Fair Value Disclosures

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures

5. Fair Value Disclosures

ASC 820, Fair Value Measurement, defines fair value as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:

• Level 1 — Quoted prices for identical instruments in active markets

• Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date

• Level 3 — Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date

The financial instruments measured at fair value on a recurring basis were as follows:

	June 30, 2012
Description	Level 1		Level 2		Level 3		Total
	(In thousands)
Debt securities	$	12,092	$	4,485	$	12,436	$	29,013
Equity securities		0		12		0		12
Total investments	$	12,092	$	4,497	$	12,436	$	29,025

	December 31, 2011
Description	Level 1		Level 2		Level 3		Total
	(In thousands)
Debt securities	$	17,186	$	4,727	$	10,504	$	32,417
Equity securities		0		11		0		11
Total investments	$	17,186	$	4,738	$	10,504	$	32,428

Level 1 financial instruments are debt securities in which fair values were determined from quoted prices in an active market. Level 2 financial instruments are debt and equity securities in which fair values were determined from quoted prices in an inactive market or for similar instruments in an active market. Level 3 financial instruments are private debt securities where fair value was determined using a cash flow model that considered estimated interest rates, discount rates, prepayments and defaults.

The Company uses a third-party service provider to value its Level 3 financial instruments. Significant changes in the pricing of these instruments are compared to activity of similar financial instruments, or general market conditions, for reasonableness. At June 30, 2012, the unobservable inputs used in the valuation of Level 3 financial instruments were as follows:

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
				Constant prepayment rate		15% - 20% (18%)
Private debt obligations	$	12,436	Discounted cash flow	Probability of default		2% (2%)
				Recovery rate		50% - 70% (60%)

At June 30, 2012, the summary of changes in fair value of Level 3 financial instruments was as follows:

	Private Debt Obligations
	(In thousands)
Fair value at December 31, 2011	$	10,504
Unrealized gains, included in other comprehensive loss		1,932
Fair value at June 30, 2012	$	12,436

At June 30, 2012 and December 31, 2011, as required by ASC 825, Financial Instruments, the following presents net book values and estimated fair values of notes payable.

	June 30, 2012				December 31, 2011
	Net Book Value		Estimated Fair Value		Net Book Value		Estimated Fair Value
	(In thousands)
$750,000 senior secured notes	$	750,000	$	785,625	$	750,000	$	697,500
Secured promissory notes	$	1,700	$	1,700	$	2,056	$	2,056

The $750.0 million senior secured notes are level 2 financial instruments in which fair value was based on quoted market prices at the end of the period in an inactive market.

Other financial instruments consist primarily of cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable, other liabilities and secured promissory notes. Book values of these financial instruments approximate fair value due to their relatively short-term nature.