Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We are exposed to changes in interest rates primarily from long-term variable-rate debt arrangements.
Foreign Currency Risk
We are exposed to fluctuations in currency exchange rates as a result of our net investments in countries other than the US. Foreign currency transaction losses for the three and nine months ended September 30, 2021 were $42.9 million and $43.4 million, respectively. Movements in currency exchange rates could impact the translation of assets and liabilities of these foreign operations which are translated at the exchange rate in effect on the balance sheet date. We have not historically used operational hedges or forward currency exchange rate contracts to manage the impact of currency exchange rate fluctuations on earnings and cash flows.
On April 16, 2021, a subsidiary of the Company entered into a foreign exchange contract to hedge the risk of appreciation of the GBP-denominated purchase price related to Gamesys pursuant to which such subsidiary can purchase approximately £900 million at a contracted exchange rate.
On April 16, 2021, a subsidiary of the Company entered into two foreign exchange contracts to hedge the risk of appreciation of both the GBP-denominated and Euro-denominated debt held by Gamesys which would be paid off at closing of the Gamesys acquisition pursuant to which such subsidiary can purchase £200 million and €336 million, at a contracted exchange rate, respectively.
The total premium paid by the subsidiary of the Company on these contracts was $22.6 million.
On August 20, 2021, a subsidiary of the Company modified the above mentioned foreign exchange forward contracts, decreasing the notional amount of the GBP-denominated forward purchase commitments by £746 million to £354 million, collectively. The Company received $1.7 million upon settlement of the modification, which decreased the remaining fair value of the contracts.
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