Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. 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 do not hold any market risk sensitive instruments for trading purposes. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market, short-term and long-term SOFR rates, and their potential impact on our long-term debt. While interest rate increases have slowed in 2023 with the Federal Reserve only increasing the federal funds rate by 100-basis points, in 2022 the 400-basis point federal funds rate increase demonstrates significant changes can occur in a short time period and interest rate change is a risk to us. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our Credit Facility. We are also exposed to a lesser extent to foreign currency exchange risk for funds held in our Canadian operating and restricted cash accounts. While there is risk of fluctuations in the foreign exchange rate between the Canadian dollar and United States dollar, our exposure is limited given the size of our Canadian operations and the minimal amount of cash held in Canadian bank accounts. A weakening or strengthening of the United States dollar to the Canadian dollar by 2x the current conversion rate, would not cause the value of the funds held in Canadian operating and restricted cash accounts to change significantly. We do not currently utilize derivative financial instruments for trading or speculative purposes.
Table of Debt Maturities and Interest Rates
The following table provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations. For our debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. The weighted-average variable rates are based upon prevailing interest rates.
The scheduled maturities of our long-term debt outstanding for the years ending December 31 are as follows:
Scheduled Maturity Date
Year Ending December 31,
(In millions)
2024
2025
2026
2027
2028
Thereafter
Total
Fair Value
Long-term debt (including current portion):
Fixed-rate
$
0.3
$
0.2
$
—
$
1,000.0
$
—
$
900.0
$
1,900.5
$
1,777.0
Average interest rate
4.8
%
4.8
%
4.8
%
4.8
%
4.8
%
4.8
%
4.8
%
Variable-rate
$
44.0
$
44.0
$
44.0
$
914.3
$
—
$
—
$
1,046.3
$
1,021.2
Average interest rate
7.2
%
7.2
%
7.2
%
7.2
%
—
%
—
%
7.2
%
As of December 31, 2023, our long-term variable-rate borrowings represented approximately 35.5% of total long-term debt. Based on December 31, 2023 debt levels, a 100-basis-point change in the interest rate would cause our annual interest costs to change by approximately $10.5 million.
The following table provides other information about our long-term debt:
December 31, 2023
Outstanding
Face
Carrying
Estimated
(In millions)
Amount
Value
Fair Value
Credit Facility
$
1,046.3
$
1,032.9
$
1,021.2
4.750% senior notes due 2027
1,000.0
992.2
957.5
4.750% senior notes due 2031
900.0
889.9
819.0
Other
0.5
0.5
0.5
Total long-term debt
$
2,946.8
$
2,915.5
$
2,798.2
The estimated fair value of our Credit Facility is based on a relative value analysis performed on or about December 31, 2023. The estimated fair values of our Senior Notes are based on quoted market prices as of December 31, 2023. The other debt is fixed-rate debt and the fair value for this obligation has been estimated to equal its carrying value as there are no observable market inputs. See also "Liquidity and Capital Resources" above.
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