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Borrowing Arrangements | 12 Months Ended
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Dec. 31, 2011
Borrowing Arrangements |
Borrowing Arrangements |
Note 10—Borrowing Arrangements The following is a summary of our senior notes payable and other debt as of December 31, 2011 and 2010:
|  | 2011 |  | 2010 |
--- | --- | --- | --- | --- | ---
|  | (In thousands) |
Unsecured revolving credit facilities |  | $ | 455,578 |  | $ | 40,000 |
37/8% Convertible Senior Notes due 2011 |  |  | — |  |  | 230,000 |
9% Senior Notes due 2012 |  |  | 82,433 |  |  | 82,433 |
81/4% Senior Notes due 2012 |  |  | 72,950 |  |  | — |
Unsecured term loan due 2013 |  |  | 200,000 |  |  | 200,000 |
6.25% Senior Notes due 2013 |  |  | 269,850 |  |  | — |
Unsecured term loan due 2015(1) |  |  | 126,875 |  |  | — |
3.125% Senior Notes due 2015 |  |  | 400,000 |  |  | 400,000 |
6% Senior Notes due 2015 |  |  | 234,420 |  |  | — |
61/2% Senior Notes due 2016 |  |  | 200,000 |  |  | 400,000 |
Unsecured term loan due 2017(1) |  |  | 375,000 |  |  | — |
63/4% Senior Notes due 2017 |  |  | 225,000 |  |  | 225,000 |
4.750% Senior Notes due 2021 |  |  | 700,000 |  |  | — |
6.90% Senior Notes due 2037 |  |  | 52,400 |  |  | — |
6.59% Senior Notes due 2038 |  |  | 22,973 |  |  | — |
Mortgage loans and other(2) |  |  | 2,762,964 |  |  | 1,349,521 |
Total |  |  | 6,180,443 |  |  | 2,926,954 |
Capital lease obligations |  |  | 143,006 |  |  | — |
Unamortized fair value adjustment |  |  | 144,923 |  |  | 11,790 |
Unamortized commission fees and discounts |  |  | (39,256 | ) |  | (38,700 | )
Senior notes payable and other debt |  | $ | 6,429,116 |  | $ | 2,900,044 |
(1) The aggregate amounts presented above represent the $500.0 million of borrowings oustanding under our unsecured term loan facility. Certain amounts included in the 2015 tranche represent Canadian dollar borrowings. (2) The amounts presented above exclude debt related to real estate assets classified as held for sale as of December 31, 2011. The total mortgage debt for these properties as of December 31, 2011 was $14.6 million, and is included in accounts payable and other liabilities on the Consolidated Balance Sheet. As of December 31, 2011, our joint venture partners' share of total debt was $46.6 million with respect to eight properties we owned through consolidated joint ventures. As of December 31, 2010, our joint venture partners' share of total debt was $4.8 million with respect to three properties we owned through consolidated joint ventures. Total debt does not include our portion of debt related to investments in unconsolidated entities, which was $131.5 million and $45.9 million at December 31, 2011 and 2010, respectively. Unsecured Revolving Credit Facility and Unsecured Term Loans We have $2.0 billion of aggregate borrowing capacity under our unsecured revolving credit facility, which may be increased to up to $2.5 billion at our option, subject to the satisfaction of certain conditions, and includes sublimits of (a) up to $200 million for letters of credit, (b) up to $200 million for swingline loans, (c) up to $250 million for loans in certain alternative currencies, and (d) up to 50% of the facility for certain negotiated rate loans. Borrowings under our unsecured revolving credit facility bear interest at a fluctuating rate per annum (based on the applicable LIBOR for Eurocurrency rate loans and the higher of (i) the federal funds rate plus 0.50%, (ii) the administrative agent's prime rate and (iii) the applicable LIBOR plus 1.0% for base rate loans, plus, in each case, a spread based on our senior unsecured long-term debt ratings). At December 31, 2011, the applicable spread was 110 basis points for Eurocurrency rate loans and 10 basis points for base rate loans. We also pay a facility fee ranging from 15 to 45 basis points per annum (based on our senior unsecured long-term debt ratings) on the aggregate revolving commitments under our unsecured revolving credit facility. At December 31, 2011, the facility fee was 17.5 basis points. Borrowings under our unsecured revolving credit facility mature on October 16, 2015, but may be extended for an additional period of one year at our option, subject to the satisfaction of certain conditions. Our unsecured revolving credit facility imposes certain customary restrictions on us, including restrictions pertaining to: (i) liens; (ii) investments; (iii) the incurrence of additional indebtedness; (iv) mergers, sales of assets and dissolutions; (v) certain dividend, distribution and other payments; (vi) permitted businesses; (vii) transactions with affiliates; (viii) agreements limiting certain liens; and (ix) the maintenance of certain consolidated total leverage, secured debt leverage, unsecured leverage and fixed charge coverage ratios and minimum consolidated adjusted net worth, and contains customary events of default. At December 31, 2011, we had $455.6 million of borrowings outstanding, $8.3 million of outstanding letters of credit and $1.54 billion of available borrowing capacity under our unsecured revolving credit facility. We also recognized a $2.4 million loss on extinguishment of debt for the three months and year ended December 31, 2011, representing the write-off of unamortized deferred financing fees from our previous unsecured revolving credit facilities. In December 2011, we entered into a new $500.0 million unsecured term loan facility with a weighted average maturity of 4.5 years, priced at LIBOR plus 125 basis points. The term loan facility consists of a three-year tranche and a five-year tranche and includes an accordion feature that permits us to expand our borrowing capacity to up to $900.0 million, subject to the satisfaction of certain conditions. Borrowings under the term loan facility may be made in U.S. dollars or Canadian dollars. Concurrently with the closing of the term loan facility, we terminated the commitments under an $800.0 million term loan priced at LIBOR plus 150 basis points and scheduled to mature in June 2012, that was previously extended to NHP and assumed by us in connection with the NHP acquisition. In September 2010, we entered into a $200.0 million three-year unsecured term loan with Bank of America, N.A., as lender. The term loan is non-amortizing and bears interest at an all-in fixed rate of 4% per annum. Each of the term loan facility and the term loan contains the same restrictive covenants as our unsecured revolving credit facility. Convertible Senior Notes In November 2011, we repaid in full $230.0 million principal amount outstanding of our 37/8% convertible senior notes due 2011 upon maturity. In accordance with the terms of the indenture governing the convertible notes, we paid the principal amount of the notes and accrued but unpaid interest thereon in cash and issued an aggregate of 943,714 shares of our common stock in settlement of the conversion value in excess of the principal amount. The conversion rate of the convertible notes had been subject to adjustment in certain circumstances, including the payment of certain quarterly dividends in excess of a reference amount. To the extent the market price of our common stock exceeded the conversion price, our earnings per share were diluted. The convertible notes had a minimal dilutive impact per share for the years ended December 31, 2011, 2010 and 2009. See "Note 15—Earnings Per Share." Senior Notes As of December 31, 2011, we had $1.6 billion aggregate principal amount of senior notes issued by our subsidiaries, Ventas Realty and Ventas Capital Corporation (collectively, the "Ventas Issuers") outstanding. Prior to 2009, we issued $200.0 million principal amount of our 61/2% senior notes due 2016 at a 1/2% discount to par value, $200.0 million principal amount of our 63/4% senior notes due 2017 at a 5/8% discount to par value and $50.0 million principal amount of our 65/8% senior notes due 2014 at a 1% discount to par value. As of December 31, 2011, we also had outstanding $652.6 million aggregate principal amount of senior notes that were issued by NHP and assumed by our subsidiary, Nationwide Health Properties, LLC ("NHP LLC"), in connection with the NHP acquisition. In February 2012, we issued and sold $600.0 million aggregate principal amount of 4.25% senior notes due 2022, at a public offering price equal to 99.214% of par for total proceeds of $595.3 million, before the underwriting discount and expenses. Also in February 2012, we exercised our option to redeem all $200.0 million principal amount outstanding of our 61/2% senior notes due 2016 pursuant to the terms of the indenture governing the notes. We will pay a total of $206.5 million, plus accrued and unpaid interest, on the redemption date and expect to recognize a loss on extinguishment of debt in the first quarter of 2012. In July 