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 December 31:



Lender	Balance at December 31, 2019		Interest rate at December 31, 2019	Maturity	Amortization provision	Properties encumbered at December 31, 2019	Balance at December 31, 2018
Fixed rate debt
Morgan Stanley Bank of America Merrill Lynch Trust 2014-C18	$	8,639	4.54%	08/2024	25 years	1	$	8,817
Great Western Bank (1)		13,290	4.33%	12/2021 (5)	25 years	1		13,615
Great Western Bank (1)		971	4.33%	12/2021 (5)	7 years	-		1,171
Total fixed rate debt		22,900						23,603

Variable rate debt
Wells Fargo		25,612	3.76% (2)	11/2022 (6)	30 years	3		26,048
KeyBank credit facility (3)		86,845	4.30% (4)	10/2020 (7)	Interest only	9		89,487
Total variable rate debt		112,457				14		115,535

Total long-term debt	$	135,357					$	139,138
Less: Deferred financing costs		(1,356)						(2,208)
Total long-term debt, net of deferred financing costs		134,001						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 $1,356 and $2,190	$	134,001					$	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 $9,020 at December 31, 2019. The commitment fee on unused facility is 0.20%. See Note 17 for changes occurring subsequent to December 31, 2019.

(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); 30-day LIBOR for $30,000 notional capped at 3.35% after giving effect to market rate cap (see Note 8). See Note 17 for changes occurring subsequent to December 31, 2019.

(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) See Note 17 for changes occurring subsequent to December 31, 2019.

At December 31, 2019, we had long-term debt of $135,357 with a weighted average term to maturity of 1.5 years and a weighted average interest rate of 4.22%. Of this total, at December 31, 2019, $22,900 was fixed rate debt with a weighted average term to maturity of 2.3 years and a weighted average interest rate of 4.41% and $112,457 was variable rate debt with a weighted average term to maturity of 1.2 years and a weighted average interest rate of 4.18%. At December 31, 2018, we had long-term debt of $138,000 associated with assets held for use with a weighted average term to maturity of 2.1 years and a weighted average interest rate of 5.15%. Of this total, at December 31, 2018, $23,604 was fixed rate debt with a weighted average term to maturity of 1.9 years and a weighted average interest rate of 4.41% and $114,396 was variable rate debt with a weighted average term to maturity of 2.9 years and a weighted average interest rate of 5.30%.

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:



	Total
2020	$	88,076
2021		14,341
2022		24,886
2023		214
2024		7,840
Thereafter		-
Total	$	135,357

As discussed further in the Subsequent Events footnote (see Note 17), on March 30, 2020, the Key Bank credit facility was amended to, among other things, extend the maturity date of the facility to April 1, 2021, providing also for two extension options (six months and five months). Following this modification, contractual debt maturities on debt outstanding at December 31, 2019 were as follows:


	Total
2020	$	1,231
2021		101,186
2022		24,886
2023		214
2024		7,840
Thereafter		-
Total	$	135,357

Financial Covenants

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

Debt Yield: The ratio of adjusted net operating income for the borrowing base properties to indebtedness outstanding under the credit facility cannot be less than 10%. The covenant is first tested on September 30, 2020 and for purposes of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the calculation is based on the most recently ended four fiscal quarters.

Consolidated Leverage Ratio: The ratio of consolidated total indebtedness to consolidated total asset value cannot exceed 60%.

Fixed Charge Coverage Ratio: The ratio of adjusted consolidated EBITDA to consolidated fixed charges cannot be less than (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50 to 1 as of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For purposes of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the calculation is based on the most recently ended four fiscal quarters.

Borrowing Base Leverage Ratio: The ratio of indebtedness outstanding under the credit facility to borrowing base asset value (based on updated appraisals required by the lenders) cannot exceed 65%. The covenant is first tested on June 30, 2021.

On March 30, 2020, our credit facility with KeyBank was amended to, among other things:

Implement a collateral-specific minimum debt yield (ratio of adjusted net operating income for the borrowing base properties to indebtedness outstanding under the credit facility) of 10%. The covenant is first tested on September 30, 2020 and for purposes of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the calculation is based on the most recently ended four fiscal quarters.

Maintain the maximum consolidated leverage ratio (ratio of consolidated total indebtedness to consolidated total asset value) of 60% but provide for updated appraisals to determine consolidated total asset value (if required by the lenders).

Modify the fixed charge coverage ratio (ratio of adjusted consolidated EBITDA to consolidated fixed charges) to (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50 to 1 as of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For purposes of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the calculation is based on the most recently ended four fiscal quarters. The covenant was previously 1.50 to 1 tested at the end of each fiscal quarter based on the most recently ended four fiscal quarters.

Implement a maximum borrowing base leverage ratio (ratio of indebtedness outstanding under the credit facility to borrowing base asset value (based on updated appraisals required by the lenders) of 65%. The covenant is first tested on June 30, 2021.

Eliminate the financial covenants regarding secured leverage ratio, tangible net worth and variable rate debt.

Modify the covenant on dividends and distributions to provide that no cash dividends or distributions may be made to common or preferred shareholders.

Modify the covenants on recourse debt and investments to provide that no additional recourse debt or investments will be permitted.

As a result of the anticipated impact of the COVID-19 virus on the hotel industry generally, the Company has received waivers from Great Western Bank with respect to compliance with its quarterly debt service coverage ratios (consolidated and for the Leawood Aloft collateral) for March 31, 2020 and June 30, 2020 and modifications for September 30, 2020 and December 31, 2020 (providing for lower collateral covenant and use of annualized results). The modification also provides for a three month deferral of principal and interest payments.

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 December 31, 2019, we are not in default of any of our loans.