LONG-TERM DEBT

Our outstanding long-term debt is shown below:



	As of December 31,
	2013			2012
(in thousands)
FPU secured first mortgage bonds:
9.57% bond, due May 1, 2018	$	—		$	5,444
10.03% bond, due May 1, 2018	—			2,994
9.08% bond, due June 1, 2022	7,967			7,962
Uncollateralized senior notes:
7.83% note, due January 1, 2015	2,000			4,000
6.64% note, due October 31, 2017	10,909			13,636
5.50% note, due October 12, 2020	14,000			16,000
5.93% note, due October 31, 2023	30,000			30,000
5.68% note, due June 30, 2026	29,000			29,000
6.43% note, due May 2, 2028	7,000			—
3.73% note, due December 16, 2028	20,000			—
Convertible debentures:
8.25% due March 1, 2014	646			942
Promissory notes	445			125
Capital lease obligation	6,978			—
Total long-term debt	128,945			110,103
Less: current maturities	(11,353		)	(8,196		)
Total long-term debt, net of current maturities	$	117,592		$	101,907

Annual maturities and principal repayments of consolidated long-term debt, excluding the capital lease obligation, are as follows: $10,504 for 2014; $7,803 for 2015; $7,798 for 2016; $10,698 for 2017; $7,971 for 2018 and $77,226 thereafter. See Note 14, Lease obligations for future payments related to the capital lease obligation.

Secured First Mortgage Bonds

In May 2013, prior to their respective maturities and in conjunction with the issuance of the Senior Notes, which is further described later, we redeemed the 9.57 percent and 10.03 percent series of FPU’s first mortgage bonds. The difference between the carrying value of those bonds and the amount paid at redemption of $93,000 was deferred as a regulatory asset. We are amortizing this difference over the remaining terms of these bonds as an adjustment to interest expense, as allowed by the Florida PSC.

FPU’s remaining secured first mortgage bonds are guaranteed by Chesapeake and are secured by a lien covering all of FPU’s property. FPU’s first mortgage bonds contain a restriction that limits the payment of dividends by FPU. It provides that FPU cannot make dividends or other restricted payments in excess of the sum of $2.5 million plus FPU’s consolidated net income accrued on and after January 1, 1992. As of December 31, 2013, FPU’s cumulative net income base was $95.1 million, offset by restricted payments of $37.6 million, leaving $57.5 million of cumulative net income for FPU free of restrictions pursuant to this covenant.

The dividend restrictions by FPU’s first mortgage bonds resulted in approximately $53.3 million of the net assets of our consolidated subsidiaries being restricted at December 31, 2013. This represents approximately 19 percent of our consolidated net assets. Other than the dividend restrictions by FPU’s first mortgage bonds, there are no legal, contractual or regulatory restrictions on the net assets of our subsidiaries for the purposes of determining the disclosure of parent-only financial statements.

Uncollateralized Senior Notes

In September 2013, we entered into a Note Agreement with the Note Holders. Under the terms of the Note Agreement, we will issue $70.0 million in aggregate of unsecured Senior Notes to the Note Holders. In December 2013, we issued Series A Notes of unsecured Senior Notes, with an aggregate principal amount of $20.0 million, at a rate of 3.73 percent. Series B Notes of the unsecured Senior Notes, with an aggregate principal amount of $50.0 million, will be issued in May 2014, at a rate of 3.88 percent. The proceeds received from the issuances of the Notes will be used to reduce our short-term borrowings under our lines of credit and to fund capital expenditures.

In June 2010, we entered into an agreement with Metropolitan Life Insurance Company and New England Life Insurance Company to issue up to $36.0 million of Chesapeake’s unsecured Senior Notes. In June 2011, we issued $29.0 million of 5.68 percent unsecured Senior Notes to permanently finance the redemption of two series of FPU first mortgage bonds in 2010. On May 2, 2013, we issued an additional $7.0 million of 6.43 percent unsecured senior notes under the same agreement.

All of our uncollateralized Senior Notes require periodic principal and interest payments as specified in each note. They also contain various restrictions. The most stringent restrictions state that we must maintain equity of at least 40 percent of total capitalization, and the fixed charge coverage ratio must be at least 1.2 times. The most recent Senior Notes issued in December 2013 also contain a restriction that we must maintain an aggregate net book value in our regulated business assets of at least 50 percent of our consolidated total assets. Failure to comply with those covenants could result in accelerated due dates and/or termination of the uncollateralized senior note agreements. As of December 31, 2013, we are in compliance with all of our debt covenants.

Most of Chesapeake’s uncollateralized Senior Notes contain a “Restricted Payments” covenant as defined in the Note agreements. The most restrictive covenants of this type are included within the 7.83 percent Unsecured Senior Notes, due January 1, 2015. The covenant provides that we cannot pay or declare any dividends or make any other Restricted Payments in excess of the sum of $10.0 million, plus our consolidated net income accrued on and after January 1, 2001. As of December 31, 2013, the cumulative consolidated net income base was $218.1 million, offset by Restricted Payments of $117.7 million, leaving $100.5 million of cumulative net income free of restrictions

Convertible Debentures

Prior to the maturity in March 2014, the holders of outstanding Convertible Debentures had the option to convert them into shares of our common stock at a conversion price of $17.01 per share. During 2013 and 2012, Convertible Debentures totaling $296,000 and $187,000, respectively, were converted to stock. The Convertible Debentures were also redeemable for cash at the option of the holder, subject to an annual non-cumulative maximum limitation of $200,000. No Convertible Debentures were redeemed for cash in 2013. In 2012, Convertible Debentures totaling $5,000 were redeemed for cash. Subsequent to December 31, 2013, Convertible Debentures totaling $537,000 were converted to stock and $109,000 were redeemed for cash. As of March 1, 2014, we no longer have any outstanding Convertible Debentures.