Interest Rate Swaps

6 Months Ended

Mar. 31, 2012

Interest Rate Swaps [Abstract]

INTEREST RATE SWAPS

4. INTEREST RATE SWAPS

In March 2009, the Company executed interest rate swap agreements with Citibank, N.A. (“Citibank”) and Wachovia Bank, N.A. (currently Wells Fargo Bank, N.A.), as counterparties, with notional amounts totaling $425.0 million, of which $225.0 million expired on February 28, 2011, and the remaining $200.0 million expired on February 29, 2012. The Company completed periodic assessments of the effectiveness of its cash flow hedges and determined that these cash flow hedges were ineffective subsequent to March 31, 2011, as a result of the Company’s refinancing transaction in May 2011, which established a LIBOR floor applicable to borrowings under the Senior Secured Credit Facilities, the source of the Company’s variable rate debt. Accordingly, a gain of $565,000 and $1.4 million resulting from the change in fair value of these hedging instruments has been reflected as a component of interest expense in the accompanying unaudited condensed consolidated statements of operations for the quarter and six months ended March 31, 2012, respectively. No gain or loss has been reflected in the accompanying unaudited condensed consolidated statements of operations for the quarter and six months ended March 31, 2011, as these cash flow hedges were determined to be highly effective during these periods.

In August 2011, the Company executed forward starting interest rate swaps with Citibank and Barclays Bank PLC, as counterparties, with notional amounts totaling $350.0 million, each agreement effective March 31, 2013 and expiring between September 30, 2014 and September 30, 2016. Under these agreements, the Company will be required to make quarterly fixed rate payments at annual rates ranging from 1.6% to 2.2%. The counterparties will be obligated to make quarterly floating rate payments to the Company based on the three-month LIBOR rate, each subject to a floor of 1.25%. Additionally, the Company executed a forward starting interest rate cap with Citibank, as counterparty, with a notional amount of $350.0 million and a cap rate of 1.75%, effective March 1, 2012 and expiring March 31, 2013. The Company completed an assessment of these cash flow hedges during the quarter and six months ended March 31, 2012, and determined that these hedges were highly effective. Accordingly, no gain or loss related to these hedges has been reflected in the accompanying unaudited condensed consolidated statements of operations, and the change in fair value has been included in accumulated other comprehensive loss as a component of member’s equity.

Effective Dates	Total Notional Amounts
	(in thousands)
Interest Rate Swaps
Effective from March 31, 2013 to September 30, 2014	$	50,000
Effective from March 31, 2013 to September 30, 2015		100,000
Effective from March 31, 2013 to September 30, 2016		200,000
Interest Rate Cap
Effective from March 1, 2012 to March 31, 2013	$	350,000

The fair value of the Company’s interest rate hedges at March 31, 2012 and September 30, 2011, reflect liability balances of $3.8 million and $3.1 million, respectively, and are included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets. The fair value of the Company’s interest rate hedges reflects a liability because the effect of the forward LIBOR curve on future interest payments results in less interest due to the Company under the variable rate component included in the interest rate hedging agreements, as compared to the amount due the Company’s counterparties under the fixed interest rate component.

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) authoritative guidance regarding fair value measurements, which provides a single definition of fair value, establishes a framework for measuring fair value, and expands disclosures concerning fair value measurements. The Company applies these provisions to the valuation and disclosure of its interest rates hedges. This authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: (i) Level 1, which is defined as quoted prices in active markets that can be accessed at the measurement date; (ii) Level 2, which is defined as inputs other than quoted prices in active markets that are observable, either directly or indirectly; and (iii) Level 3, which is defined as unobservable inputs resulting from the existence of little or no market data, therefore potentially requiring an entity to develop its own assumptions.

The Company determines the fair value of its interest rate hedges in a manner consistent with that used by market participants in pricing hedging instruments, which includes using a discounted cash flow analysis based upon the terms of the agreements, the impact of the forward LIBOR curve and an evaluation of credit risk. Given the use of observable market assumptions and the consideration of credit risk, the Company has categorized the valuation of its interest rate hedges as Level 2.