2011, we repaid in full, at par, $339.0 million principal amount then outstanding of NHP LLC's 6.50% senior notes due 2011 upon maturity. NHP LLC's remaining senior notes outstanding bear interest at fixed rates ranging from 6.00% to 8.25% per annum and have maturity dates ranging from July 1, 2012 to July 7, 2038, subject in certain cases to earlier repayment at the option of the holders. Also, in July 2011, we redeemed $200.0 million principal amount outstanding of our 61/2% senior notes due 2016, at a redemption price equal to 103.25% of par, plus accrued and unpaid interest to the redemption date, pursuant to the call option contained in the indenture governing the notes. As a result, we paid a total of $206.5 million, plus accrued and unpaid interest, on the redemption date and recognized a loss on extinguishment of debt of $8.7 million in the third quarter of 2011. In May 2011, we issued and sold $700.0 million aggregate principal amount of 4.750% senior notes due 2021, at a public offering price equal to 99.132% of par, for total proceeds of $693.9 million, before the underwriting discount and expenses. In November 2010, we issued and sold $400.0 million aggregate principal amount of 3.125% senior notes due 2015, at a public offering price equal to 99.528% of par, for total proceeds of $398.1 million, before the underwriting discount and expenses. In October 2010, we redeemed all $71.7 million principal amount outstanding of our 65/8% senior notes due 2014, at a redemption price equal to 102.21% of par, plus accrued and unpaid interest to the redemption date, pursuant to the call option contained in the indenture governing the notes. As a result, we paid a total of $73.3 million, plus accrued and unpaid interest, on the redemption date and recognized a loss on extinguishment of debt of $2.5 million during the fourth quarter of 2010. In June 2010, we redeemed all $142.7 million principal amount outstanding of our 71/8% senior notes due 2015, at a redemption price equal to 103.56% of par, plus accrued and unpaid interest to the redemption date, pursuant to the call option contained in the indenture governing the notes. As a result, we paid a total of $147.8 million, plus accrued and unpaid interest, on the redemption date and recognized a loss on extinguishment of debt of $6.4 million during the second quarter of 2010. In May 2010, we repaid in full, at par, $1.4 million principal amount then outstanding of our 63/4% senior notes due 2010 upon maturity. During 2009, we issued and sold $200.0 million aggregate principal amount of 61/2% senior notes due 2016 at a 153/4% discount to par value, for total proceeds of $168.5 million, before the underwriting discount and expenses. We also repaid in full, at par, $49.8 million principal amount outstanding of our 83/4% senior notes due 2009 upon maturity, and purchased in open market transactions and/or through cash tender offers $361.6 million of our senior notes composed of: $121.6 million principal amount of our outstanding 63/4% senior notes due 2010; $109.4 million principal amount of our outstanding 9% senior notes due 2012; $103.3 million principal amount of our outstanding 65/8% senior notes due 2014; and $27.3 million principal amount of our outstanding 71/8% senior notes due 2015. We recognized a loss on extinguishment of debt of $6.1 million related to these purchases. All of the Ventas Issuers' senior notes are unconditionally guaranteed by Ventas. In addition, at the time of their original issuance, all of the Ventas Issuers' senior notes issued prior to November 2010 were unconditionally guaranteed, jointly and severally, on a senior unsecured basis by certain of our direct and indirect subsidiaries. In September 2010, the subsidiary guarantees on the Ventas Issuers' then outstanding senior notes (other than the 9% senior notes due 2012) were released pursuant to the terms of the indentures governing the notes. The Ventas Issuers' senior notes are part of our and the Ventas Issuers' general unsecured obligations, ranking equal in right of payment with all of our and the Ventas Issuers' existing and future senior obligations and ranking senior to all of our and the Ventas Issuers' existing and future subordinated indebtedness. However, the Ventas Issuers' senior notes are effectively subordinated to our and the Ventas Issuers' secured indebtedness, if any, to the extent of the value of the assets securing that