DEBT

Secured Indebtedness

The Company’s secured debt consists of the following (dollars in thousands):



Interest Rate Type	Principal Balance as of September 30, 2018 ⁽¹⁾		Principal Balance as of December 31, 2017⁽¹⁾		Weighted Average Effective Interest Rate at September 30, 2018 ⁽²⁾		Maturity Date
Fixed Rate	$	157,012	$	160,702	3.87	%	December 2021 - August 2051
Variable Rate	98,500		98,500		4.06	%	July 2019
	$	255,512	$	259,202	3.95	%


⁽¹⁾	Principal balance does not include deferred financing costs, net of $2.7 million and $2.8 million as of September 30, 2018 and December 31, 2017, respectively.


⁽²⁾	Weighted average effective interest rate includes private mortgage insurance.

On August 17, 2017, in connection with the CCP Merger (see Note 3, “CCP Merger and Recent Real Estate Acquisitions”), the Company assumed a $98.5 million variable rate secured term loan that bears interest at LIBOR plus 1.80% and matures in July 2019.

Senior Unsecured Notes

The Company’s senior unsecured notes consist of the following (dollars in thousands):



		Principal Balance as of
Title	Maturity Date	September 30, 2018 ⁽¹⁾		December 31, 2017 ⁽¹⁾

5.5% senior unsecured notes due 2021 (“2021 Notes”)	February 1, 2021	$	500,000	$	500,000
5.375% senior unsecured notes due 2023 (“2023 Notes”)	June 1, 2023	200,000		200,000
5.125% senior unsecured notes due 2026 (“2026 Notes”)	August 15, 2026	500,000		500,000
5.38% senior unsecured notes due 2027 (“2027 Notes”)	May 17, 2027	100,000		100,000
		$	1,300,000	$	1,300,000


⁽¹⁾	Principal balance does not include premium, net of $14.9 million and deferred financing costs, net of $7.7 million as of September 30, 2018 and does not include premium, net of $15.9 million and deferred financing costs, net of $9.6 million as of December 31, 2017.

The 2021 Notes and the 2023 Notes were issued by the Operating Partnership and Sabra Capital Corporation, wholly owned subsidiaries of the Company (the “Issuers”). The 2021 Notes accrue interest at a rate of 5.5% per annum payable semiannually on February 1 and August 1 of each year, and the 2023 Notes accrue interest at a rate of 5.375% per annum payable semiannually on June 1 and December 1 of each year.

The 2026 Notes and the 2027 Notes were assumed as a result of the CCP Merger (see Note 3, “CCP Merger and Recent Real Estate Acquisitions”) and accrue interest at a rate of 5.125% and 5.38%, respectively, per annum. Interest is payable semiannually on February 15 and August 15 of each year for the 2026 Notes and on May 17 and November 17 of each year for the 2027 Notes.

The obligations under the 2021 Notes, 2023 Notes and 2027 Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by Sabra and certain subsidiaries of Sabra; provided, however, that such guarantees are subject to release under certain customary circumstances. The obligations under the 2026 Notes are fully and unconditionally guaranteed, on an unsecured basis, by Sabra; provided, however, that such guarantee is subject to release under certain customary circumstances. See Note 12, “Summarized Condensed Consolidating Information” for additional information concerning the circumstances pursuant to which the guarantors will be automatically and unconditionally released from their obligations under the guarantees.

The indentures and agreements (the “Senior Notes Indentures”) governing the 2021 Notes, 2023 Notes, 2026 Notes and 2027 Notes (collectively, the “Senior Notes”) include customary events of default and require the Company to comply with specified restrictive covenants. As of September 30, 2018, the Company was in compliance with all applicable financial covenants under the Senior Notes Indentures.

Credit Facility

Effective on August 17, 2017, the Operating Partnership and Sabra Canadian Holdings, LLC (together, the “Borrowers”), Sabra and the other parties thereto entered into a fourth amended and restated unsecured credit facility (the “Credit Facility”). The Credit Facility amends and restates the prior credit facility entered into by the Borrowers in January 2016 (the “Prior Credit Facility”). The Company recognized a $0.6 million loss on extinguishment of debt during the three and nine months ended September 30, 2017 related to write-offs of deferred financing costs in connection with amending and restating the Prior Credit Facility.

The Credit Facility includes a $1.0 billion revolving credit facility (the “Revolving Credit Facility”), $1.1 billion in U.S. dollar term loans and a CAD $125.0 million Canadian dollar term loan (collectively, the “Term Loans”). Further, up to $175.0 million of the Revolving Credit Facility may be used for borrowings in certain foreign currencies. The Credit Facility also contains an accordion feature that can increase the total available borrowings to $2.5 billion, subject to terms and conditions.

The Revolving Credit Facility has a maturity date of August 17, 2021, and includes two six-month extension options. $200.0 million of the U.S. dollar Term Loans has a maturity date of August 17, 2020, and the other Term Loans have a maturity date of August 17, 2022.

As of September 30, 2018, there was $619.0 million outstanding under the Revolving Credit Facility and $381.0 million available for borrowing.

