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 are exposed to changes in interest rates primarily from variable rate long-term debt arrangements. We manage our interest rate risk by monitoring interest rates, including future projected rates, and adjust our mix of fixed and variable rate borrowings.
Interest Rate Risk
As of December 31, 2023, the face value of our long-term debt was $12.4 billion , including variable-rate long-term borrowings of $3.2 billion. No amounts were outstanding under our revolving credit facility.
The table below provides information as of December 31, 2023 about our fixed rate and variable rate financial instruments that are sensitive to changes in interest rates, including the cash flows associated with amortization and average interest rates. Principal amounts are used to calculate the payments to be exchanged under the related agreements and average variable rates are based on implied forward rates in the yield curve as of December 31, 2023 and should not be considered a predictor of actual future interest rates.
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Expected Maturity Date
(Dollars in millions) 2024 2025 (a)
2026 2027 2028 Thereafter Total Fair Value
Liabilities
Long-term debt
Fixed rate $ 2 $ 4,390 $ 2 $ 1,613 $ 2 $ 3,237 $ 9,246 $ 9,230
Average interest rate 4.3 % 6.1 % 4.3 % 8.1 % 4.3 % 6.1 % 6.5 %
Variable rate $ 63 $ 63 $ 63 $ 63 $ 585 $ 2,356 $ 3,193 $ 3,186
Average interest rate 6.9 % 5.7 % 5.4 % 5.5 % 4.9 % 6.7 % 6.5 %
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(a) Maturities of $4.4 billion in 2025 of fixed rate were repaid with the net proceeds of the $2.9 billion CEI Term Loan B-1 and the $1.5 billion CEI Senior Secured Notes due 2032. Following these transactions, the balance of fixed rate debt decreased by $2.9 billion and the balance of variable rate debt increased by $3.0 billion.
As of December 31, 2023, borrowings outstanding under our CEI credit agreement were variable-rate borrowings. Assuming a 100 basis-point increase in Term SOFR, our annual interest cost would change by approximately $32 million based on gross amounts outstanding at December 31, 2023.
We do not purchase or hold any derivative financial instruments for trading purposes.
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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.