NOTE 5. DEBT

All debt is incurred by the OP. The Parent does not have any indebtedness, but guarantees the unsecured debt issued by the OP.

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

	June 30, 2018					December 31, 2017
	Weighted Average Interest Rate (1)			Amount Outstanding (2)		Weighted Average Interest Rate (1)			Amount Outstanding (2)
Credit facilities		0.9	%	$	11,658		1.8	%	$	317,392
Senior notes		2.9	%		7,102,381		3.0	%		6,067,277
Term loans		1.2	%		1,402,568		1.7	%		2,046,945
Unsecured other		6.1	%		13,093		6.1	%		13,546
Secured mortgages		5.5	%		897,424		5.3	%		967,471
Total		2.9	%	$	9,427,124		2.9	%	$	9,412,631

(1)

The interest rates presented represent the effective interest rates (including amortization of debt issuance costs and the noncash premiums or discounts) at the end of the period for the debt outstanding and include the impact of interest rate swaps designated as cash flow hedges, which effectively fix the interest rate on our variable rate debt.

(2)	Included in the outstanding balances were borrowings denominated in non-U.S. dollars. The following table summarizes our debt by currency (in thousands):

	June 30, 2018		December 31, 2017
British pound sterling	$	653,632	$	671,522
Canadian dollar		274,180		451,080
Euro		4,184,844		3,839,422
Japanese yen		1,276,029		1,306,380
U.S. dollar		3,038,439		3,144,227
Total	$	9,427,124	$	9,412,631

Generally, we borrow in the functional currency of the consolidated subsidiaries but we also borrow in currencies other than the U.S. dollar in the OP and may designate this borrowing as a nonderivative financial instrument. We may also hedge our foreign currency risk by designating derivative financial instruments as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign investments. See Note 9 for more information about our nonderivative and derivative financial instruments.

Credit Facilities

We have a global senior credit facility (the “Global Facility”), under which we may draw in British pounds sterling, Canadian dollars, euro, Japanese yen and U.S. dollars on a revolving basis up to $3.0 billion (subject to currency fluctuations). We have the ability to increase the Global Facility to $3.8 billion, subject to currency fluctuations and obtaining additional lender commitments. 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 OP. The Global Facility is scheduled to mature in April 2020; however, we may extend the maturity date for six months on two occasions, subject to the satisfaction of certain conditions and payment of extension fees.

We also have a Japanese yen revolver (the “Revolver”) with availability of ¥50.0 billion ($451.7 million at June 30, 2018). We have the ability to increase the Revolver to ¥65.0 billion ($587.2 million at June 30, 2018), subject to obtaining additional lender commitments. Pricing under the Revolver, including the spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the OP. The Revolver is scheduled to mature in February 2021; however, we may extend the maturity date for one year, subject to the satisfaction of certain conditions and payment of extension fees.

We refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities.”

The following table summarizes information about our Credit Facilities at June 30, 2018 (in millions):

Aggregate lender commitments	$	3,479
Less:
Borrowings outstanding		12
Outstanding letters of credit		31
Current availability	$	3,436

Senior Notes

In January 2018, we issued €400.0 million ($494.2 million) of senior notes bearing a floating rate of Euribor plus 0.25%, maturing in January 2020. The exchange rate used to calculate into U.S. dollars was the spot rate at the date of the transaction. The effective interest rate was -0.08% at June 30, 2018, primarily due to the amortization of the net premium on the debt. In association with the issuance, we entered into cash flow hedges to effectively fix the interest rate, as discussed in Note 9. Following the issuance, we used the proceeds to pay down our multi-currency term loan (the “2017 Term Loan”) during the first quarter of 2018.

In June 2018, we issued $400.0 million of senior notes that bear an interest rate of 3.88% and mature in September 2028 and $300.0 million of senior notes that bear an interest rate of 4.38% and mature in September 2048. Following the issuance, we used the proceeds to pay down our Global Facility in the second quarter of 2018 and our Canadian term loan (the “2015 Canadian Term Loan”) in July 2018.

Term Loans

During the six months ended June 30, 2018, we borrowed on our Global Facility and paid down CAD 201.4 million ($158.9 million) on the 2015 Canadian Term Loan, leaving CAD $170.5 million ($128.7 million at June 30, 2018) outstanding. In association with the pay down of the 2015 Canadian Term Loan, we terminated our Canadian denominated cash flow hedges in February 2018. See Note 9 for more information.

During the six months ended June 30, 2018 and 2017, we paid down $1.0 billion and $575.7 million, and reborrowed $500.0 million and $877.5 million, on our 2017 Term Loan.

Long-Term Debt Maturities

Principal payments due on our debt for the remainder of 2018 and for each year through the period ended December 31, 2022, and thereafter were as follows at June 30, 2018 (in thousands):

	Unsecured
	Credit		Senior			Term Loans			Secured
Maturity	Facilities		Notes			and Other			Mortgages			Total
2018 (1)	$	-	$	-		$	492		$	108,137		$	108,629
2019 (1)		-		-			1,014			446,328			447,342
2020 (2)		11,658		1,165,802			1,077			12,409			1,190,946
2021		-		816,060			910			14,600			831,570
2022		-		816,060			452,455			10,636			1,279,151
Thereafter		-		4,356,824			968,756			306,385			5,631,965
Subtotal		11,658		7,154,746			1,424,704			898,495			9,489,603
Premiums (discounts), net		-		(23,909	)		-			2,212			(21,697	)
Debt issuance costs, net		-		(28,456	)		(9,043	)		(3,283	)		(40,782	)
Total	$	11,658	$	7,102,381		$	1,415,661		$	897,424		$	9,427,124

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

(2)	Included in the 2020 maturities was the Global Facility that can be extended until 2021, as discussed above.

Financial Debt Covenants

We have $7.1 billion of senior notes and $1.4 billion of term loans outstanding at June 30, 2018 under two separate indentures, as supplemented, that were subject to certain financial covenants. We are also subject to financial covenants under our Credit Facilities and certain secured mortgages. At June 30, 2018, we were in compliance with all of our financial debt covenants.

Guarantee of Finance Subsidiary Debt

In July 2018, we formed a finance subsidiary as part of our European operations, Prologis Euro Finance LLC (“Euro Finance Subsidiary”), that is 100% indirectly owned by the OP. All unsecured debt issued by the Euro Finance Subsidiary will be fully and unconditionally guaranteed by the OP. There are no restrictions or limits on the OP’s ability to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 3-10 of Regulation S-X, the separate financial statements of the Euro Finance Subsidiary are not provided.