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Hedging our Floating Rate Borrowings
−Removed: As of December 31, 2021, all of our floating rate borrowings were hedged with interest rate swaps.
+Added: As of December 31, 2022, the interest rates for 89% of our consolidated borrowings were fixed or swap-fixed with interest rate swaps.
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.
−Removed: We attempt to minimize this credit risk by contracting with a variety of financial counterparties with investment ratings.
+Added: We attempt to minimize this credit risk by contracting with a variety of financial counterparties with investment grade ratings.
+Added: As of December 31, 2022, the interest expense for our floating rate borrowings that are not hedged would increase by $5.6 million per year for every one hundred basis point increase in the related benchmark interest rate.
+Added: See Note 8 to our consolidated financial statements in Item 15 of this Report for the future swap expirations with a total notional amount of $837.4 million in the first quarter of 2023.
+Added: Higher interest rates would cause an increase in our future interest expense, which would reduce our future net income and cash flows from operations.
Market Transition to SOFR from USD-LIBOR
−Removed: On March 5, 2021, the FCA announced that USD-LIBOR will no longer be published after June 30, 2023.
−Removed: This announcement has several implications, including setting the spread that may be used to automatically convert contracts from USD-LIBOR to SOFR.
−Removed: Most of 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 SOFR - which include:
−Removed: (i) loan interest payments, (ii) swap interest payments, and (iii) the value of loans and swaps.
+Added: On March 5, 2021, the FCA announced that USD-LIBOR would no longer be published after June 30, 2023.
+Added: This announcement has several implications, including setting the type of SOFR to which LIBOR is converted (e.g., Term SOFR, Daily Simple SOFR or Daily Compounded SOFR) and agreeing on a spread that may be applied when converting contracts from USD-LIBOR to SOFR.
+Added: As of December 31, 2022, most of our floating rate borrowings and interest rate swaps are indexed to USD-LIBOR, and we currently expect that all of these loans and interest rate swaps will be converted to SOFR by July 1, 2023.
+Added: We are evaluating issues relating to transitioning contracts to SOFR - which include, among other issues, the calculation of:
+Added: (i) loan interest payments, (ii) swap interest payments, and (iii) the value of, and accounting for, loans and swaps.
While we currently expect USD-LIBOR to be available in substantially its current form until at least June 30, 2023, it is possible that USD-LIBOR will become unavailable prior to that time.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.