Quarterly report pursuant to Section 13 or 15(d)

Debt

v2.4.0.8
Debt
9 Months Ended
Sep. 30, 2013
Debt Disclosure [Abstract]  
Debt
Debt
 
Our debt consisted of the following (dollars in thousands):
 
Maximum
 
 
 
 
 
 
 
 
 
 Availability at
 
Carrying Value at
 
 
 
Scheduled Maturity
 
September 30,
2013
 
September 30,
2013
 
December 31,
2012
 
Stated Interest Rates at
 
 Dates at
 
 
 
 
September 30, 2013
 
September 30, 2013
Mortgage and Other Secured Loans:
 

 
 

 
 

 
 
 
 
Fixed rate mortgage loans (1)
N/A

 
$
882,311

 
$
948,414

 
3.96% - 7.87% (2)
 
2014-2034
Variable rate secured loan
N/A

 
37,894

 
38,475

 
LIBOR + 2.25% (3)
 
11/2/2015
Other construction loan facilities
$
26,150

 

 
29,557

 
N/A
 
N/A
Total mortgage and other secured loans
 

 
920,205

 
1,016,446

 
 
 
 
Revolving Credit Facility (4)
800,000

 

 

 
LIBOR + 0.975% to 1.75% (5)
 
7/1/2017
Term Loan Facilities (6)
(6
)
 
620,000

 
770,000

 
LIBOR + 1.10% to 2.60% (7)
 
2015-2019
Unsecured Senior Notes (8)
 
 
 
 
 
 
 
 
 
3.600% Senior Notes
N/A

 
347,183

 

 
3.60%
 
5/15/2023
5.250% Senior Notes
N/A

 
245,360

 

 
5.25%
 
2/15/2024
Unsecured notes payable
N/A

 
1,723

 
1,788

 
0% (9)
 
5/1/2026
4.25% Exchangeable Senior Notes (10)
N/A

 
560

 
230,934

 
4.25%
 
4/15/2030
Total debt, net
 

 
$
2,135,031

 
$
2,019,168

 
 
 
 

(1)  
Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $465,000 at September 30, 2013 and $1.3 million at December 31, 2012.
(2)
The weighted average interest rate on these loans was 5.98% at September 30, 2013.
(3) 
The interest rate on the loan outstanding was 2.43% at September 30, 2013.
(4)
Refer to the paragraph below for disclosure pertaining to the Revolving Credit Facility.
(5)
The weighted average interest rate on the Revolving Credit Facility was 1.45% at September 30, 2013.
(6)  
We have the ability to borrow an aggregate of an additional $180.0 million under these term loan facilities, provided that there is no default under the facilities and subject to the approval of the lenders.
(7) 
The weighted average interest rate on these loans was 1.80% at September 30, 2013.
(8)
Refer to the paragraphs below for disclosure pertaining to these notes.
(9)  
These notes carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $788,000 at September 30, 2013 and $873,000 at December 31, 2012.
(10) 
As described further in our 2012 Annual Report on Form 10-K, these notes have an exchange settlement feature that provides that the notes may, under certain circumstances, be exchangeable for cash and, at COPLP’s discretion, COPT common shares at an exchange rate (subject to adjustment) of 20.8513 shares per one thousand dollar principal amount of the notes (exchange rate is as of September 30, 2013 and is equivalent to an exchange price of $47.96 per common share).  During the nine months ended September 30, 2013, we repaid $239.4 million principal amount of these notes and recognized a $25.9 million loss on early extinguishment of debt. The carrying value of these notes included a principal amount of $575,000 and an unamortized discount totaling $15,000 at September 30, 2013 and a principal amount of $240.0 million and an unamortized discount totaling $9.1 million at December 31, 2012.  The effective interest rate under the notes, including amortization of the issuance costs, was 6.05%.  Because the closing price of our common shares at September 30, 2013 and December 31, 2012 was less than the exchange price per common share applicable to these notes, the if-converted value of the notes did not exceed the principal amount.  The table below sets forth interest expense recognized on these notes before deductions for amounts capitalized (in thousands):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Interest expense at stated interest rate
$
6

 
$
2,550

 
$
4,201

 
$
7,650

Interest expense associated with amortization of discount
2

 
919

 
1,613

 
2,717

Total
$
8

 
$
3,469

 
$
5,814

 
$
10,367



All debt is owed by the Operating Partnership. While COPT is not directly obligated by any debt, it has guaranteed our Revolving Credit Facility, Term Loan Facilities, Unsecured Senior Notes and 4.25% Exchangeable Senior Notes.

