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 exposure to interest rate volatility. As of December 31, 2023, before taking into account any interest rate swap agreements then in place, we held $980.0 million of variable rate debt under our secured senior term loans due 2028. The secured senior term loans due 2028 ("2028 Term Loans") pay interest at the Term SOFR rate plus the Term SOFR adjustment (as defined by the Term Loan Agreement) of 0.11448% plus a margin of 1.75% (reduced from 2.00% in December 2023).
To hedge interest rate exposure on a portion of this outstanding variable debt, we entered into interest rate swap agreements. Under the terms of the interest rate swaps entered into in 2022 ("2022 Swaps"), which hedge the interest rate exposure on the 2028 Term Loans, we receive interest based on the variable rates on the 2028 Term Loans and we pay a fixed amount of interest. For more information on the structure of the 2028 Term Loans or 2022 Swaps, see Note 12, "Financing Arrangements," to our consolidated financial statements included in Item 8 of this report. As of December 31, 2023, under the terms of the 2022 Swaps, the Company received interest based on the one-month Term SOFR index and paid interest at the fixed rate of 1.9645% on a notional amount of $600.0 million. When combined with the 1.75% interest rate margin for Term SOFR borrowings and the Term SOFR adjustment of 0.11448% under the 2028 Term Loans, the effective annual interest rate on such $600.0 million aggregate principal amount of the 2028 Term Loans was approximately 3.83%. The remaining balance of the 2028 Term Loans subject to interest rate risk as of December 31, 2023 was $380.0 million.
We designated our interest rate swap instruments 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 total borrowings at December 31, 2023 (in thousands):
Scheduled Maturity Dates 2024 2025 2026 2027 2028 Thereafter Total
Secured senior term loans due 2028 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 940,000 $ — $ 980,000
Unsecured senior notes due 2027 — — — 545,000 — — 545,000
Unsecured senior notes due 2029 — — — — — 300,000 300,000
Unsecured senior notes due 2031 — — — — — 500,000 500,000
Long term debt, at par $ 10,000 $ 10,000 $ 10,000 $ 555,000 $ 940,000 $ 800,000 $ 2,325,000
The interest rate on the $545.0 million unsecured senior 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 unsecured senior notes due July 15, 2029 is fixed at 5.125%. Interest payments on these $300.0 million unsecured senior notes are also due semiannually on January 15 and July 15 in the amount of $7.7 million upon each date.
In January 2023, we issued $500.0 million principal amount of 6.375% unsecured senior notes due February 1, 2031. Interest payments on this debt are due semiannually on February 1 and August 1 in the amount of $15.9 million upon each date, and the payments commenced on August 1, 2023.
As of December 31, 2023, interest payments on the $600.0 million of our secured senior term loan, that is effectively fixed by the 2022 Swaps, are approximately $1.9 million per month, inclusive of the margin, Term SOFR Adjustment and fixed swap rate, discussed above. We continue to have variable interest rate risk relative to the portion of our secured senior term loans which exceeds the $600.0 million of principal which is subject to the 2022 Swaps. Should the average interest rate on the remaining variable portion of our long-term debt change by 100 basis points, we estimate that our annual interest expense would change by up to approximately $4.8 million.
In addition to the fixed and variable borrowings described above, we have a revolving credit agreement with a maximum borrowing of up to $400.0 million. As of December 31, 2023, the Company had no borrowings outstanding under the facility, letters of credit of $134.3 million issued under the facility and $265.7 million available to borrow. Borrowings under this facility would be subject to interest rate variability.
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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 in which we transact business and the U.S. Dollar. Given our significant investment in Canada and operations in India and the fluctuations that have and can occur between the U.S. Dollar and Canadian Dollar or Indian Rupee exchange rates, significant movements in cumulative translation adjustment amounts recorded as a component of other comprehensive loss can occur in any given period.
During 2023, 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 and payable balances related to their operations. Those U.S. denominated balances are subject to foreign currency gains or losses. Exchange rate movements also affect the translation of 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 $11.9 million for the year ended December 31, 2023.
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