NOTE 5. LONG-TERM DEBT

Long-term debt, including debt related to hotel properties held for sale, consisted of the following loans payable at December 31:

Lender		Balance at December 31, 2015	Interest rate at December 31, 2015	Maturity		Amortization provision	Properties encumbered at December 31, 2015		Balance at December 31, 2014

Fixed rate debt
GE Capital Franchise Finance Corporation	$	10,819	7.17%	02/2017		15 years	4	$	11,335
GE Capital Franchise Finance Corporation		3,864	4.75%	02/2018		15 years	4		4,057
GE Capital Franchise Finance Corporation		-							10,667
Great Western Bank		-							7,885
Citigroup Global Markets Realty		-							11,869
Elkhorn Valley Bank		-							2,583
Middle Patent Capital, LLC		-							8,300
Cantor Commercial Real Estate Lending		5,826	4.25%	11/2017		30 years	1		5,936
Morgan Stanley Mortgage Capital Holdings		27,542	5.83%	12/2017		25 years	22		28,630
Total fixed rate debt		48,051							91,262

Variable rate debt
Great Western Bank		3,215(6)	4.50% (1)	06/2018		Interest only	4		1,425
GE Capital Franchise Finance Corporation		4,990	3.67% (2)	11/2020		25 years	1		-
GE Capital Franchise Finance Corporation		10,079	3.67% (2)	11/2020		25 years	1		-
The Huntington National Bank		9,981	2.49% (3)	11/2020		25 years	4		-
LMREC 2015 - CREI, Inc. (Latitude)		11,220	6.50% (4)	05/2018	$	12 monthly (5)	1		-
Total variable rate debt		39,485					42		1,425

Total long-term debt	$	87,536						$	92,687

Less: Debt related to hotel properties held for sale		(17,218)							(47,536)
Total long-term debt held for use	$	70,318						$	45,151

(1) Prime rate plus 1%; was fixed rate debt at 4.5% prior to amendment on June 5, 2015

(2) 90-day LIBOR plus 3.25%

(3) 30-day LIBOR plus 2.25%, fixed at 4.13% after giving effect to interest rate swap

(4) 30-day LIBOR plus 6.25%

(5) $12 monthly payment begins May 2016

(6) Total availability under this revolving credit facility was $5,733 at December 31, 2015; commitment fee on unused facility is 0.25%

At December 31, 2015, we had long-term debt of $70,318 associated with assets held for use with a weighted average term to maturity of 3.0 years and a weighted average interest rate of 5.13%. Of this total, at December 31, 2015, $33,037 is fixed rate debt with a weighted average term to maturity of 1.8 years and a weighted average interest rate of 5.64% and $37,281 is variable rate debt with a weighted average term to maturity of 4.0 years and a weighted average interest rate of 4.67%. At December 31, 2014, we had long-term debt of $45,151 associated with assets held for use with a weighted average term to maturity of 2.4 years and a weighted average interest rate of 5.70%, all of which was fixed rate debt.

Debt is classified as held for sale if the properties collateralizing it are held for sale. Debt associated with assets held for sale is classified in the table below based on its contractual maturity although the balances are expected to be repaid within one year upon the sale of the related hotel properties. Aggregate annual principal payments on debt for the next five years and thereafter are as follows:



	Held for sale		Held for use		Total
2016	$	681	$	2,051	$	2,732
2017		14,333		29,016		43,349
2018		2,204		16,108		18,312
2019		-		686		686
2020		-		22,457		22,457
Total	$	17,218	$	70,318	$	87,536

Financial Covenants

The Company’s debt agreements contain requirements as to the maintenance of minimum levels of debt service and fixed charge coverage and required loan-to-value and leverage ratios, and place certain restrictions on dividends. As of December 31, 2015, we were in compliance with our financial covenants.

If we fail to pay our indebtedness when due, fail to comply with covenants or otherwise default on our loans, unless waived, we could incur higher interest rates during the period of such loan defaults, be required to immediately pay our indebtedness, and ultimately lose our hotels through lender foreclosure if we are unable to obtain alternative sources of financing with acceptable terms. Our Great Western Bank and certain of our GE facilities contain cross-default provisions which would allow Great Western Bank and GE to declare a default and accelerate our indebtedness to them if we default on our other loans and such default would permit that lender to accelerate our indebtedness under any such loan. As of December 31, 2015, we are not in default of any of our loans.

Convertible Loan

On January 9, 2014, we entered into an unsecured convertible loan agreement with RES, for a revolving line of credit of up to $2,000 with an annual interest rate equal to LIBOR plus 7%. During the first quarter of 2014, the Company borrowed the full amount of $2,000 available under the loan agreement.

Upon issuance, it was determined that the conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative liability as there was no explicit limit to the number of shares to be delivered upon settlement of the conversion option. The initial fair value of the conversion feature was determined to be $151 and was recorded as a derivative liability with the offset recorded as a debt discount against the convertible loan.

RES applied the amount owed to it under the loan to purchase 1,250,000 shares of newly issued common stock. On June 11, 2014, the effective purchase date, $1,950, the fair value of the shares issued, was recorded in equity, and a gain of $88 was recorded in other income to reflect the change in fair value from March 31, 2014 to the date of conversion of the convertible loan, amortized debt discount, and the separately accounted for embedded derivative.