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Mortgage and Other Indebtedness | 6 Months Ended
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Jun. 30, 2017
Debt Disclosure [Abstract] |
Mortgage and Other Indebtedness | Mortgage and Other Indebtedness, Net Debt of the Company CBL has no indebtedness. Either the Operating Partnership or one of its consolidated subsidiaries, that it has a direct or indirect ownership interest in, is the borrower on all of the Company's debt. CBL is a limited guarantor of the 5.25%, 4.60%, and 5.95% senior unsecured notes (collectively, the "Notes"), issued by the Operating Partnership in November 2013, October 2014, and December 2016, respectively, for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates. The Company also provides a similar limited guarantee of the Operating Partnership's obligations with respect to its unsecured credit facilities and three unsecured term loans as of June 30, 2017. Debt of the Operating Partnership Mortgage and other indebtedness, net consisted of the following:
| June 30, 2017 |  | December 31, 2016
| Amount |  | Weighted- Average Interest Rate (1) |  | Amount |  | Weighted- Average Interest Rate (1)
Fixed-rate debt: |  |  |  |  |  |  |
Non-recourse loans on operating properties | $ | 2,043,402 |  |  | 5.51% |  | $ | 2,453,628 |  |  | 5.55%
Senior unsecured notes due 2023 (2) | 446,761 |  |  | 5.25% |  | 446,552 |  |  | 5.25%
Senior unsecured notes due 2024 (3) | 299,943 |  |  | 4.60% |  | 299,939 |  |  | 4.60%
Senior unsecured notes due 2026 (4) | 394,474 |  |  | 5.95% |  | 394,260 |  |  | 5.95%
Total fixed-rate debt | 3,184,580 |  |  | 5.44% |  | 3,594,379 |  |  | 5.48%
Variable-rate debt: |  |  |  |  |  |  |  |  |
Non-recourse term loans on operating properties | 10,899 |  |  | 3.03% |  | 19,055 |  |  | 3.13%
Recourse term loans on operating properties | 89,298 |  |  | 3.68% |  | 24,428 |  |  | 3.29%
Construction loan (5) | — |  |  | —% |  | 39,263 |  |  | 3.12%
Unsecured lines of credit | 181,069 |  |  | 2.25% |  | 6,024 |  |  | 1.82%
Unsecured term loans | 800,000 |  |  | 2.49% |  | 800,000 |  |  | 2.04%
Total variable-rate debt | 1,081,266 |  |  | 2.55% |  | 888,770 |  |  | 2.15%
Total fixed-rate and variable-rate debt | 4,265,846 |  |  | 4.71% |  | 4,483,149 |  |  | 4.82%
Unamortized deferred financing costs | (16,406 | ) |  |  |  | (17,855 | ) |  |
Total mortgage and other indebtedness, net | $ | 4,249,440 |  |  |  |  | $ | 4,465,294 |  |  |
(1) | Weighted-average interest rate includes the effect of debt premiums and discounts, but excludes amortization of deferred financing costs.
(2) | The balance is net of an unamortized discount of $3,239 and $3,448 as of June 30, 2017 and December 31, 2016, respectively.
(3) | The balance is net of an unamortized discount of $57 and $61 as of June 30, 2017 and December 31, 2016, respectively.
(4) | The balance is net of an unamortized discount of $5,526 and $5,740 as of June 30, 2017 and December 31, 2016, respectively.
(5) | The Outlet Shoppes at Laredo opened in April 2017 and the construction loan balance is included in recourse term loans on operating properties as of June 30, 2017.
Senior Unsecured Notes
Description |  | Issued (1) |  | Amount |  | Interest Rate (2) |  | Maturity Date (3)
2026 Notes |  | December 2016 |  | $ | 400,000 |  |  | 5.95% |  | December 2026
2024 Notes |  | October 2014 |  | 300,000 |  |  | 4.60% |  | October 2024
2023 Notes |  | November 2013 |  | 450,000 |  |  | 5.25% |  | December 2023
(1) | Issued by the Operating Partnership. CBL is a limited guarantor of the Operating Partnership's obligations under the Notes as described above.
(2) | Interest is payable semiannually in arrears. Interest was payable for the 2026 Notes, the 2024 Notes and the 2023 Notes beginning June 15, 2017; April 15, 2015; and June 1, 2014, respectively. The interest rate for the 2024 Notes and the 2023 Notes is subject to an increase ranging from 0.25% to 1.00% from time to time if, on or after January 1, 2016 and prior to January 1, 2020, the ratio of secured debt to total assets of the Company, as defined, is greater than 40% but less than 45%. The required ratio of secured debt to total assets for the 2026 Notes is 40% or less. As of June 30, 2017, this ratio was 27% as shown below.
