Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in our 2020 Annual Report on Form 10-K. On March 5, 2021, the United Kingdom Financial Conduct Authority (“FCA”), a regulator of financial services firms and financial markets in the United Kingdom, formally announced the cessation of LIBOR as of June 30, 2023. The Alternative Reference Rates Committee, a group of private-market participant convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended Secured Overnight Financing Rate (“SOFR”) as a more robust reference rate alternative to U.S. dollar LIBOR. Concurrent with the FCA’s announcement, the International Swaps and Derivatives Association (“ISDA”) determined that the announcement constituted an index cessation event and consequently the fallback spread adjustments were fixed and published, with the spread adjustment between U.S. dollar 1-Month LIBOR and SOFR at 0.11%. Borrowings under our Unsecured Credit Agreement and our $200 million unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin, as specified in Note 8 - Debt. On October 6, 2021, we entered into a third amended and restated revolving credit and term loan agreement, extending the maturities under the existing Unsecured Credit Agreement to October 31, 2025. However, the credit agreement, as amended, includes customary LIBOR replacement terms. The $200 million unsecured term loan matures on January 15, 2024, however, the loan agreement includes provisions for an alternative rate of interest in the event LIBOR is no longer a widely recognized benchmark rate. As of September 30, 2021, the fallback rate under SOFR was 0.16%. Comparatively, the U.S. dollar 1-Month LIBOR rate as of September 30, 2021 was 0.08%. Consequently, we do not anticipate the transition from LIBOR will have a material impact on our financial statements or results of operations.
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