Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, we are exposed to market risks, including changes in interest rates and certain foreign currency rates, primarily relating to the Canadian dollar.
Interest Rate Risk
Our philosophy in managing interest rate risk is to maintain a debt portfolio inclusive of both variable and fixed-rate debt so as to limit our interest expense and exposure to interest rate volatility. In 2018, we entered into interest rate swap agreements with the intention of hedging interest rate exposure on a portion of our outstanding LIBOR-based variable rate senior secured term loans. Under the terms of the swaps, we receive interest based on the 1-month LIBOR index and pay interest at a weighted average rate of approximately 2.92% on an initial notional amount of $350.0 million. When combined with the 1.75% interest rate margin for Eurocurrency borrowings, the effective annual interest rate on such $350.0 million aggregate principal amount of senior secured term loans was therefore approximately 4.67% as of December 31, 2021.
We designated our interest rate swap agreements as effective cash flow hedges at inception, and therefore the change in fair value is recorded in stockholders' equity as a component of accumulated other comprehensive loss and included in interest expense at the same time as interest expense is affected by the hedged transactions. Differences paid or received over the life of the agreements are recorded as additions to or reductions of interest expense on the underlying debt.
The following table provides information regarding our fixed and variable rate borrowings at December 31, 2021 (in thousands):
Scheduled Maturity Dates 2022 2023 2024 2025 2026 Thereafter Total
Senior secured term loans due 2024 $ 7,535 $ 7,535 $ 704,556 $ — $ — $ — $ 719,626
Senior secured term loans due 2028 10,000 10,000 10,000 10,000 10,000 950,000 1,000,000
Unsecured senior notes due 2027 — — — — — 545,000 545,000
Unsecured senior notes due 2029 — — — — — 300,000 300,000
Long term debt, at par $ 17,535 $ 17,535 $ 714,556 $ 10,000 $ 10,000 $ 1,795,000 $ 2,564,626
The interest rate on the $545.0 million senior unsecured notes due July 15, 2027 is fixed at 4.875%. Interest payments on this debt are due semiannually on January 15 and July 15 in the amount of $13.3 million upon each date. The interest rate on the $300.0 million senior unsecured notes due July 15, 2029 is fixed at 5.125%. Interest payments on these $300.0 million senior unsecured notes are also due semiannually on January 15 and July 15 in the amount of $7.7 million upon each date.
As of December 31, 2021, we continue to have interest rate risk relative to the portion of our senior secured term loans which exceeds the $350.0 million of principal which is subject to our interest rate swap agreements. As of December 31, 2021, $1,369.6 million of those term loans were subject to variable interest rate risk. The weighted-average interest rate on the variable portion of the term loans as of December 31, 2021 was 2.04%.
In early 2022, we entered into interest rate swap agreements with a notional amount of $600.0 million to effectively fix the interest rate on an additional $600.0 million of the senior secured term loans. After the execution of these interest rate swap agreements, only $769.6 million remained subject to variable interest rate risk and should the average interest rate on the remaining variable rate portion of our long-term debt change by 100 basis points, we estimate that our annual interest expense would change by up to approximately $8.1 million. See Note 11, "Financing Arrangements" to our consolidated financial statements included in Item 8 of this report for more details on the 2022 interest rate swaps.
In addition to the fixed and variable rate borrowings described in the above table, we have a revolving credit agreement with maximum borrowings of up to $400.0 million (with a $300.0 million sub-limit for letters of credit), under which no borrowings were outstanding at December 31, 2021.
Foreign Currency Risk
We view our investment in our foreign subsidiaries as long-term; thus, we have not entered into any hedging transactions between any two foreign currencies or between any of the foreign currencies and the U.S. Dollar. Given our significant investment in Canada and the fluctuations that have and can occur between the U.S. Dollar and Canadian Dollar exchange rates, significant movements in cumulative translation adjustment amounts recorded as a component of other comprehensive income (loss) can occur in any given period.
During 2021, our Canadian subsidiaries transacted a portion of their business in U.S. Dollars and at any period end had cash on deposit in U.S. Dollars and outstanding U.S. Dollar accounts receivable related to those transactions. Those cash and receivable amounts are subject to foreign currency gains or losses. Exchange rate movements also affect the translation of
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Canadian generated profits and losses into U.S. Dollars. Had the Canadian Dollar been 10.0% stronger or weaker against the U.S. Dollar, we would have reported increased or decreased net income of $1.1 million for the years ended December 31, 2021 and 2020.
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