NOTE 6. DEBT

All debt is incurred by the OP or its consolidated subsidiaries. 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):

	September 30, 2018					December 31, 2017
	Weighted Average Interest Rate (1)			Amount Outstanding (2) (3)		Weighted Average Interest Rate (1)			Amount Outstanding (2)
Credit facilities		0.8	%	$	235,822		1.8	%	$	317,392
Senior notes		2.7	%		8,353,096		3.0	%		6,067,277
Term loans		1.5	%		1,765,300		1.7	%		2,046,945
Unsecured other		6.1	%		13,093		6.1	%		13,546
Secured mortgages		5.3	%		864,818		5.3	%		967,471
Total		2.7	%	$	11,232,129		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 undesignated and designated interest rate swaps, 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:

	September 30, 2018		December 31, 2017
British pound sterling	$	648,184	$	671,522
Canadian dollar		279,184		451,080
Euro		5,166,017		3,839,422
Japanese yen		1,791,824		1,306,380
U.S. dollar		3,346,920		3,144,227
Total	$	11,232,129	$	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 10 for more information about our nonderivative and derivative financial instruments.

(3)	Through the DCT Transaction, we assumed $1.9 billion of debt with a weighted average interest rate of 3.4%, which includes the noncash premium. Prior to September 30, 2018, we paid down $1.8 billion of the assumed debt.

In order to pay down the debt, we utilized the proceeds principally from the issuance of the following senior notes: (i) in June 2018, $700.0 million senior notes due in September 2028 through 2048 with interest rates ranging from 3.9% to 4.4%; (ii) in July 2018, €700.0 million ($818.7 million) senior notes due in January 2029 with an interest rate of 1.9%; and (iii) in September 2018, ¥55.1 billion ($488.7 million) senior notes due in September 2025 through 2038 with interest rates ranging from 0.7% to 1.5%. The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date.

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 ($441.1 million at September 30, 2018). We have the ability to increase the Revolver to ¥65.0 billion ($573.4 million at September 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 September 30, 2018 (in millions):


Aggregate lender commitments	$	3,453
Less:
Borrowings outstanding		236
Outstanding letters of credit		32
Current availability	$	3,185

Senior Notes

In January 2018, we issued €400.0 million ($494.2 million) of senior notes bearing a floating rate of Euribor plus 0.3%, maturing in January 2020. The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date. In association with the issuance, we entered into cash flow hedges to effectively fix the interest rate, as discussed in Note 10. 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.

We also issued senior notes as described above to pay down debt assumed in the DCT Transaction of $1.8 billion, as well as for general corporate purposes.

Term Loans

During the nine months ended September 30, 2018, we borrowed on our Global Facility and paid down CAD 201.4 million ($158.9 million) on a Canadian term loan (“2015 Canadian Term Loan”), leaving CAD 170.5 million ($131.0 million at September 30, 2018) outstanding. In association with the pay down, we terminated our Canadian-denominated cash flow hedges in February 2018. See Note 10 for more information.

During the nine months ended September 30, 2018 and 2017, we paid down $1.5 billion and $1.1 billion, respectively, and reborrowed $1.4 billion and $1.0 billion, respectively, 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 September 30, 2018 (in thousands):

	Unsecured
	Credit		Senior			Term Loans			Secured
Maturity	Facilities		Notes			and Other			Mortgages			Total
2018 (1)	$	-	$	-		$	492		$	2,427			2,919
2019 (1)		-		-			1,014			443,143			444,157
2020 (2)		219,944		1,157,600			391,077			23,493			1,792,114
2021 (2)		15,878		810,320			910			71,073			898,181
2022		-		810,320			441,792			12,236			1,264,348
Thereafter		-		5,637,801			951,438			314,545			6,903,784
Subtotal		235,822		8,416,041			1,786,723			866,917			11,305,503
Premiums (discounts), net		-		(27,318	)		-			1,547			(25,771	)
Debt issuance costs, net		-		(35,627	)		(8,330	)		(3,646	)		(47,603	)
Total	$	235,822	$	8,353,096		$	1,778,393		$	864,818		$	11,232,129

(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 and 2017 Term Loan that can be extended until 2021 and 2022, respectively. Included in the 2021 maturities was the Revolver that can be extended until 2022.

Financial Debt Covenants

We have $8.4 billion of senior notes and $1.8 billion of term loans outstanding at September 30, 2018 that were subject to certain financial covenants under their related indentures. We are also subject to financial covenants under our Credit Facilities and certain secured mortgage debt. At September 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 operations in Europe, Prologis Euro Finance LLC (“Euro Finance Subsidiary”).

In August 2018, we formed a finance subsidiary as part of our operations in Japan, Prologis Yen Finance LLC (“Yen Finance Subsidiary”).

In October 2018, we formed a finance subsidiary as part of our operations in the United Kingdom, Prologis Sterling Finance LLC (“Sterling Finance Subsidiary”).

The Euro Finance Subsidiary and Yen Finance Subsidiary are 100% indirectly owned by the OP and all unsecured debt issued by each entity is fully and unconditionally guaranteed by the OP. The Sterling Finance Subsidiary is 100% indirectly owned by the OP and all unsecured debt issued 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, Yen Finance Subsidiary and Sterling Finance Subsidiary are not provided.