filings.toolsItem 3. Quantitative and Qualitative Disclosures about Market Risk
6K characters. Original on sec.gov · Markdown
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest rate and foreign currency sensitivity
There has been no material change in the nature of the Company's interest rate risks or foreign currency exchange risks from those described in Part II Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022.
The tables below provide information about our financial instruments that are sensitive to changes in interest rates as of March 31, 2023. For further information on the components of the Company's long-term debt and their interest rates, see Note 6 to the condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q at Part I Item 1.
| Expected maturity date | Average interest rate | Fair value**(1)** | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long term debt: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed rate | $ | 35 | $ | 30 | $ | 33 | $ | 43 | $ | 31 | $ | 28 | $ | 4,389 | $ | 4,589 | 4.43 | % | $ | 3,602 | |||||||||||||||||||||||||||||||||||||||
| Variable rate | $ | 147 | $ | 1,370 | $ | 34 | $ | 2,554 | $ | 4 | $ | 2 | $ | 1 | $ | 4,112 | 4.63 | % | $ | 4,062 |
(1)Represents the fair value of the Company’s long-term debt excluding financing leases. See Note 6 to the condensed consolidated financial statements for further details.
The scheduled principal payments for all debt that bears a variable rate by its terms, including all of Term Loan B-1 and Term Loan A, have been included on the variable rate line of the schedule of expected maturities above. Additionally, the principal amounts of Term Loan B-1 and Term Loan A have been included in the calculation of the average variable interest rate presented.
However, principal amounts of $2,624 million for Term Loan B-1 and $876 million of Term Loan A (the capped debt) are subject to LIBOR caps of 2.00% through June 30, 2024. As of March 31, 2023, applicable LIBOR rates were above this 2.00%, making the interest rates on this capped debt “economically fixed", unless or until applicable LIBOR rates were to fall back below 2.00% during the remaining term of the caps. As a result, as of March 31, 2023, total fixed and economically fixed debt was $8,089 million, with an average interest rate of 4.28%, while total variable rate debt not subject to caps was $612 million with an average rate of 7.74%.
See Note 6 for further details on the Company’s interest rate cap agreements.
| Notional amount | Contract maturity date | Fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Receive variable | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 cap agreements | $ | 3,500 | $ | — | $ | 3,500 | $ | — | $ | — | $ | — | $ | — | $ | — | LIBOR above 2% | $ | 112.7 |
Subsequent to March 31, 2023, the Company amended its senior secured credit facilities and entered into several forward interest rate cap agreements that become effective beginning June 28, 2024. For additional information see Note 14.
Previous: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. · Next: Item 4. Controls and Procedures