Borrowings under the Revolving Credit Facility bear interest on the outstanding principal amount at a rate equal to an applicable interest margin plus, at the Operating Partnership’s option, either (a) LIBOR or (b) a base rate determined as the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate, and (iii) one-month LIBOR plus 1.0% (the “Base Rate”). On August 17, 2017, Sabra’s ratings met the Investment Grade Ratings Criteria (as defined in the credit agreement), and Sabra elected to use the ratings-based applicable interest margin for borrowings which will vary based on the Debt Ratings, as defined in the credit agreement, and will range from 0.875% to 1.65% per annum for LIBOR based borrowings and 0.00% to 0.65% per annum for borrowings at the Base Rate. As of September 30, 2018, the interest rate on the Revolving Credit Facility was 3.51%. In addition, the Operating Partnership pays a facility fee ranging between 0.125% and 0.300% per annum based on the aggregate amount of commitments under the Revolving Credit Facility regardless of amounts outstanding thereunder.

The U.S. dollar Term Loans bear interest on the outstanding principal amount at a rate equal to an applicable interest margin plus, at the Operating Partnership’s option, either (a) LIBOR or (b) the Base Rate. The ratings-based applicable interest margin for borrowings will vary based on the Debt Ratings, as defined in the credit agreement, and will range from 0.90% to 1.90% per annum for LIBOR based borrowings and 0.00% to 0.90% per annum for borrowings at the Base Rate. The Canadian dollar Term Loan bears interest on the outstanding principal amount at a rate equal to the Canadian Dollar Offered Rate (“CDOR”) plus an interest margin that will range from 0.90% to 1.90% depending on the Debt Ratings.

On June 10, 2015, the Company entered into an interest rate swap agreement to fix the CDOR portion of the interest rate for CAD $90.0 million of its Canadian dollar Term Loan at 1.59%. In addition, CAD $90.0 million of the Canadian dollar Term Loan was designated as a net investment hedge. On August 10, 2016, the Company entered into two interest rate swap agreements to fix the LIBOR portion of the interest rate for $245.0 million of its U.S. dollar Term Loans at 0.90% and one interest rate swap agreement to fix the CDOR portion on CAD $35.0 million of its Canadian dollar Term Loan at 0.93%. See Note 8, “Derivative and Hedging Instruments” for further information.

As a result of the CCP Merger (see Note 3, “CCP Merger and Recent Real Estate Acquisitions”), the Company assumed eight interest rate swap agreements that fix the LIBOR portion of the interest rate for $600 million of the Company’s U.S. dollar Term Loans at a weighted average rate of 1.31%. See Note 8, “Derivative and Hedging Instruments” for further information.

The obligations of the Borrowers under the Credit Facility are guaranteed by Sabra and certain subsidiaries of Sabra.

The Credit Facility contains customary covenants that include restrictions or limitations on the ability to make acquisitions and other investments, pay dividends, incur additional indebtedness, engage in non-healthcare related business activities, enter into transactions with affiliates and sell or otherwise transfer certain assets as well as customary events of default. The Credit Facility also requires Sabra, through the Operating Partnership, to comply with specified financial covenants, which include a maximum leverage ratio, a minimum fixed charge coverage ratio and a minimum tangible net worth requirement. As of September 30, 2018, the Company was in compliance with all applicable financial covenants under the Credit Facility.

Interest Expense

During the three and nine months ended September 30, 2018, the Company incurred interest expense of $37.3 million and $109.9 million, respectively, and $24.6 million and $56.2 million during the three and nine months ended September 30, 2017, respectively. Interest expense includes non-cash interest expense of $2.6 million and $7.5 million for the three and nine months ended September 30, 2018, respectively, and $2.0 million and $5.3 million for the three and nine months ended September 30, 2017, respectively. As of September 30, 2018 and December 31, 2017, the Company had $15.6 million and $24.7 million, respectively, of accrued interest included in accounts payable and accrued liabilities on the accompanying condensed consolidated balance sheets.

Maturities

The following is a schedule of maturities for the Company’s outstanding debt as of September 30, 2018 (in thousands):



	Secured Indebtedness			Revolving Credit Facility ⁽¹⁾		Term Loans			Senior Notes			Total
October 1 through December 31, 2018	$	1,085		$	—	$	—		$	—		$	1,085
2019	102,930			—		—			—			102,930
2020	4,578			—		200,000			—			204,578
2021	20,039			619,000		—			500,000			1,139,039
2022	4,285			—		996,888			—			1,001,173
Thereafter	122,595			—		—			800,000			922,595
Total Debt	255,512			619,000		1,196,888			1,300,000			3,371,400
Premium, net	—			—		—			14,860			14,860
Deferred financing costs, net	(2,685		)	—		(7,241		)	(7,740		)	(17,666		)
Total Debt, Net	$	252,827		$	619,000	$	1,189,647		$	1,307,120		$	3,368,594


⁽¹⁾	Revolving Credit Facility is subject to two six-month extension options.