(3) | The Notes are redeemable at the Operating Partnership's election, in whole or in part from time to time, on not less than 30 days and not more than 60 days' notice to the holders of the Notes to be redeemed. The 2026 Notes, the 2024 Notes and the 2023 Notes may be redeemed prior to September 15, 2026; July 15, 2024; and September 1, 2023, respectively, for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date and a make-whole premium calculated in accordance with the indenture. On or after the respective dates noted above, the Notes are redeemable for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest. If redeemed prior to the respective dates noted above, each issuance of Notes is redeemable at the treasury rate plus 0.50%, 0.35% and 0.40% for the 2026 Notes, the 2024 Notes and the 2023 Notes, respectively.
Unsecured Lines of Credit The Company has three unsecured credit facilities that are used for retirement of secured loans, repayment of term loans, working capital, construction and acquisition purposes, as well as issuances of letters of credit. Each facility bears interest at LIBOR plus a spread of 0.875% to 1.55% based on the Company's credit ratings. As of June 30, 2017, the Company's interest rate based on its credit ratings of Baa3 from Moody's Investors Service ("Moody's") and BBB- from Standard & Poor's ("S&P") and Fitch Ratings ("Fitch") is LIBOR plus 120 basis points. Additionally, the Company pays an annual facility fee that ranges from 0.125% to 0.300% of the total capacity of each facility based on the Company's credit ratings. As of June 30, 2017, the annual facility fee was 0.25%. The three unsecured lines of credit had a weighted-average interest rate of 2.25% at June 30, 2017. The following summarizes certain information about the Company's unsecured lines of credit as of June 30, 2017:
|  | Total Capacity |  | Total Outstanding |  | Maturity Date |  | Extended Maturity Date |
Wells Fargo - Facility A |  | $ | 500,000 |  |  | $ | — |  | (1) | October 2019 |  | October 2020 | (2)
First Tennessee |  | 100,000 |  |  | 15,384 |  | (3) | October 2019 |  | October 2020 | (4)
Wells Fargo - Facility B |  | 500,000 |  |  | 165,685 |  | (5) | October 2020 |  |  |
|  | $ | 1,100,000 |  |  | $ | 181,069 |  |  |  |  |  |
(1) | There was $150 outstanding on this facility as of June 30, 2017 for letters of credit. Up to $30,000 of the capacity on this facility can be used for letters of credit.
(2) | The extension option is at the Company's election, subject to continued compliance with the terms of the facility, and has a one-time extension fee of 0.15% of the commitment amount of the credit facility.
(3) | Up to $20,000 of the capacity on this facility can be used for letters of credit.
(4) | The extension option on the facility is at the Company's election, subject to continued compliance with the terms of the facility, and has a one-time extension fee of 0.20% of the commitment amount of the credit facility.
(5) | Up to $30,000 of the capacity on this facility can be used for letters of credit.
See Note 16 for information on the modification of a debt covenant on the two $500,000 unsecured lines of credit subsequent to June 30, 2017. Unsecured Term Loans The Company has a $350,000 unsecured term loan, which bears interest at a variable rate of LIBOR plus 1.35% based on the Company's current credit ratings. The loan matures in October 2017 and has two one-year extension options, subject to continued compliance with the terms of the loan agreement, for an outside maturity date of October 2019. At June 30, 2017, the outstanding borrowings of $350,000 had an interest rate of 2.40%. The Company has a $400,000 unsecured term loan, which bears interest at a variable rate of LIBOR plus 1.50% based on the Company's current credit ratings and has a maturity date of July 2018. At June 30, 2017, the outstanding borrowings of $400,000 had an interest rate of 2.55%. The Company also has a $50,000 unsecured term loan that matures in February 2018. The term loan bears interest at a variable rate of LIBOR plus 1.55%. At June 30, 2017, the outstanding borrowings of $50,000 had a weighted-average interest rate of 2.60%. See Note 16 for information on the various extensions and modifications of the unsecured term loans made subsequent to June 30, 2017. Covenants and Restrictions The agreements for the unsecured lines of credit, the Notes and unsecured term loans contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum unencumbered asset and interest ratios, maximum secured indebtedness ratios, maximum total indebtedness ratios and limitations on cash flow distributions. The Company believes that it was in compliance with all financial covenants and restrictions at June 30, 2017. Unsecured Lines of Credit and Unsecured Term Loans The following presents the Company's compliance with key covenant ratios, as defined, of the credit facilities and term loans as of June 30, 2017:
Ratio |  | Required |  | Actual |
Debt to total asset value |  | < 60% |  | 50% |
Unencumbered asset value to unsecured indebtedness |  | > 1.6x |  | 2.3x | (1)
Unencumbered NOI to unsecured interest expense |  | > 1.75x |  | 3.5x |
EBITDA to fixed charges (debt service) |  | > 1.5x |  | 2.4x |
(1) | The debt covenant limits the total amount of unsecured indebtedness the Company may have outstanding, which varies over time based on the ratio. Based on the Company’s outstanding unsecured indebtedness as of June 30, 2017, the total amount available to the Company to borrow on its lines of credit was $33,539 less than the total capacity of the lines of credit.
