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Debt | 9 Months Ended
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Sep. 30, 2020
Debt Instruments [Abstract] |
Debt Disclosure | DebtDebt consists of the following ($ in thousands):
| September 30, 2020 |  | December 31, 2019
Revolving credit facility - unsecured | $ | 288,000 |  |  | $ | 300,000 |
Bank term loans - unsecured | 650,000 |  |  | 550,000 |
Private placement term loans - unsecured | 400,000 |  |  | 400,000 |
HUD mortgage loans - secured, non-recourse | 41,542 |  |  | 42,138 |
Fannie Mae term loans - secured, non-recourse | 95,444 |  |  | 95,706 |
Convertible senior notes - unsecured | 60,000 |  |  | 59,697 |
Unamortized loan costs | (6,018) |  |  | (7,076) |
| $ | 1,528,968 |  |  | $ | 1,440,465 |
The HUD loans are presented in the table above net of discounts of $1,179,000 and $1,238,000 as of September 30, 2020 and December 31, 2019, respectively. Repayment of HUD mortgage loans As of September 30, 2020, the Company had HUD mortgage loans secured by ten properties leased to Bickford with a net book value of $47,862,000. Nine of the mortgage notes required monthly payments of principal and interest from 4.3% to 4.4% (inclusive of mortgage insurance premiums) with original maturities in August and October 2049. One additional HUD mortgage loan assumed in 2014 at a discount, required monthly payments of principal and interest of 2.9% (inclusive of mortgage insurance premium) with an original maturity in October 2047. On October 30, and November 2, 2020, the Company repaid all ten HUD mortgage loans with a combined balance of $42,629,000, plus accrued interest of $157,000 and a prepayment fee of $1,619,000. Aggregate principal maturities of debt as of September 30, 2020 are as follows (in thousands):
Remainder of 2020 | $ | 91 |
2021 | 448,371 |
2022 | 250,389 |
2023 | 475,407 |
2024 | 75,425 |
2025 | 143,761 |
Thereafter | 100,000 |
| 1,493,444 |
Less: unamortized loan costs | (6,018) |
HUD mortgages | 41,542 |
| $ | 1,528,968 |
Unsecured revolving credit facility and bank term loans Our unsecured bank credit facility consists of three term loans –$100,000,000 maturing in July 2021, $250,000,000 maturing in August 2022 and $300,000,000 maturing in September 2023 - and a $550,000,000 revolving credit facility that matures in August 2021 with a one year extension option available after payment of a 10 basis point extension fee. We have swap agreements to fix the interest rates on $340,000,000 of term loans and $60,000,000 of our revolving credit facility that expire in December 2021, when LIBOR is scheduled for discontinuation. We entered into the $100,000,000 term loan in July 2020, which bears interest at 30-day LIBOR (with a 50 basis point floor) plus 185 basis points, based on our current leverage ratios. The term loan provides us with the option to extend the maturity by one year subject to the payment of a 20 basis point extension fee. The proceeds from this loan were used to reduce the outstanding balance on our revolving credit facility. The Company incurred approximately $1,039,000 of deferred financing cost associated with this loan. The revolving facility fee is currently 20 basis points per annum, and based on our current leverage ratios, the facility presently provides for floating interest on the revolver and the term loans at 30-day LIBOR plus 120 basis points and a blended 140 basis points, respectively. At September 30, 2020 and December 31, 2019, 30-day LIBOR was 15 basis points and 176 basis points, respectively. Through June 2020, the Company utilized $610,000,000 in interest rate swaps, designated as cash flow hedges, to fix the variable interest rate on the amounts outstanding on our term loans and revolving credit facility, at which time $210,000,000 of these hedges expired. As of September 30, 2020, we had $538,000,000 of outstanding variable rate debt exposed to interest rate risk through December 2021, at which time our remaining hedges expire. Our swaps and the financial instruments to which they relate are described in the table below, under the caption “Interest Rate Swap Agreements.” At September 30, 2020, we had $262,000,000 available to draw on the revolving portion of our credit facility, subject to usual and customary covenants. Among other stipulations, the unsecured credit facility agreement requires that we maintain certain financial ratios within limits set by our creditors. At September 30, 2020, we were in compliance with these ratios. Pinnacle Bank is a participating member of our banking group. A member of NHI’s Board of Directors and chairman of our audit committee is also the chairman of Pinnacle Financial Partners, Inc., the holding company for Pinnacle Bank. NHI’s local banking transactions are conducted primarily through Pinnacle Bank. Private placement term loans Our unsecured private placement term loans, payable interest-only, are summarized below ($ in thousands):
Amount |  | Inception |  | Maturity |  | Fixed Rate
$ | 125,000 |  |  | January 2015 |  | January 2023 |  | 3.99%
50,000 |  |  | November 2015 |  | November 2023 |  | 3.99%
75,000 |  |  | September 2016 |  | September 2024 |  | 3.93%
50,000 |  |  | November 2015 |  | November 2025 |  | 4.33%
100,000 |  |  | January 2015 |  | January 2027 |  | 4.51%
$ | 400,000 |  |  |  |  |  |  |
