%) and has maturity dates of December 2016 to April 2023.

During 2015, we issued secured mortgage debt totaling $471.9 million, which included Canadian secured mortgage debt of CAD $195.0 million ($140.4 million at December 31, 2015). The debt has stated interest rates ranging from 1.7% to 3.7% (effective interest rates ranging from 2.0% to 3.7%) and has maturity dates of July 2020 to December 2025.

In connection with the acquisitions of a controlling interest in NAIF in 2014, we assumed secured mortgage debt of $1.2 billion, which includes premiums of $84.2 million. The debt has stated interest rates ranging from 5.0% to 6.5% (effective interest rates ranging from 1.9% to 3.4%) and has maturity dates of October 2016 to December 2020.

TMK bonds are a financing vehicle in Japan for special purpose companies known as TMKs. During 2015, we issued new TMK bonds (with interest rates ranging from 0.6% to 0.8% scheduled to mature from September 2016 and October 2016) totaling ¥23.0 billion ($191.0 million at December 31, 2015). During 2014, we issued ¥7.2 billion ($70.7 million) of new TMK bonds and paid off or transferred all of our outstanding TMK bonds, leaving no TMK bonds outstanding at December 31, 2014.

Debt Covenants

We have approximately $6.5 billion of senior notes and $2.1 billion of term loans outstanding at December 31, 2015 that were issued under three separate indentures, as supplemented, and are subject to certain financial covenants. We are also subject to financial covenants under our Credit Facilities and certain secured mortgage debt. At December 31, 2015, we were in compliance with all of our debt covenants.

Long-Term Debt Maturities

Principal payments due on our debt, for each year through the period ending December 31, 2025, and thereafter were as follows at December 31, 2015 (in millions):

	Prologis
	Unsecured
	Credit		Senior			Term Loans and			Secured Mortgage						Consolidated Entities’			Total Consolidated
Maturity	Facilities		Notes			Other Debt			Debt			Total			Debt			Debt
2016 (1) (2)	$	-	$	-		$	401		$	363		$	764		$	170		$	934
2017 (3)		-		-			563			8			571			516			1,087
2018		-		175			1			167			343			403			746
2019		-		618			1			305			924			143			1,067
2020		-		849			1			6			856			252			1,108
2021		-		1,262			341			13			1,616			128			1,744
2022		-		762			541			9			1,312			1			1,313
2023		-		850			269			32			1,151			142			1,293
2024		-		762			1			132			895			1			896
2025		-		750			1			129			880			1			881
Thereafter		-		544			6			-			550			2			552
Subtotal		-		6,572			2,126			1,164			9,862			1,759			11,621
Unamortized premiums (discounts), net		-		(23	)		-			13			(10	)		68			58
Unamortized debt issuance costs, net		-		(33	)		(10	)		(5	)		(48	)		(4	)		(52	)
Totals	$	-	$	6,516		$	2,116		$	1,172		$	9,804		$	1,823		$	11,627

(1)	We expect to repay the amounts maturing in 2016 related to our wholly owned debt with cash generated from operations, proceeds from dispositions of wholly owned real estate properties, or as necessary, with borrowings on our Credit Facilities.

(2)	Included in 2016 maturities is the Senior Term Loan that can be extended until 2017.

(3)	Included in 2017 maturities is the Euro Term Loan that can be extended until 2019.

Interest Expense

The following table summarizes the components of interest expense from continuing operations for the years ended December 31 (in thousands):

	2015			2014			2013
Gross interest expense	$	394,012		$	377,666		$	471,923
Amortization of premium, net		(45,253	)		(21,440	)		(39,015	)
Amortization of deferred loan costs		13,412			14,116			14,374
Interest expense before capitalization	$	362,171		$	370,342		$	447,282
Capitalized amounts		(60,808	)		(61,457	)		(67,955	)
Net interest expense	$	301,363		$	308,885		$	379,327
Total cash paid for interest, net of amounts capitalized	$	345,916		$	258,441		$	426,528

Early Extinguishment of Debt

In an effort to reduce our borrowing costs and extend our debt maturities, we repurchased certain debt, principally outstanding senior notes and secured mortgage debt, generally with proceeds from the issuance of senior notes outlined above, and in 2013, an equity offering (as described in Note 10). As a result, we recognized a gain or loss represented by the difference between the recorded debt (including premiums and discounts and related debt costs) and the consideration we paid to retire the debt, including fees.

The following table summarizes the activity related to the repurchase of debt and net loss on early extinguishment of debt for the years ending December 31 (in millions):

	2015		2014		2013
Senior notes:
Original principal amount	$	709.7	$	1,290.4	$	2,142.0
Cash purchase price	$	789.0	$	1,460.3	$	2,411.9
Term loans:
Original principal amount	$	600.0	$	-	$	-
Cash repayment price	$	600.0	$	-	$	-
Secured mortgage debt:
Original principal amount	$	571.5	$	528.0	$	1,570.9
Cash repayment price	$	595.5	$	531.2	$	1,570.9
Total:
Original principal amount	$	1,881.2	$	1,818.4	$	3,712.9
Cash purchase/repayment price	$	1,984.5	$	1,991.5	$	3,982.8
Loss on early extinguishment of debt	$	86.3	$	165.3	$	277.0