On July 16, 2013, we entered into an amendment to our credit agreement providing for an unsecured revolving credit facility (the “Revolving Credit Facility”). The amendment extended the maturity date of the facility from September 2014 to July 2017, with the ability for us to extend such maturity by one year at our option, provided that there is no default under the facility and we pay an extension fee of 0.15% of the total availability of the facility. The amendment also changed the interest rate on the facility to be based on LIBOR (customarily the 30-day rate) plus 0.975% to 1.750%, as determined by the credit ratings assigned to COPLP by Standard & Poor’s Rating Services, Moody’s Investor Services, Inc. or Fitch Ratings Ltd. (collectively, the “Ratings Agencies”). Also on July 16, 2013, we entered into amendments on $550.0 million in existing unsecured term loan agreements with the same group of lenders as the Revolving Credit Facility that added one year in extension options and changed the interest rate applicable to the facilities to be based on LIBOR (customarily the 30-day rate) plus 1.10% to 2.00%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies.

During the nine months ended September 30, 2013, we issued the following senior notes:

a $350.0 million aggregate principal amount of 3.600% Senior Notes at an initial offering price of 99.816% of their face value on May 6, 2013, resulting in proceeds, after deducting discounts of the initial purchasers of the notes, but before other offering expenses, of $347.1 million. The notes mature on May 15, 2023. The carrying value of these notes reflects an unamortized discount totaling $2.8 million at September 30, 2013. The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%; and
a $250.0 million aggregate principal amount of 5.250% Senior Notes at an initial offering price of 98.783% of their face value on September 16, 2013, resulting in proceeds, after deducting discounts of the initial purchasers of the notes, but before other offering expenses, of $245.3 million. The notes mature on February 15, 2024. The carrying value of these notes reflects an unamortized discount totaling $4.6 million at September 30, 2013. The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%
 
We may redeem these notes, in whole at any time or in part from time to time, at our option, at a redemption price equal to the greater of (1) the aggregate principal amount of the notes being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted to its present value, on a semi-annual basis at an adjusted treasury rate plus a spread (30 basis points for the 3.600% Senior Notes and 40 basis points for the 5.250% Senior Notes), plus, in each case, accrued and unpaid interest thereon to the date of redemption. However, in each case, if this redemption occurs on or after three months prior to the maturity date, the redemption price will be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date. These notes are unconditionally guaranteed by COPT.

We capitalized interest costs of $2.2 million in the three months ended September 30, 2013, $3.4 million in the three months ended September 30, 2012, $6.7 million in the nine months ended September 30, 2013 and $10.8 million in the nine months ended September 30, 2012.

The following table sets forth information pertaining to the fair value of our debt (in thousands): 
 
September 30, 2013
 
December 31, 2012
 
Carrying
 
Estimated
 
Carrying
 
Estimated
 
Amount
 
Fair Value
 
Amount
 
Fair Value
Fixed-rate debt
 

 
 

 
 

 
 

Unsecured Senior Notes
$
592,543

 
$
579,654

 
$

 
$

4.25% Exchangeable Senior Notes
560

 
575

 
230,934

 
240,282

Other fixed-rate debt
884,034

 
812,246

 
950,202

 
968,180

Variable-rate debt
657,894

 
661,593

 
838,032

 
845,558

 
$
2,135,031

 
$
2,054,068

 
$
2,019,168

 
$
2,054,020