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Mortgage and Other Indebtedness, Net | 9 Months Ended
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Sep. 30, 2017
Debt Disclosure [Abstract] |
Mortgage and Other Indebtedness, Net | 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, as described below, 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 September 30, 2017. Debt of the Operating Partnership Mortgage and other indebtedness, net consisted of the following:
| September 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 | $ | 1,807,519 |  |  | 5.34% |  | $ | 2,453,628 |  |  | 5.55%
Senior unsecured notes due 2023 (2) | 446,868 |  |  | 5.25% |  | 446,552 |  |  | 5.25%
Senior unsecured notes due 2024 (3) | 299,944 |  |  | 4.60% |  | 299,939 |  |  | 4.60%
Senior unsecured notes due 2026 (4) | 615,669 |  |  | 5.95% |  | 394,260 |  |  | 5.95%
Total fixed-rate debt | 3,170,000 |  |  | 5.37% |  | 3,594,379 |  |  | 5.48%
Variable-rate debt: |  |  |  |  |  |  |  |  |
Non-recourse term loans on operating properties | 10,868 |  |  | 3.04% |  | 19,055 |  |  | 3.13%
Recourse term loans on operating properties | 89,612 |  |  | 3.87% |  | 24,428 |  |  | 3.29%
Construction loan (5) | — |  |  | —% |  | 39,263 |  |  | 3.12%
Unsecured lines of credit | 79,970 |  |  | 2.43% |  | 6,024 |  |  | 1.82%
Unsecured term loans | 885,000 |  |  | 2.69% |  | 800,000 |  |  | 2.04%
Total variable-rate debt | 1,065,450 |  |  | 2.77% |  | 888,770 |  |  | 2.15%
Total fixed-rate and variable-rate debt | 4,235,450 |  |  | 4.72% |  | 4,483,149 |  |  | 4.82%
Unamortized deferred financing costs | (19,272 | ) |  |  |  | (17,855 | ) |  |
Total mortgage and other indebtedness, net | $ | 4,216,178 |  |  |  |  | $ | 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 $3,132 and $3,448 as of September 30, 2017 and December 31, 2016, respectively.
(3) | The balance is net of an unamortized discount of $56 and $61 as of September 30, 2017 and December 31, 2016, respectively.
(4) | The balance is net of an unamortized discount of $9,331 and $5,740 as of September 30, 2017 and December 31, 2016, respectively. In September 2017, the Operating Partnership issued and sold an additional $225,000 of the series of 2026 Notes. See further information below.
(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 September 30, 2017.
Senior Unsecured Notes
Description |  | Issued (1) |  | Amount |  | Interest Rate (2) |  | Maturity Date (3)
2026 Notes |  | December 2016 / September 2017 (4) |  | $ | 625,000 |  |  | 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 September 30, 2017, this ratio was 24% 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.
(4) | On September 1, 2017, the Operating Partnership issued and sold an additional $225,000 of the 2026 Notes. The first interest payment with respect to the additional issuance will occur on December 15, 2017. After deducting underwriting discounts and other offering expenses, the net proceeds from the sale were approximately $218,913. The Operating Partnership used the net proceeds to reduce amounts outstanding under its unsecured credit facilities and for general business purposes.
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 credit ratings for the Operating Partnership's senior unsecured long-term indebtedness. As of September 30, 2017, the Operating Partnership's interest rate based on the credit ratings of its unsecured long-term indebtedness 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 credit ratings described above. As of September 30, 2017, the annual facility fee was 0.25%. The three unsecured lines of credit had a weighted-average interest rate of 2.43% at September 30, 2017. The following summarizes certain information about the Company's unsecured lines of credit as of September 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 |  |  | 36,034 |  | (3) |  | October 2019 |  | October 2020 | (4)
Wells Fargo - Facility B |  | 500,000 |  |  | 43,936 |  | (5) |  | October 2020 |  |  |
|  | $ | 1,100,000 |  |  | $ | 79,970 |  | (6) |  |  |  |  |
(1) | There was $150 outstanding on this facility as of September 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.
(6) | See debt covenant section below for limitation on excess capacity.