The agreements for the unsecured credit facilities and unsecured term loans described above contain default provisions customary for transactions of this nature (with applicable customary grace periods). Additionally, any default in the payment of any recourse indebtedness greater than or equal to $50,000 or any non-recourse indebtedness greater than $150,000 (for the Company's ownership share) of CBL, the Operating Partnership or any Subsidiary, as defined, will constitute an event of default under the agreements to the credit facilities. The credit facilities also restrict the Company's ability to enter into any transaction that could result in certain changes in its ownership or structure as described under the heading “Change of Control/Change in Management” in the agreements for the credit facilities. See Note 16 for information on the modification of the debt covenant related to the two $500,000 unsecured lines of credit and unsecured term loans subsequent to June 30, 2017. Senior Unsecured Notes The following presents the Company's compliance with key covenant ratios, as defined, of the Notes as of June 30, 2017:
Ratio |  | Required |  | Actual
Total debt to total assets |  | < 60% |  | 52%
Secured debt to total assets |  | < 45% (1) |  | 27%
Total unencumbered assets to unsecured debt |  | > 150% |  | 213%
Consolidated income available for debt service to annual debt service charge |  | > 1.5x |  | 3.1x
(1) | On January 1, 2020 and thereafter, secured debt to total assets must be less than 40% for the 2023 Notes and the 2024 Notes. The required ratio of secured debt to total assets for the 2026 Notes is 40% or less.
The agreements for the Notes described above contain default provisions customary for transactions of this nature (with applicable customary grace periods). Additionally, any default in the payment of any recourse indebtedness greater than or equal to $50,000 of the Operating Partnership will constitute an event of default under the Notes. Other Several of the Company’s malls/open-air centers, associated centers and community centers, in addition to the corporate office buildings, are owned by special purpose entities, created as a requirement under certain loan agreements that are included in the Company’s condensed consolidated financial statements. The sole business purpose of the special purpose entities is to own and operate these properties. The real estate and other assets owned by these special purpose entities are restricted under the loan agreements in that they are not available to settle other debts of the Company. However, so long as the loans are not under an event of default, as defined in the loan agreements, the cash flows from these properties, after payments of debt service, operating expenses and reserves, are available for distribution to the Company. Mortgages on Operating Properties Loan Repayments The Company repaid the following loans, secured by the related consolidated Properties, in 2017:
Date |  | Property |  | Interest Rate at Repayment Date |  | Scheduled Maturity Date |  | Principal Balance Repaid (1)
January |  | The Plaza at Fayette |  | 5.67% |  | April 2017 |  | $ | 37,146 |
January |  | The Shoppes at St. Clair Square |  | 5.67% |  | April 2017 |  | 18,827 |
February |  | Hamilton Corner |  | 5.67% |  | April 2017 |  | 14,227 |
March |  | Layton Hills Mall |  | 5.66% |  | April 2017 |  | 89,526 |
April |  | The Outlet Shoppes at Oklahoma City (2) |  | 5.73% |  | January 2022 |  | 53,386 |
April |  | The Outlet Shoppes at Oklahoma City - Phase II (2) |  | 3.53% |  | April 2019 |  | 5,545 |
April |  | The Outlet Shoppes at Oklahoma City - Phase III (2) |  | 3.53% |  | April 2019 |  | 2,704 |
|  |  |  |  |  |  |  | $ | 221,361 |
(1) | The Company retired the loans with borrowings from its credit facilities unless otherwise noted.
(2) | The loan was retired in conjunction with the sale of the property which secured the loan. See Note 4 for more information. The Company recorded an $8,500 loss on extinguishment of debt due to a prepayment fee on the early retirement.
