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Interest Rate Risk
−Removed: Our exposure to risk based on changes in interest rates during the nine month period ended September 30, 2021 relates primarily to our Second Amended and Restated Credit Agreement.
−Removed: The Second Amended and Restated Credit Agreement bore interest at floating rates.
−Removed: The Credit Agreement, effective October 27, 2021, which replaces and supersedes the Second Amended and Restated Credit Agreement, also bears interest at floating rates (see Note 14.
−Removed: “Subsequent Events” for additional information).
+Added: Our exposure to risk based on changes in interest rates during the three-month period ended March 31, 2022 relates primarily to the Revolving Credit Facility.
+Added: The Revolving Credit Facility bears interest at floating rates.
For variable rate debt, interest rate changes generally do not affect the fair market value of such debt assuming all other factors remain constant but do impact future earnings and cash flows.
Accordingly, we may be exposed to interest rate risk on borrowings under the Credit Agreement.
−Removed: The Company has entered into two interest rate swap agreements for a total notional amount of $100 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings.
−Removed: These interest rate swaps had a fair value of zero at inception and were effective November 30, 2018 and July 31, 2019 with respective maturity dates of November 30, 2021 and February 21, 2023.
−Removed: These interest rate swaps have been designated as cash flow hedges and convert the Company’s interest rate payments on the first $100 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate.
−Removed: As a result of these interest rate swaps, interest payments on approximately 74% of our total borrowings, as of September 30, 2021, have been swapped from floating rate to fixed rate for the life of the swaps, without an exchange of the underlying principal amount.
+Added: As of March 31, 2022, the Company had one interest rate swap agreement outstanding for a total notional amount of $50 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings.
+Added: The interest rate swap had a fair value of zero at inception and was effective July 31, 2019 with a maturity date of February 21, 2023.
+Added: The interest rate swap has been designated as a cash flow hedge and converts the Company's interest rate payments on the first $50 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate.
+Added: As a result of this interest rate swap, interest payments on approximately 23% of our borrowings, as of March 31, 2022, have been swapped from floating rate to fixed rate for the life of the swap, without an exchange of the underlying principal amount.
A hedge effectiveness assessment was completed by comparing the critical terms of the hedged items with the hedging instruments, and also by reviewing the credit standing of the counterparties.
−Removed: As of September 30, 2021, it was determined that the critical terms continued to exactly match, and that the counterparties still had the ability to honor their obligations.
+Added: As of March 31, 2022, it was determined that the critical terms continued to exactly match, and that the counterparties still had the ability to honor their obligations.
As a result, the hedges continue to be deemed effective.
−Removed: Based on current borrowing levels at September 30, 2021, net of the interest rate swap, a 25-basis point fluctuation in interest rates for the nine months ended September 30, 2021 would have resulted in an increase or decrease to our interest expense of approximately $0.1 million.
+Added: Based on current borrowing levels at March 31, 2022, net of the interest rate swap, a 25-basis point fluctuation in interest rates for the three months ended March 31, 2022 would have resulted in an increase or decrease to our interest expense of approximately $0.4 million.
See “Note 12.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.