Debt and obligations under capital lease

(a) Long-term debt and obligations under capital lease

Long-term debt and obligations under capital lease consists of the following:



	2013	2012
December 31,	$’000	$’000

Loans from banks and other parties collateralized by property, plant and equipment payable over periods of one to nine years (2012 - one to 20 years), with a weighted average interest rate of 4.22% (2012 - 4.14%)	543,567	521,494
Obligations under capital lease	14	66

Total long-term debt and obligations under capital lease	543,581	521,560

Less: Current portion	71,011	90,115

Non-current portion of long-term debt and obligations under capital lease	472,570	431,445

For the renovation of El Encanto, Santa Barbara, California, OEH entered into a loan agreement in August 2011 for $45,000,000 to be drawn as construction progressed. At December 31, 2013, OEH had borrowed $43,988,000 (2012 - $25,749,000) under this facility. The loan has a maturity of three years, with two one year extensions, at an annual interest rate based on monthly LIBOR plus 3.65%.

In June 2012, OEH renewed a loan secured by Napasai, Koh Samui, Thailand. The loan consists of two tranches, a $9,000,000 facility and a THB135,000,000 ($4,251,000) facility. Annual interest on both tranches is 3.00% over LIBOR and BIBOR, the respective reference rates, and both mature in July 2017.

In September 2012, OEH drew a new loan facility of €35,000,000 ($44,400,000) to refinance €36,844,000 ($46,757,000) of long-term debt maturing in 2013 secured by the two Sicilian hotels. The loan matures in three years and bears interest at a rate of EURIBOR plus 5.00% per annum. OEH has entered into interest rate swaps to fix the variable interest rate of the full amount on the loan at 5.59%.

In December 2012, OEH entered into a $50,000,000 loan secured by Grand Hotel Europe, St. Petersburg, Russia. The first tranche of $24,000,000 was drawn in the year ended December 31, 2013 and used for general corporate purposes, including repayment of $4,000,000 of existing debt secured by the hotel. The second tranche of $26,000,000 is being used for the hotel's refurbishment project. From this second tranche, $2,000,000 has been drawn in the year ended December 31, 2013. Annual interest on both tranches is 7.00% over LIBOR and the facility has a maturity of five years. A capital lease on the hotel was extinguished as part of the refinancing, resulting in a gain of $1,514,000 in the year ended December 31, 2012.

In July 2013, OEH entered into a new loan facility for $24,000,000 secured by The Inn at Perry Cabin and ‘21’ Club. Annual interest is 3.00% over LIBOR and the facility has a maturity of five years. Of these loan proceeds, $17,130,000 was used to repay existing debt secured by these properties.

In August 2013, OEH signed a new loan facility secured by Le Manoir aux Quat’Saisons, Oxfordshire, England, and Reid’s Palace. The loan consists of two tranches – €15,000,000 (equivalent to $19,925,000 at the date drawn) which is secured by Reid’s Palace and £12,981,000 (equivalent to $19,826,000 at the date drawn) secured by Le Manoir aux Quat’Saisons. The euro tranche has annual interest of 4.00% above EURIBOR and a maturity of 18 months, and the sterling tranche has annual interest of 3.75% over LIBOR and a maturity of five years. The loan proceeds were used to repay existing debt secured by these properties.

In October 2013, OEH entered into a new loan facility for £20,000,000 (equivalent to $32,334,000 on October 31, 2013) secured by OEH's European train assets. The first tranche of £16,000,000 (equivalent to $25,867,000 on October 31, 2013) was used to refinance the previous loan secured on the trains. The second tranche of £4,000,000 (equivalent to $6,467,000 on October 31, 2013) was undrawn at December 31, 2013 and is available to finance future expansion. The facility has a maturity of five years and bears interest at a rate of LIBOR plus 4.00% per annum.

In addition, the maturities of two further loans were extended subsequent to December 31, 2013 and have been classified as long-term debt. See Note 24.

At December 31, 2013, one of OEH’s subsidiaries had not complied with certain financial covenants in a loan facility. The $556,000 outstanding on this loan is due to be repaid in the first quarter of 2014.

Most of OEH’s loan facilities relate to specific hotel or other properties and are secured by a mortgage on the particular property. In most cases, the Company is either the borrower or the subsidiary owning the property is the borrower, with the loan guaranteed by the Company.

The loan facilities generally place restrictions on the property-owning company’s ability to incur additional debt and limit liens, and restrict mergers and asset sales, and include financial covenants. Where the property-owning subsidiary is the borrower, the financial covenants relate to the financial performance of the property financed and generally include covenants relating to interest coverage, debt service, and loan-to-value and debt-to-EBITDA tests. Most of the facilities under which the Company is the borrower or the guarantor also contain financial covenants which are based on the performance of OEH on a consolidated basis. The covenants include a quarterly interest coverage test, minimum cash requirement test and a quarterly net worth test.

Many of OEH's bank loan facilities include cross-default provisions under which a failure to pay principal or interest by the borrower or guarantor under other indebtedness in excess of a specified threshold amount would cause a default under the facilities. Under OEH's largest loan facility, the specified cross-default threshold amount is $25,000,000. At December 31, 2013, no cross-default provision in a loan facility had been triggered.

The following is a summary of the aggregate maturities of long-term debt, including obligations under capital lease, at December 31, 2013:



Year ended December 31,		$’000

2014		71,011
2015		380,388
2016		28,510
2017		22,839
2018		38,112
2019 and thereafter		2,721

Total long-term debt and obligations under capital lease		543,581

The Company has guaranteed $384,818,000 of the long-term debt of its subsidiary companies as at December 31, 2013 (2012 -$341,078,000).

Deferred financing costs related to the above outstanding long-term debt were $11,080,000 at December 31, 2013 (2012 - $13,694,000) and are amortized to interest expense over the term of the corresponding long-term debt.

The debt of Charleston Center LLC, a consolidated VIE, of $96,150,000 at December 31, 2013 (2012 - $97,945,000) is non-recourse to OEH and separately disclosed on the consolidated balance sheet. The debt was entered into in October 2010 and has a maturity of three years, with two one year extensions and the interest rate is at LIBOR plus a margin of 3.50% per annum. See Note 5.

(b) Working capital loans

OEH had approximately $3,021,000 of working capital lines of credit at December 31, 2013 (2012 - $4,473,000) repayable within one year issued by various financial institutions and having various expiration dates, of which $2,883,000 was undrawn (2012 - $4,473,000). The weighted average interest rate on the amount of $138,000 drawn at December 31, 2013 was 6.24%.

The following is a summary of future minimum lease payments under capital leases together with the present value of the minimum lease payments at December 31, 2013:



Year ended December 31,		$’000

2014		14
Minimum lease payments		14
Less: Amount of interest contained in above payments		—

Present value of minimum lease payments		14

The amount of interest deducted from minimum lease payments to arrive at the present value is the interest contained in each of the leases.