Fair Value Measurements

9 Months Ended

Sep. 30, 2021

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash, cash equivalents and restricted cash—the carrying amounts reported in the Condensed Consolidated Balance Sheets for interest-bearing deposits approximate their fair value due to the short-term nature thereof.

Debt—the carrying values approximates fair values for bonds issued under the Norwegian Bond Debt and the Convertible Bond Debt, which are traded on the Oslo Stock Exchange and NASDAQ, respectively. The carrying amounts of our term loan and revolver loan under the New Ultraco Debt Facility and revolver loan under Holdco Revolving Credit Facility approximate their fair value, due to their variable interest rates. All the credit facilities except the Convertible Bond Debt were refinanced on October 1, 2021 at their carrying values.

The Company defines fair value, establishes a framework for measuring fair value and provides disclosures about fair value measurements. The fair value hierarchy for disclosure of fair value measurements is as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. Our Level 1 non-derivatives include cash, money-market accounts and restricted cash accounts.

Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable. Our Level 2 non-derivatives include our debt balances under the Convertible Bond Debt, Holdco Revolving Credit Facility, Norwegian Bond Debt and the New Ultraco Debt Facility. Freight forward agreements, bunker swaps and interest rate swaps are considered to be a Level 2 item as the Company, using the income approach to value the derivatives, uses observable Level 2 market inputs at measurement date and standard valuation techniques to convert future amounts to a single present amount assuming that participants are motivated, but not compelled to transact. See Note 5 Derivative Instruments.

Level 3 – Inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

September 30, 2021


			Fair Value
	Carrying Value (7)		Level 1		Level 2
Assets
Cash and cash equivalents (1)	$	125,644,368	$	125,644,368	$	—
Collateral on derivatives	31,369,664		31,369,664		—
Other current assets (2)	1,097,484		—		1,097,484
Liabilities
Norwegian Bond Debt (3)	176,000,000		—		179,960,000
New Ultraco Debt Facility (4)	158,671,371		—		158,671,371
Holdco Revolving Credit Facility (4)	24,000,000		—		24,000,000
Convertible Bond Debt (5)	114,119,000		—		171,178,500
Fair value of Derivatives - current (6)	24,381,091		—		24,381,091

December 31, 2020


			Fair Value
	Carrying Value (7)		Level 1		Level 2
Assets
Cash and cash equivalents (1)	$	88,848,771	$	88,848,771	$	—
Other current assets (2)	483,739		131,340		352,399
Liabilities
Norwegian Bond Debt (3)	180,000,000		—		173,250,000
New Ultraco Debt Facility (4)	166,429,594		—		166,429,594
Super Senior Facility (4)	15,000,000		—		15,000,000
Convertible Bond Debt (5)	114,120,000		—		92,748,748
Fair value of Derivatives - current and noncurrent (6)	1,132,398		—		1,132,398

(1) Includes restricted cash (current and noncurrent) of $25.6 million at September 30, 2021 and $18.9 million at December 31, 2020.

(2) Relates to unrealized mark-to-market gains on bunker swaps as of September 30, 2021 and December 31, 2020. Includes $0.1 million of collateral on derivatives as of December 31, 2020.

(3) The fair value of the bond is based on the last trades on September 20, 2021 and December 14, 2020 on Bloomberg.com.

(4) The fair value of the liabilities is based on the required repayment to the lenders if the debt was discharged in full on September 30, 2021.

(5) The fair value of the Convertible Bond Debt is based on the last trade on September 28, 2021 and December 21, 2020 on Bloomberg.com.

(6) Includes $24.4 million of unrealized mark-to-market losses on FFAs as of September 30, 2021 and $1.1 million of unrealized losses on our interest swaps as of December 31, 2020.

(7) The outstanding debt balances represent the face value of the debt excluding debt discount and debt issuance costs.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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