Fair Value Of Financial Instruments

3 Months Ended

Mar. 31, 2012

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820 requires disclosure of fair value information about financial instruments, whether recognized or not in our consolidated balance sheets. Fair values are based on estimates using present value or other valuation techniques in cases where quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts that ultimately may be realized or paid at settlement or maturity of the financial instruments and those differences may be material. Disclosures about fair value of financial instruments exclude certain financial instruments and all non-financial instruments from our disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of our Company.

Estimated fair values, carrying values and various methods and assumptions used in valuing our financial instruments are set forth below (dollars in thousands):

			March 31, 2012				December 31, 2011
		Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	(a)	1	$	608,791	$	608,791	$	572,297	$	572,297
Finance receivables, net	(b)	3	9,475,676		9,759,910		9,162,492		9,385,851
Restricted cash – securitization notes payable	(a)	1	856,573		856,573		919,283		919,283
Restricted cash – credit facilities	(a)	1	121,657		121,657		136,556		136,556
Restricted cash – other	(a)	1	49,350		49,350		59,136		59,136
Interest rate swap agreements	(d)	3	1,786		1,786		2,004		2,004
Interest rate cap agreements purchased	(d)	2	3,984		3,984		4,548		4,548
Financial liabilities:
Syndicated and lease warehouse facilities	(c)	2	525,269		525,269		802,571		802,571
Medium term note facility and Wachovia funding facility	(d)	3	253,394		253,709		296,820		296,542
Securitization notes payable	(d)
Securitization notes payable		1	6,819,658		6,884,143		6,937,841		6,945,865
Private securitization 2012-PP1		3	739,699		743,458
Senior notes	(d)	2	500,000		530,000		500,000		510,000
Convertible senior notes	(d)	2	500		500		500		500
Interest rate swap agreements	(d)	3	2,125		2,125		6,440		6,440
Interest rate cap agreements sold	(d)	2	4,093		4,093		4,768		4,768

_________________ 

(a) The carrying value of cash and cash equivalents, restricted cash – securitization notes payable, restricted cash – credit facilities and restricted cash – other is considered to be a reasonable estimate of fair value since these investments bear interest at market rates and have maturities of less than 90 days.

(b) The fair value of the finance receivables is estimated based upon forecasted cash flows on the receivables discounted using a pre-tax weighted average cost of capital. The forecast includes among other things items such as prepayment, defaults, recoveries and fee income assumptions.

(c) The syndicated and lease warehouse facilities have variable rates of interest and maturities of approximately one year. Therefore, carrying value is considered to be a reasonable estimate of fair value.

(d) The fair values of the interest rate cap and swap agreements, medium term note facility and Wachovia funding facility, securitization notes payable, senior notes and convertible senior notes are based on quoted market prices, when available. If quoted market prices are not available, the market value is estimated by discounting future net cash flows expected to be settled using a current risk-adjusted rate.

The fair value of our finance receivables use observable and unobservable inputs within a cash flow model. Those unobservable inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the finance receivable portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables which is the basis for the calculation of the series of cash flows that derive the fair value of the portfolio. The series of cash flows are calculated and discounted using a weighted average cost of capital using unobservable debt and equity percentages, an unobservable cost of equity, and an observable cost of debt based on companies with a similar credit rating and maturity profile as our portfolio. Macroeconomic factors could affect the credit performance of our portfolio and therefore, could potentially impact the assumptions used in our cash flow model.

The medium term note facility uses observable and unobservable inputs to estimate fair value. Observable inputs are used regarding an advance rate on the receivables to generate an estimated debt amount as well as the interest rate used to calculate the series of estimated principal payments. Those series of interest payments are discounted using an unobservable interest rate based on the most recent securitization in order to estimate fair value which would approximate the replacement value.

Securitization notes payable includes the 2012-PP1 Trust which uses observable and unobservable inputs to estimate fair value. Unobservable inputs are related to the structuring of the debt into various classes, which is based on public securitizations issued during the same time frame. Observable inputs are used by obtaining active prices based on the securitization debt issued during the same time frame. These observable inputs are then used to create expected market prices (unobservable input), which are then applied to the calculated debt classes in order to estimate fair value which would approximate market value.