Except for specific debt-coverage ratios, covenants pertaining to the private placement term loans are generally conformed with those governing our credit facility. Our unsecured private placement term loan agreements include a rate increase provision that is effective if any rating agency lowers our credit rating on our senior unsecured debt below investment grade and our compliance leverage increases to 50% or more. Fannie Mae term loans In March 2015, we obtained $78,084,000 in Fannie Mae financing. The term-debt financing consists of interest-only payments at an annual rate of 3.79% and a 10-year maturity. The mortgages are non-recourse and secured by thirteen properties leased to Bickford. In a December 2017 acquisition, we assumed additional Fannie Mae debt that amortizes through 2025 when a balloon payment will be due, is subject to prepayment penalties until 2024, bears interest at a nominal rate of 4.6%, and has a remaining balance of $17,360,000 at September 30, 2020. All together, these notes are secured by facilities having a net book value of $131,024,000 at September 30, 2020. Convertible senior notes In March 2014, we issued $200,000,000 of 3.25% senior unsecured convertible notes due April 2021 (the “Notes”) with interest payable April 1st and October 1st of each year. The Notes were convertible at an initial rate of 13.93 shares of common stock per $1,000 principal amount, representing a conversion price of approximately $71.81 per share for a total of approximately 2,785,200 underlying shares. The conversion rate is subsequently adjusted upon each occurrence of certain events, as defined in the indenture governing the Notes, including the payment of dividends at a rate exceeding that prevailing in 2014. The conversion option was accounted for as an “optional net-share settlement conversion feature,” meaning that upon conversion, NHI’s conversion obligation may be satisfied, at our option, in cash, shares of common stock or a combination of cash and shares of common stock. Therefore, we use the treasury stock method to account for potential dilution in the calculation of earnings per diluted share. In December 2019, through the issuance of common stock and cash we retired $60,000,000 of our convertible notes. Settlement of the notes requires management to allocate the consideration we ultimately pay between the debt component and the equity conversion feature as though they were separate instruments. The allocation is effected by recording the fair value of the debt component first, with any remainder allocated to the conversion feature. Amounts expended to settle the notes are recognized first as a settlement of the notes at our carrying value and then are recognized in income to the extent the portion allocated to the debt instrument differs from carrying value. The remainder of the allocation, if any, is treated as settlement of equity and adjusted through our capital in excess of par account. As of September 30, 2020, our $60,000,000 of senior unsecured convertible notes were convertible at a rate of 14.88 shares of common stock per $1,000 principal amount, representing a conversion price of approximately $67.21 per share for a total of 892,716 shares on the remaining $60,000,000 of senior unsecured convertible notes. For the three and nine months ended September 30, 2020, there was no dilution resulting from the conversion option within our convertible debt. If our current share price increases above the adjusted $67.21 conversion price, dilution may become attributable to the conversion feature. At September 30, 2020, the face amount of the convertible debt exceeded its value on conversion, when value on conversion was computed as if the debt were immediately eligible to convert. Interest Rate Swap Agreements Our existing interest rate swap agreements will collectively continue through December 2021 to hedge against fluctuations in variable interest rates applicable to $400,000,000 of our bank loans. In June 2020, there were $210,000,000 notional amount of swaps that matured. During the next year, approximately $7,100,000 of losses, which are included in accu mulated other comprehensive loss, are projected to be reclassified into earnings. As of September 30, 2020, we employed the following interest rate swap contracts to mitigate our interest rate risk on our bank term and revolver loans described above ($ in thousands):
Date Entered |  | Maturity Date |  | Swap Rate |  | Rate Index |  | Notional Amount |  | Fair Value (Liability)
March 2019 |  | December 2021 |  | 2.22% |  | 1-month LIBOR |  | $ | 100,000 |  |  | $ | (2,597) |
March 2019 |  | December 2021 |  | 2.21% |  | 1-month LIBOR |  | $ | 100,000 |  |  | $ | (2,613) |
June 2019 |  | December 2021 |  | 1.61% |  | 1-month LIBOR |  | $ | 150,000 |  |  | $ | (2,736) |
June 2019 |  | December 2021 |  | 1.63% |  | 1-month LIBOR |  | $ | 50,000 |  |  | $ | (920) |
If the fair value of the hedge is an asset, we include it in our Condensed Consolidated Balance Sheets among other assets, and, if a liability, as a component of accounts payable and accrued expenses. See Note 11 for fair value disclosures about our interest rate swap agreements. Net liability balances for our hedges included as components of accounts payable and accrued expenses on September 30, 2020 and December 31, 2019, were $8,866,000 and $3,433,000, respectively. The following table summarizes interest expense ($ in thousands):
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Interest expense on debt at contractual rates | $ | 10,129 |  |  | $ | 14,308 |  |  | $ | 33,701 |  |  | $ | 40,736 |
(Gains) losses reclassified from accumulated other |  |  |  |  |  |  |
comprehensive income (loss) into interest expense | 1,778 |  |  | (390) |  |  | 4,533 |  |  | (1,031) |
Capitalized interest | (9) |  |  | (161) |  |  | (169) |  |  | (476) |
Amortization of debt issuance costs, debt discount and other | 994 |  |  | 904 |  |  | 2,524 |  |  | 2,696 |
Total interest expense | $ | 12,892 |  |  | $ | 14,661 |  |  | $ | 40,589 |  |  | $ | 41,925 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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