5. DEBT

Debt consists of the following:


	Carrying Value						Principal Amounts
	June 30, 2013			December 31, 2012			June 30, 2013
Mortgage Debt:
Traverse City/Kansas City mortgage loan	$	61,660		$	62,215		$	62,914
Pocono Mountains mortgage loan		92,244			93,114			90,984
Concord mortgage loan		47,440			49,158			47,285
First mortgage notes		255,456			258,293			230,000
Other Long-Term Debt:
Junior subordinated debentures		61,164			60,984			80,545

		517,964			523,764			511,728
Less current portion of long-term debt		(65,881	)		(66,768	)		(65,881	)

Total long-term debt	$	452,083		$	456,996		$	445,847

The carrying value amounts as of June 30, 2013 and December 31, 2012, include net fair value adjustments that are amortized to interest expense over the life of each loan, using the effective interest rate method. The unamortized fair value adjustment as of June 30, 2013 and December 31, 2012 was $6,236 and $8,705, respectively.

Traverse City/Kansas City Mortgage Loan — This non-recourse loan is secured by our Traverse City and Kansas City resorts. The loan bears interest at a fixed rate of approximately 7.00%, is subject to a 25-year principal amortization schedule, and matures in January 2015. The loan has customary financial and operating debt compliance covenants. The loan also has customary restrictions on our ability to prepay the loan prior to maturity. We were in compliance with all covenants under this loan at June 30, 2013. While recourse under the loan is limited to the property owner’s interest in the mortgaged property, we have provided limited guarantees with respect to certain customary non-recourse provisions and environmental indemnities relating to the loan.

In September 2010, the loan’s master servicer implemented a lock-box cash management arrangement. The lock-box cash management arrangement requires substantially all cash receipts for the two resorts to be moved each day to a lender-controlled bank account, which the loan servicer then uses to fund debt service and operating expenses for the two resorts on a monthly basis, with excess cash flow being deposited in a reserve account and held as additional collateral for the loan. Therefore, we have classified the entire outstanding principal balance of the loan as a current liability as of June 30, 2013 and December 31, 2012, since the lock-box arrangement requires us to use the properties’ working capital to service the loan, and we do not presently have the ability to refinance this loan to a new, long-term loan. Although the entire principal balance of the loan is classified as a current liability as of June 30, 2013 and December 31, 2012, the loan is not in default, and the principal balance is not due currently.

Pocono Mountains Mortgage Loan — This loan is secured by a mortgage on our Pocono Mountains resort. The loan bears interest at a fixed rate of 6.10% and matures in January 2017. The loan is currently subject to a 30-year principal amortization schedule. The loan has customary covenants associated with an individual mortgaged property. The loan also has customary restrictions on our ability to prepay the loan prior to maturity. We were in compliance with all covenants under this loan at June 30, 2013.

Concord Mortgage Loan — This loan is secured by a mortgage on our Concord resort. This loan bears interest at a floating rate of 30-day LIBOR plus a spread of 500 basis points with a minimum rate of 6.00% per annum (effective rate of 6.00% at June 30, 2013 and December 31, 2012) and matures on December 31, 2016. This loan requires four quarterly principal payments of $375. We are required to provide interest rate protection on a portion of the loan amount through the loan’s maturity date. Therefore, we executed interest rate caps that cap the loan at an 8.00% interest rate through December 2016. See Note 7 for additional discussion of the interest rate caps. We were in compliance with all covenants under this loan at June 30, 2013.

First Mortgage Notes — In April 2010, we completed, in a private placement followed by a registered exchange offer, an offering of $230,000 in aggregate principal amount of our 10.875% first mortgage notes (the “Notes”) due April 2017. The Notes were sold at a discount that provides an effective yield of 11.875% before transaction costs. The Notes are senior obligations of GWR Operating Partnership, L.L.L.P. and Great Wolf Finance Corp (“Issuers”). The Notes are guaranteed by Great Wolf Resorts and by our subsidiaries that own three of our resorts and those guarantees are secured by first priority mortgages on those three resorts. The Notes are also guaranteed by certain of our other subsidiaries on a senior unsecured basis.

Junior Subordinated Debentures — In March 2005, we completed a private offering of $50,000 of trust preferred securities (“TPS”) through Great Wolf Capital Trust I (“Trust I”), a Delaware statutory trust which is our subsidiary. The securities pay holders cumulative cash distributions at an annual fixed rate of 7.80% through March 2015 and then at a floating annual rate of LIBOR plus a spread of 310 basis points thereafter. The securities mature in March 2035 and are callable at no premium after March 2010. In addition, we invested $1,550 in Trust I’s common securities, representing 3% of the total capitalization of Trust I.

In March 2012, we completed an exchange through Great Wolf Capital Trust IV (“Trust IV”), a Delaware statutory trust which is our subsidiary, and issued $28,125 of TPS in exchange for all $28,125 of TPS of Great Wolf Capital Trust III (“Trust III”). The securities pay holders cumulative cash distributions at an annual fixed rate of 7.90% through July 2012 and at a floating annual rate equal to LIBOR plus 550 basis points thereafter (effective rate of 5.78% and 5.81% at June 30, 2013 and December 31, 2012, respectively). The securities mature in July 2017 and are callable at no premium after July 2012. In conjunction with this transaction, Trust IV issued to us 870 common securities, which are all of the issued and outstanding common securities of Trust IV, with a liquidation amount of $870. In addition, in conjunction with this transaction, we issued to Trust IV $28,995 of junior subordinated debentures with payment terms that mirror the distribution terms of the TPS of Trust IV.

Our condensed consolidated financial statements present the debentures issued to the Trusts as other long-term debt. Our investments in the Trusts are accounted for as cost investments and are included in other assets on our consolidated balance sheets. For financial reporting purposes, we record interest expense on the corresponding notes in our condensed consolidated statements of income.

For a description of the refinancing of certain of our debt that occurred after June 30, 2013, see the information provided under Note 11.