Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risks from changes in interest rates charged on our credit facilities and other variable rate indebtedness. The impact on earnings and the value of our long-term debt are subject to change as a result of movements in market rates and prices. As of March 31, 2023, 59.8%, or $2.3 billion, of our long-term debt had a weighted average fixed interest rate of 4.00%. As of March 31, 2023, we had $1.6 billion of long-term variable rate debt, at a weighted average interest rate of 7.15%.
In the normal course of business, we enter into certain interest rate cap and swap agreements with major financial institutions to manage our risk above certain interest rates on variable rate debt. As of March 31, 2023, 76% of our $1.6 billion of outstanding long-term variable rate debt is indexed to LIBOR plus a weighted average margin of 228 basis points and 24% of our outstanding long-term variable rate debt is indexed to SOFR plus a weighted average margin of 238 basis points. Accordingly, our annual interest expense related to long-term variable rate debt is directly affected by movements in LIBOR or SOFR. As of March 31, 2023, $1.4 billion, or 92%, of our long-term variable rate debt is subject to interest rate cap or swap agreements and $128.8 million of our variable rate debt is not subject to any interest rate cap or swap agreements. For our LIBOR and SOFR interest rate cap and swap agreements as of March 31, 2023, the weighted average fixed interest rate is 4.14%, and the weighted average remaining term is 1.1 years. Many of our long-term variable rate debt instruments include provisions that obligate us to obtain additional interest rate cap agreements upon the maturity of the existing interest rate cap agreements. The costs of obtaining additional interest rate cap agreements may offset the benefits of our existing interest rate cap agreements.
37
The table below reflects the additional annual debt interest expense that would have resulted for the respective basis point increases in LIBOR and SOFR as of March 31, 2023.
Increase in Index
(in basis points)
Annual Interest Expense Increase (1)
(in millions)
100 $ 2.5
200 4.2
500 8.8
1,000 15.4
(1) Amounts are after consideration of interest rate cap and swap agreements in place as of March 31, 2023, for which the weighted average remaining term is 1.1 years.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.