indebtedness. The Ventas Issuers' senior notes are also structurally subordinated to the preferred equity and indebtedness, whether secured or unsecured, of our subsidiaries. NHP LLC's senior notes are part of NHP LLC's general unsecured obligations, ranking equal in right of payment with all of NHP LLC's existing and future senior obligations and ranking senior to all of NHP LLC's existing and future subordinated indebtedness. However, NHP LLC's senior notes are effectively subordinated to NHP LLC's secured indebtedness, if any, to the extent of the value of the assets securing that indebtedness. NHP LLC's senior notes are also structurally subordinated to the preferred equity and indebtedness, whether secured or unsecured, of its subsidiaries. The Ventas Issuers may redeem each series of their senior notes and NHP LLC may redeem each series of its senior notes (other than the 6.90% senior notes due 2037 and the 6.59% senior notes due 2038), in whole at any time or in part from time to time, prior to maturity at varying redemption prices set forth in the applicable indenture, plus, in each case, accrued and unpaid interest thereon to the redemption date. NHP LLC's 6.90% senior notes due 2037 are subject to repurchase at the option of the holders, at par, on October 1 of each of 2012, 2017 and 2027, and NHP LLC's 6.59% senior notes due 2038 are subject to repurchase at the option of the holders, at par, on July 7 of each of 2013, 2018, 2023 and 2028. If we experience certain kinds of changes of control, the Ventas Issuers must make an offer to repurchase their 9% senior notes due 2012, 61/2% senior notes due 2016 and 63/4% senior notes due 2017, in whole or in part, at a purchase price in cash equal to 101% of the principal amount thereof, plus any accrued and unpaid interest to the date of purchase; provided, however, that in the event Moody's Investors Service ("Moody's") and Standard & Poor's Ratings Services ("S&P") have confirmed their ratings at Ba3 or higher and BB- or higher on the senior notes and certain other conditions are met, this repurchase obligation will not apply. Mortgages At December 31, 2011, we had 273 mortgage loans outstanding in the aggregate principal amount of $2.8 billion and secured by 228 of our properties. Of these loans, 244 loans in the aggregate principal amount of $2.4 billion bear interest at fixed rates ranging from 4.4% to 8.6% per annum, and 29 loans in the aggregate principal amount of $414.6 million bear interest at variable rates ranging from 0.6% to 7.3% per annum as of December 31, 2011. At December 31, 2011, the weighted average annual rate on our fixed rate mortgage loans was 6.1%, and the weighted average annual rate on our variable rate mortgage loans was 2.0%. Our mortgage loans had a weighted average maturity of 5.8 years as of December 31, 2011. During 2011, we assumed mortgage debt of $1.6 billion, including $1.2 billion and $442 million, respectively, in connection with the ASLG and NHP acquisitions. In February 2011, we repaid in full mortgage loans outstanding in the aggregate principal amount of $307.2 million and recognized a loss on extinguishment of debt of $16.5 million in connection with these repayments in the first quarter of 2011. Scheduled Maturities of Borrowing Arrangements and Other Provisions As of December 31, 2011, our indebtedness (excluding capital lease obligations) had the following maturities:
|  | Principal Amount Due at Maturity |  | Unsecured Revolving Credit Facility(1) |  | Scheduled Periodic Amortization |  | Total Maturities |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
|  | (In thousands) |
2012(2) |  | $ | 267,044 |  | $ | — |  | $ | 52,273 |  | $ | 319,317 |
2013 |  |  | 921,890 |  |  | — |  |  | 46,455 |  |  | 968,345 |
2014 |  |  | 237,648 |  |  | — |  |  | 41,993 |  |  | 279,641 |
2015 |  |  | 985,647 |  |  | 455,578 |  |  | 34,163 |  |  | 1,475,388 |
2016 |  |  | 544,370 |  |  | — |  |  | 27,689 |  |  | 572,059 |
Thereafter(2)(3) |  |  | 2,395,088 |  |  | — |  |  | 170,605 |  |  | 2,565,693 |
Total maturities |  | $ | 5,351,687 |  | $ | 455,578 |  | $ | 373,178 |  | $ | 6,180,443 |
