InnovAge Holding Corp. 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes. Interest rate risk As of March 31, 2021, we had total outstanding debt of $75.0 million in principal amount under the Term Loan Facility, $2.4 million under the convertible term loan, and no outstanding debt under the Revolving Credit Facility. As of June 30, 2020, we had total outstanding debt of $190.0 million in principal amount under the prior Term Loan Facility, $25.0 million under the prior Revolving Credit Facility and $2.4 million under the Convertible Term Loan. Borrowings under the 2016 Credit Agreement bore interest at a floating rate per annum, equal to an applicable margin, plus, at our option, an alternative base rate or Eurodollar rate. Under the 2016 Credit Agreement, the applicable margin for borrowings was (a) with respect to term loan borrowings, 5.5% for alternate base rate borrowings and 6.5% for Eurodollar borrowings and (b) with respect to revolving loans, 3.5% for alternate base rate borrowings and 4.5% for Eurodollar borrowings. Under the 2021 Credit Agreement, the applicable margin for borrowings is (a) with respect to term loan and revolving loan borrowings, 0.75% for alternate base rate borrowings and 1.75% for Eurodollar borrowings. ​ ​ Additionally, we are required to pay the following fees pursuant to the terms of the 2021 Credit Agreement: ​ (a) a commitment fee on the average daily unused portion of the revolving credit commitments of 0.25% effective March 8, 2021 and 0.5% per annum prior to that date; (b) a customary administrative agent fee to the first lien administrative agent; (c) a participation fee on the daily amount of letter of credit exposure of each letter of credit issued by each issuing bank at a rate equal to 5.0% with respect to the term loan borrowings after the 2021 Credit Agreement; and (d) a fronting fee which shall accrue at 0.125% on the actual daily amounts of the exposure determined in the prior subsection (c). ​ We had cash and cash equivalents of $201.5 million and $112.9 million as of March 31, 2021 and June 30, 2020, respectively, which are deposited with high credit quality financial institutions and are primarily in demand deposit accounts. Our cash and cash equivalents and interest payments in respect of our debt are subject to market risk due to changes in interest rates. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our business, financial condition or results of operations. Inflation risk Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition. ​