Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Measurements

Fair Value Measurements

Note 6 Fair Value Measurements

Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best information available. Accordingly, we employ valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. We are able to classify fair value balances utilizing a fair value hierarchy based on the observability of those inputs.

Under the fair value hierarchy:

● Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market;

● Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not

quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and

● Level 3 measurements include those that are unobservable and of a subjective nature.

Recurring Fair Value Measurements

Our financial assets that are accounted for at fair value on a recurring basis as of December 31, 2022 and 2021 consisted of short term investments and restricted cash held in trust. During 2022, there were no transfers of our financial assets between Level 1 and Level 2 measures. Our financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of December 31, 2022 and 2021, our restricted cash held in trust was carried at fair market value and totaled $284.8 million and $281.5 million, respectively, and consisted of Level 1 measurements. No material Level 2 or Level 3 measurements existed for our financial assets for any of the periods presented.

Our financial liabilities that are accounted for at fair value on a recurring basis as of December 31, 2022 consisted of the Warrants and are included in other long-term liabilities in the accompanying consolidated financial statements. During the first quarter of 2022, the Warrants began using Level 1 inputs instead of Level 3 inputs due to increased trading volume. As of December 31, 2022, the Warrants were carried at fair market value and totaled $80.9 million.

The fair value of the Warrants was initially measured at fair value using a Monte Carlo option pricing model. As of December 31, 2021, the estimated fair value of the Warrants was determined using Level 3 inputs. Inherent in the option pricing simulation are assumptions related to expected stock-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of the Warrants based on implied and historical volatility of the company’s traded common stock. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the Warrants is based on the Company’s ability to initiate expiration, subject to a 20 business day notice period. As of December 31, 2021, the Warrants were valued at $0.1 million.

Nonrecurring Fair Value Measurements

We applied fair value measurements to our nonfinancial assets and liabilities measured on a nonrecurring basis, which consist of measurements primarily to assets held-for-sale, goodwill, intangible assets and other long-lived assets and assets acquired and liabilities assumed in a business combination. Based upon our review of the fair value hierarchy, the inputs used in these fair value measurements were considered Level 3 inputs.

Fair Value of Debt Instruments

We estimate the fair value of our debt instruments in accordance with U.S. GAAP. The fair value of our long-term debt and revolving credit facilities is estimated based on quoted market prices or prices quoted from third-party financial institutions, thus a Level 2 measurement. The carrying and fair values of these liabilities were as follows:

		As of December 31,
				2022						2021
		Effective						Effective
		Interest		Carrying		Fair		Interest		Carrying		Fair
		Rate		Value		Value		Rate		Value		Value
	(Dollars in thousands)
5.50% senior notes due January 2023		6.13	%	$	—	$	—	5.87	%	$	24,446	$	24,736
5.10% senior notes due September 2023		5.46	%		52,004		51,354	5.42	%		82,703		84,044
0.75% senior exchangeable notes due January 2024		0.97	%		177,005		164,898	5.90	%		259,839		257,730
5.75% senior notes due February 2025		6.02	%		474,092		454,773	6.03	%		548,458		508,881
6.50% senior priority guaranteed notes due February 2025		—	%		—		—	6.50	%		50,485		50,490
9.00% senior priority guaranteed notes due February 2025		9.00	%		209,384		213,507	9.00	%		218,082		226,914
7.25% senior guaranteed notes due January 2026		7.52	%		557,902		529,432	7.52	%		559,978		522,079
7.375% senior priority guaranteed notes due May 2027		7.74	%		700,000		686,686	7.74	%		700,000		724,906
7.50% senior guaranteed notes due January 2028		7.70	%		389,609		354,400	7.70	%		389,609		346,966
2018 revolving credit facility		—	%		—		—	3.72	%		460,000		460,000
				$	2,559,996	$	2,455,050			$	3,293,600	$	3,206,746
Less: deferred financing costs					22,456						30,805
				$	2,537,540					$	3,262,795

The fair values of our cash equivalents, trade receivables and trade payables approximate their carrying values due to the short-term nature of these instruments.