Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risk exposures, including interest rate risk. The following discussion regarding our risk management activities includes forward-looking statements that involve risk and uncertainties. Estimates of future performance and economic conditions are reflected assuming certain changes in interest rates. Caution should be used in evaluating our overall market risk from the information presented below, as actual results may differ.
Interest Rate Risk
Based on our proportionate share of consolidated and unconsolidated variable-rate debt at March 31, 2021, and excluding the secured credit facility, which is included in liabilities subject to compromise in the accompanying condensed consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase or decrease in interest rates on variable-rate debt would result in annual cash flows of approximately $7.6 million and $5.7 million, respectively, and increase or decrease annual interest expense, after the effect of capitalized interest, by approximately $0.9 million.
Based on our proportionate share of consolidated and unconsolidated variable-rate debt at March 31, 2021, and including the secured credit facility, which is included in liabilities subject to compromise in the accompanying condensed consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase or decrease in interest rates on variable-rate debt would result in annual cash flows of approximately $119.0 million and $106.0 million, respectively, and increase or decrease annual interest expense, after the effect of capitalized interest, by approximately $6.5 million.
Based on our proportionate share of total consolidated, unconsolidated and other debt at March 31, 2021, and excluding the secured credit facility and senior unsecured notes, which are included in liabilities subject to compromise in the accompanying condensed consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase in interest rates would decrease the fair value of debt by approximately $14.9 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $15.7 million.
Based on our proportionate share of total consolidated, unconsolidated and other debt at March 31, 2021, and including the secured credit facility and senior unsecured notes, which are included in liabilities subject to compromise in the accompanying condensed consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase in interest rates would decrease the fair value of debt by approximately $28.4 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $28.9 million.
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