Quantitative and Qualitative Disclosures about Market Risk
−Removed: We use derivative instruments to hedge interest rate risk related to our floating rate borrowings.
+Added: We use interest rate swaps to hedge interest rate risk related to our floating rate borrowings.
However, our use of these instruments exposes us to credit risk from the potential inability of our counterparties to perform under the terms of those agreements.
We attempt to minimize this credit risk by contracting with a variety of high-quality financial counterparties.
−Removed: See Notes 8 and 10 to our consolidated financial statements in Item 15 of this Report for more information regarding our debt and derivatives.
−Removed: As of December 31, 2019 , we have no outstanding floating rate debt that is unhedged.
−Removed: In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
−Removed: As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee ("ARRC"), which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR.
+Added: See Notes 8 and 10 to our consolidated financial statements in Item 15 of this Report for more information regarding our debt and interest rate swaps.
+Added: As of December 31, 2020, we had no outstanding floating rate debt that was unhedged.
+Added: Market Transition to SOFR from USD-LIBOR
+Added: In July 2017, the Financial Conduct Authority ("FCA" - the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after December 31, 2021.
+Added: As a result, the Federal Reserve Board ("FRB")and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee ("ARRC"), which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR.
ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry-wide and company-specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR.
−Removed: Our floating rate borrowings and derivative instruments are indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks - which include interest on loans and amounts received and paid on derivative instruments.
−Removed: These risks arise in connection with transitioning contracts to a new alternative rate.
−Removed: The value of loans or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued.
−Removed: While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point.
+Added: The administrator of LIBOR has proposed stopping publication of the one-week and two-month USD-LIBOR settings after 31 December 2021, and the remaining USD LIBOR settings (i.e., the overnight and the one- , three-, six- and 12- month settings) after June 30, 2023.
+Added: After the announcement, the FCA, FRB and other regulators issued statements encouraging banks to cease entering into new contracts referencing USD-LIBOR as soon as practicable, but no later than 31 December 2021, to facilitate an orderly transition from USD-LIBOR.
+Added: Our floating rate borrowings and interest rate swaps are indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks in connection with transitioning contracts to a new alternative rate - which include:
+Added: (i) loan interest payments, (ii) amounts received and paid on interest rate swaps, and (iii) the value of loans or derivative instruments.
+Added: While we currently expect USD-LIBOR to be available in substantially its current form until at least December 31, 2021, and possibly until June 30, 2023, it is possible that USD-LIBOR will become unavailable prior to that time.
This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator.
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