NOTE 6. LONG-TERM DEBT

Long-term debt related to wholly owned properties, including debt related to hotel properties held for sale, consisted of the following loans payable at March 31, 2019 and December 31, 2018:


Lender		Balance at March 31, 2019	Interest rate at March 31, 2019	Maturity	Amortization provision	Properties encumbered at March 31, 2019	Balance at December 31, 2018
Fixed rate debt
Morgan Stanley Bank of America Merrill Lynch Trust 2014-C18	$	8,772	4.54%	08/2024	25 years	1	$	8,817
Great Western Bank (1)		13,556	4.33%	12/2021 (5)	25 years	1		13,615
Great Western Bank (1)		1,135	4.33%	12/2021 (5)	7 years	-		1,171
Total fixed rate debt		23,463						23,603

Variable rate debt
Wells Fargo		25,937	4.88% (2)	11/2022 (6)	30 years	3		26,048
KeyBank credit facility (3)		86,845	5.49% (4)	04/2020 (7)	Interest only	9		89,487
Total variable rate debt		112,782				14		115,535

Total long-term debt	$	136,245					$	139,138
Less: Deferred financing costs		(2,118)						(2,208)
Total long-term debt, net of deferred financing costs		134,127						136,930
Less: Long-term debt related to hotel properties held for sale, net of deferred financing costs of $0 and $18		-						(1,120)
Long-term debt related to hotel properties held for use, net of deferred financing costs of $2,118 and $2,190	$	134,127					$	135,810

(1) Both loans are collateralized by Aloft Leawood.

(2) Variable rate of 30-day LIBOR plus 2.39%, effectively fixed at 4.44% after giving effect to interest rate swap (see Note 8).

(3) $150,000 credit facility that includes an accordion feature that would allow the credit facility to be increased to $400,000 with additional lender commitments. Available borrowing capacity under the credit facility is based on a borrowing base formula for the pool of hotel properties securing the facility. Total unused availability under this credit facility was $10,164 at March 31, 2019. The commitment fee on unused facility is 0.20%.

(4) Borrowings under the facility accrue interest based on a leverage-based pricing grid, at the Company’s option, at either LIBOR plus a spread ranging from 2.25% to 3.00% (depending on leverage) or a base rate plus a spread ranging from 1.25% to 2.00% (depending on leverage).

(5) Term may be extended for additional two years subject to interest rate adjustments.

(6) Two one-year extension options subject to the satisfaction of certain conditions.

(7) The maturity of the credit facility was extended to October 1, 2020 on May 3, 2019, subsequent to quarter end. Two extension options, extending the maturity of the credit facility to March 1, 2021 and March 1, 2022, are available subject to certain conditions including the completion of specific capital achievements.

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 remainder of 2019 and thereafter are as follows:


	Total
Remainder of 2019	$	885
2020		88,076
2021		14,344
2022		24,886
2023		214
Thereafter		7,840
Total	$	136,245

Financial Covenants

We are required to satisfy various financial covenants within our debt agreements, including the following financial covenants within our credit facility:

Leverage Ratio: The ratio of consolidated total indebtedness to consolidated total asset value cannot exceed 60%. Commencing on April 1, 2020, the foregoing leverage ratio will no longer be applicable, and in lieu thereof, the ratio of consolidated total indebtedness to adjusted consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for the most recently ended four fiscal quarters cannot exceed 6.25 to 1.

Secured Leverage Ratio: The ratio of consolidated secured indebtedness (excluding the credit facility) to consolidated total asset value cannot exceed 40%.

Fixed Charge Coverage Ratio: The ratio of adjusted consolidated EBITDA for the most recently ended four fiscal quarters to consolidated fixed charges for the most recently ended four fiscal quarters cannot be less than 1.50 to 1.

Tangible Net Worth: Consolidated tangible net worth cannot be less than $55 million plus 80% of net offering proceeds.

Unhedged Variable Rate Debt: Consolidated unhedged variable rate debt cannot exceed 25% of consolidated total asset value.

Distributions: The Company is permitted to make distributions during any period of four fiscal quarters in an aggregate amount of up to 95% of funds available for distribution.

Certain of the terms used in the foregoing descriptions of the financial covenants within our credit facility have the meanings given to them in the credit facility, and certain of the financial covenants are subject to pro forma adjustments for acquisitions and sales of hotel properties and for specific capital events.

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 credit facility contains cross-default provisions which would allow the lenders under our credit facility 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 March 31, 2019, we are not in default of any of our loans.

As a result of ongoing renovations at the Aloft Leawood property, the Company did not satisfy the required pre-dividend debt service coverage ratio on that property-specific debt at March 31, 2019. On March 8, 2019, Great Western Bank waived the required debt service coverage ratio for the Leawood Aloft for March 31, 2019 and modified the required ratio for subsequent periods.