DEBT AND CAPITAL LEASE OBLIGATION

Convertible Debentures

On March 12, 2008, the Company issued and sold $181.5 million aggregate principal amount of senior convertible debentures due March 15, 2028 (“debentures”). The debentures pay interest at 1.875% per annum, payable semi-annually on March 15 and September 15 of each year, and commenced on September 15, 2008. The debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. Holders of the debentures may require the Company to repurchase all or a portion of their debentures on March 15, 2013, March 15, 2018 and March 15, 2023, or at any time before March 15, 2028 upon the occurrence of certain events including a change in control. The Company may redeem the debentures for cash beginning on or after March 22, 2013. In October 2009, the Company undertook the exchange of $15.0 million face amount of the convertible debentures for 1.84 million shares of the Company's common stock. The debentures so acquired were retired. The outstanding balance of $166.5 million is reported as short-term debt obligation as of June 30, 2012.

Amortization expense related to the issuance costs of the debentures was approximately $0.2 million in each of the three- month periods ended June 30, 2012 and 2011, respectively, and $0.5 million for each of the six- month periods ended June 30, 2012 and 2011, respectively. The interest expense on the debentures was approximately $0.8 million, respectively, for each of the three- month periods ended June 30, 2012 and 2011, and $1.6 million, respectively, for each of the six- month periods ended June 30, 2012 and 2011. The Company made cash payments of $1.6 million for interest on the debentures during each of the six- month periods ended June 30, 2012 and 2011.

Exempt Facility Revenue Bonds

The Company also has outstanding a $30.0 million offering of 8.0% Exempt Facility Revenue Bonds, Series 2000, issued through the State of Montana Board of Investments and due July 1, 2020. The balance outstanding at June 30, 2012, was $29.5 million, which is net of unamortized discount of $0.5 million. The Company made cash payments of $1.2 million for interest on the revenue bonds during the second quarter of 2012.

Asset-Backed Revolving Line of Credit

Effective December 23, 2011, the Company signed a $100.0 million asset-backed revolving credit agreement with Wells Fargo Capital Finance, incurring debt issuance costs of $1.1 million. Borrowings under this working capital facility are limited to a borrowing base comprised of 85% of eligible accounts receivable and 70% of eligible inventories. Borrowings will be secured by the Company’s accounts receivable, metals inventories and other accounts. The asset-backed revolving credit facility includes a single fixed-charge coverage covenant that only takes effect when less than 30% of the total borrowing capacity under the line remains available. The facility includes a $50.0 million letter of credit sub-facility. Outstanding borrowings under the facility accrue interest at a spread over the London Interbank Offer Rate that varies from 2.25% to 2.75%, decreasing progressively as the percentage drawn against the facility increases. The Company also pays an unused line fee on committed but unutilized commitments under the facility at a rate per annum of 0.375% or 0.5%, depending on utilization of the facility. On January 13, 2012, the Company completed the syndication of this facility to a group of four banks and simultaneously expanded the maximum line of credit to $125.0 million. The Company recognized $0.2 million in fees associated with the asset-backed revolving credit agreement in the three- and six- month periods ended June 30, 2012. Amortization expense related to the issuance costs of the credit agreement was approximately $0.1 million for the three- and six- month periods ended June 30, 2012. As of June 30, 2012, there was no drawn balance under this revolving credit facility, although approximately $5.3 million in undrawn letters of credit had been issued under this facility as collateral for sureties.

Capital Lease Obligation

On June 1, 2012, the Company entered into a lease agreement with General Electric Capital Corporation covering the acquisition of a tunnel-boring machine for use on the Blitz Project adjacent to the Stillwater Mine. The transaction is structured as a capital lease with a four-year term; lease payments are due quarterly in advance. As of June 30, 2012, the outstanding balance under the capital lease was $6.7 million.

The following is a schedule by year of the future minimum lease payments for the capital lease together with the present value of the net minimum lease payments:



Quarter ended June 30, 2012 (in thousands)
Remaining 2012	$	991
2013	1,982
2014	1,982
2015	1,982
2016	496
Total minimum lease payments	7,433
Less amount representing interest	752
Present value of net minimum lease payments	6,681
Less current portion	1,651
Total long-term capital lease obligation	$	5,030

Capitalized Interest

The Company capitalizes interest incurred on its various debt instruments as a cost of properties under development. For the six- month period ended June 30, 2012, the Company capitalized interest of $0.6 million.