NOTE 6

DEBT

At December 31, 2017, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources. As of December 31, 2017, there was $35.9 million of available funds under this line of credit. The interest rate for borrowings under this line is the London Interbank Offered Rate, or LIBOR, plus 1.00%. This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time. The term of this line of credit expires on the earlier of May 25, 2018 or any date on which Citizens demands payment. The Company expects to renew this line of credit.

At December 31, 2017, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland. As of December 31, 2017, there was $14.5 million of available funds under this line of credit. The interest rate for borrowings under this line is LIBOR plus 1.50%. CoBank may make an annual patronage refund, which has been equal to 1.00% of the average line of credit and loan volume outstanding by Artesian. The patronage refunds earned by Artesian in 2017 and 2016 were $0.6 million and $0.7 million, respectively. The term of this line of credit expires on July 20, 2018. The Company expects to renew this line of credit.

On January 18, 2017, Artesian Water and CoBank entered into a Bond Purchase Agreement relating to the issue and sale by the Company to CoBank of a $40 million principal amount First Mortgage Bond, Series T, or the Series T Bond, due December 20, 2036, or the Maturity Date. The Series T Bond was issued pursuant to the Company's Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Second Supplemental Indenture, or the Supplemental Indenture, dated as of January 18, 2017 from the Company to Wilmington Trust Company, as Trustee. The Indenture is a first mortgage lien against substantially all of the Company's utility plant. The proceeds from the sale of the Series T Bond were used to prepay indebtedness of the Company under two existing First Mortgage Bonds: Series O, principal amount $20 million with interest rate of 8.17% and related prepayment costs of $4.5 million; and Series Q, principal amount $15.4 million with interest rate of 4.75%. The DEPSC approved the issuance of the Series T Bond on December 20, 2016. The DEPSC also approved deferral of the prepayment costs associated with the First Mortgage Bond, Series O and the previously deferred debt related costs associated with the First Mortgage Bonds, Series O and Series Q.

The Series T Bond carries an annual interest rate of 4.24% through and including the Maturity Date. Interest is payable on June 30th and December 31st of each year, beginning June 30, 2017, until the Company's obligation with respect to the payment of principal, premium (if any) and interest shall be discharged. Overdue payments shall bear interest as provided in the Supplemental Indenture. The terms of the Series T Bond also include certain limitations on the Company's indebtedness.

The weighted average interest rate on the lines of credit above paid by the Company was 2.28% for the year ended December 31, 2017. These lines of credit, as well as both the long-term debt and the state revolving fund loans shown below, require us to abide by certain financial covenants and ratios. As of December 31, 2017, we were in compliance with these covenants.

Long-term debt consists of:

	December 31,
In thousands	2017		2016
First mortgage bonds

Series O, 8.17%, due December 29, 2020	$	-	$	20,000
Series P, 6.58%, due January 31, 2018		25,000		25,000
Series Q, 4.75%, due December 1, 2043		-		15,400
Series R, 5.96%, due December 31, 2028		25,000		25,000
Series S, 4.45%, due December 31, 2033		9,600		10,200
Series T, 4.24%, due December 20, 2036		40,000		-
		99,600		95,600

State revolving fund loans

4.48%, due August 1, 2021		1,190		1,456
3.57%, due September 1, 2023		558		640
3.64%, due May 1, 2025		1,025		1,142
3.41%, due February 1, 2031		2,315		2,448
3.40%, due July 1, 2032		2,243		2,361
		7,331		8,047

Sub-total		106,931		103,647

Less: current maturities (principal amount)		1,344		1,316

Total long-term debt	$	105,587	$	102,331

Payments of principal amounts due during the next five years and thereafter:

In thousands	2018		2019		2020		2021		2022		Thereafter
First Mortgage bonds	$	600	$	600	$	600	$	600	$	600	$	96,600
State revolving fund loans		744		771		801		832		533		3,651
Total payments	$	1,344	$	1,371	$	1,401	$	1,432	$	1,133	$	100,251

The table above is reflective of the purchase of the $25 million principal amount First Mortgage Bond, Series U, or the Bond, due January 31, 2038, which was completed in January 2018. The proceeds from the sale of the Bond were used to pay in full at maturity indebtedness of the Company under First Mortgage Bond, Series P (see Note 18).