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 credit ratings for the Operating Partnership's senior unsecured long-term indebtedness. In July 2017, the Company exercised its option to extend the maturity date to October 2018. The loan has a one-year extension option, subject to continued compliance with the terms of the loan agreement, for an outside maturity date of October 2019. At September 30, 2017, the outstanding borrowings of $350,000 had an interest rate of 2.59%. In July 2017, the Company closed on the modification and extension of its $400,000 unsecured term loan, with an increase in the principal balance to $490,000. The variable interest spread remains at LIBOR plus 1.50% based on the credit ratings for the Operating Partnership's senior unsecured long-term indebtedness. In July 2018, the principal balance will be reduced to $300,000. The loan will mature in July 2020 and has two one-year extension options, the second of which is at the lenders' discretion, for a July 2022 extended maturity date. At September 30, 2017, the outstanding borrowings of $490,000 had an interest rate of 2.74%. In July 2017, the Company modified its $50,000 unsecured term loan to reduce the principal balance to $45,000 and change the interest rate to a variable rate of LIBOR plus 1.65%. The loan matures in June 2021 and has a one-year extension option at the Company's election, subject to continued compliance with the terms of the loan agreement, for an outside maturity date of June 2022. At September 30, 2017, the outstanding borrowings of $45,000 had a weighted-average interest rate of 2.89%. 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 September 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 September 30, 2017:
Ratio |  | Required |  | Actual
Debt to total asset value |  | < 60% |  | 49 | % |
Unsecured indebtedness to unencumbered asset value (1) |  | < 60% |  | 46 | % | (2)
Unencumbered NOI to unsecured interest expense |  | > 1.75x |  | 3.3 | x |
EBITDA to fixed charges (debt service) |  | > 1.5x |  | 2.5 | x |
(1) | The debt covenant was modified in the third quarter of 2017 to reduce the ratio from 62.5% to 60.0%. The definition of unencumbered asset value was also modified with respect to the assets that are included in the unencumbered asset pool.
(2) | 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 September 30, 2017, the total amount available to the Company to borrow on its lines of credit was $329,190 less than the total capacity of the lines of credit resulting in total availability of $690,840 as of September 30, 2017.
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. Senior Unsecured Notes The following presents the Company's compliance with key covenant ratios, as defined, of the Notes as of September 30, 2017:
Ratio |  | Required |  | Actual
Total debt to total assets |  | < 60% |  | 52%
Secured debt to total assets |  | < 45% (1) |  | 24%
Total unencumbered assets to unsecured debt |  | > 150% |  | 209%
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 properties 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 |
September |  | Hanes Mall (3) |  | 6.99% |  | October 2018 |  | 144,325 |
September |  | The Outlet Shoppes at El Paso |  | 7.06% |  | December 2017 |  | 61,561 |
|  |  |  |  |  |  |  | $ | 427,247 |
(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.
(3) | The Company recorded a $371 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 title to the consolidated mall securing the related fixed-rate debt was transferred to the lender in satisfaction of the non-recourse debt:
Date |  | Property |  | Interest Rate at Repayment Date |  | Scheduled Maturity Date |  | Balance of Non-recourse Debt |  | Gain on Extinguishment of Debt
January |  | Midland Mall |  | 6.10% |  | August 2016 |  | $ | 31,953 |  |  | $ | 3,760 |
June |  | Chesterfield Mall |  | 5.74% |  | September 2016 |  | 140,000 |  |  | 29,187 |
August |  | Wausau Center |  | 5.85% |  | April 2021 |  | 17,689 |  |  | 6,851 |
|  |  |  |  |  |  |  | $ | 189,642 |  |  | $ | 39,798 |
Other 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 September 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 |  | $ | 134,159 |
2018 |  | 667,320 |
2019 |  | 329,846 |
2020 |  | 551,004 |
2021 |  | 498,168 |
Thereafter (1) |  | 2,067,125 |
|  | 4,247,622 |
Unamortized premiums and discounts, net |  | (12,172 | )
Unamortized deferred financing costs |  | (19,272 | )
Total mortgage and other indebtedness, net |  | $ | 4,216,178 |
Of the $134,159 of scheduled principal maturities in 2017, $123,301 relates to the maturing principal balance of one operating property loan and $10,858 represents scheduled principal amortization. The $123,301 loan secured by Acadiana Mall matured in April 2017. The Company is in discussions 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 4.7 years as of September 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 |  | Nine Months Ended September 30, |  |  | Nine Months Ended September 30, |  |  | Nine Months Ended September 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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