(1) At December 31, 2011, we had $45.8 million of unrestricted cash and cash equivalents, for $409.8 million of net borrowings outstanding under our unsecured revolving credit facility. (2) The amounts presented above exclude debt related to real estate assets classified as held for sale as of December 31, 2011. The total mortgage debt for these properties as of December 31, 2011 was $14.6 million and is scheduled to mature as follows: $5.7 million in 2012 and $8.9 million thereafter. (3) Includes $52.4 million aggregate principal amount of NHP LLC's 6.90% senior notes due 2037, which are subject to repurchase, at the option of the holders, on October 1 of each of 2012, 2017 and 2027, and $23.0 million aggregate principal amount of NHP LLC's 6.59% senior notes due 2038, which are subject to repurchase, at the option of the holders, on July 7 of each of 2013, 2018, 2023 and 2028. The instruments governing our outstanding indebtedness contain covenants that limit our ability and the ability of certain of our subsidiaries to, among other things: (i) incur debt; (ii) make certain dividends, distributions and investments; (iii) enter into certain transactions; (iv) merge, consolidate or transfer certain assets; and (v) sell assets. At any time we maintain investment grade ratings by both Moody's and S&P, the indentures governing certain series of the Ventas Issuers' senior notes provide that some of these restrictive covenants will either be suspended or fall away. The Ventas Issuers' senior notes also require us and our subsidiaries to maintain total unencumbered assets of at least 150% of our unsecured debt. Our unsecured revolving credit facility and term loans also require us to maintain certain financial covenants pertaining to, among other things, our consolidated leverage, secured debt, fixed charge coverage and net worth. As of December 31, 2011, we were in compliance with all of these covenants. Derivatives and Hedging In the normal course of our business, we are exposed to the effects of interest rate movements on future cash flows under our variable rate debt obligations and foreign currency exchange rate movements on our senior living operations. We follow established risk management policies and procedures, including the use of derivative instruments, to mitigate these risks. For interest rate exposures, we use derivatives primarily to fix the rate on our variable rate debt and to manage the cost of our borrowing obligations. We prohibit the use of derivative instruments for trading or speculative purposes, and we have a policy of entering into contracts only with major financial institutions based upon their credit ratings and other factors. When considered together with the underlying exposure that the derivative is designed to hedge, we do not expect that the use of derivatives in this manner would have any material adverse effect on our future net income or financial position. Capital Leases As of December 31, 2011, we leased eight seniors housing communities pursuant to arrangements we assumed in connection with the ASLG acquisition that are accounted for as capital leases. Under each capital lease agreement, rent is subject to increase based upon changes in the Consumer Price Index or gross revenues attributable to the property, subject to certain limits, and we have a bargain option to purchase the leased property and an option to exercise renewal terms. Future minimum lease payments required under the capital lease agreements, including amounts that would be due under purchase options, as of December 31, 2011 are as follows (in thousands):
2012 |  | $ | 9,446 |
2013 |  |  | 9,573 |
2014 |  |  | 9,699 |
2015 |  |  | 9,826 |
2016 |  |  | 9,953 |
Thereafter |  |  | 162,600 |
Total minimum lease payments |  |  | 211,097 |
Less: Amount related to interest |  |  | (68,091 | )
|  | $ | 143,006 |
Net assets held under capital leases are included in net real estate investments on our Consolidated Balance Sheets and totaled $224.7 million and $0 as of December 31, 2011 and 2010, respectively. Unamortized Fair Value Adjustment As of December 31, 2011, the unamortized fair value adjustment related to the long-term debt we assumed in connection with various acquisitions was $144.9 million and will be recognized as effective yield adjustments over the remaining term of the instruments. The estimated aggregate amortization of the fair value adjustment related to long-term debt (reduction of interest expense) for each of the next five years is as follows: 2012—$54.0 million; 2013—$29.3 million; 2014—$23.3 million; 2015—$12.5 million; and 2016—$6.9 million.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 + Details
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