The following is a summary of the Company's 2017 dispositions for which the consolidated mall securing the related fixed-rate debt was transferred to the lender:
Date |  | Property |  | Interest Rate at Repayment Date |  | Scheduled Maturity Date |  | Balance of Non-recourse Debt |  | Gain on Extinguishment of Debt
January |  | Midland Mall (1) |  | 6.10% |  | August 2016 |  | $ | 31,953 |  |  | $ | 3,760 |
June |  | Chesterfield Mall (1) |  | 5.74% |  | September 2016 |  | 140,000 |  |  | 29,215 |
|  |  |  |  |  |  |  | $ | 171,953 |  |  | $ | 32,975 |
(1) | The mortgage lender completed the foreclosure process and received the title to the mall in satisfaction of the non-recourse debt.
Other The non-recourse loan secured by Wausau Center is in default and receivership at June 30, 2017. The mall generates insufficient income levels to cover the debt service on the mortgage, which had a balance of $17,689 at June 30, 2017. The Company plans to return this mall to the lender when foreclosure proceedings are complete, which is expected to occur in the third quarter of 2017. In conjunction with the divestiture of the Company's interests in a consolidated joint venture, the Company was relieved of its funding obligation related to the loan secured by vacant land owned by the joint venture, which had a principal balance of $2,466 upon the disposition of its interests in the first quarter of 2017. In the first quarter of 2017, the Company exercised an option to extend the loan secured by Statesboro Crossing to June 2018. Scheduled Principal Payments As of June 30, 2017, the scheduled principal amortization and balloon payments on all of the Company’s consolidated mortgage and other indebtedness, excluding extensions available at the Company’s option, are as follows:
2017 |  | $ | 566,930 |
2018 |  | 720,639 |
2019 |  | 300,255 |
2020 |  | 372,753 |
2021 |  | 453,168 |
Thereafter (1) |  | 1,842,125 |
|  | 4,255,870 |
Unamortized premiums and discounts, net |  | (7,713 | )
Unamortized deferred financing costs |  | (16,406 | )
Principal balance of loan secured by Wausau Center |  | 17,689 |
Total mortgage and other indebtedness, net |  | $ | 4,249,440 |
(1) | Excludes the $17,689 non-recourse loan balance secured by Wausau Center, which is in default and receivership.
Of the $566,930 of scheduled principal maturities in 2017, $185,916 relates to the maturing principal balance of two operating property loans, $31,014 represents scheduled principal amortization and $350,000 relates to an unsecured term loan which was extended subsequent to June 30, 2017 (see Note 16). The $124,156 loan secured by Acadiana Mall matured in April 2017. The Company has a preliminary agreement with the lender to modify the loan and extend its maturity date. The Company’s mortgage and other indebtedness had a weighted-average maturity of 4.2 years as of June 30, 2017 and 4.4 years as of December 31, 2016. Interest Rate Hedging Instruments The Company recorded derivative instruments in its consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the derivative has been designated as a hedge and, if so, whether the hedge has met the criteria necessary to apply hedge accounting. The Company’s objectives in using interest rate derivatives were to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily used interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involved the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The effective portion of changes in the fair value of derivatives that was designated as, and that qualified as, cash flow hedges was recorded in accumulated other comprehensive income (loss) ("AOCI/L") and then subsequently reclassified into earnings in the period that the hedged forecasted transaction affected earnings. Such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The Company's interest rate derivatives, that were designated as cash flow hedges of interest rate risk, matured on April 1, 2016. The following tables provide further information relating to the Company’s interest rate derivatives that were designated as cash flow hedges of interest rate risk in 2016:
|  | Gain Recognized in OCI/L (Effective Portion) |  | Location of Losses Reclassified from AOCI into Earnings (Effective Portion) |  | Loss Recognized in Earnings (Effective Portion) |  | Location of Gain Recognized in Earnings (Ineffective Portion) |  | Gain Recognized in Earnings (Ineffective Portion)
Hedging Instrument |  | Six Months Ended June 30, |  |  | Six Months Ended June 30, |  |  | Six Months Ended June 30,
| 2017 |  | 2016 |  |  | 2017 |  | 2016 |  |  | 2017 |  | 2016
Interest rate contracts |  | $ | — |  |  | $ | 434 |  |  | Interest Expense |  | $ | — |  |  | $ | (443 | ) |  | Interest Expense |  | $ | — |  |  | $ | — |

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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 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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