Fair Value Of Financial Instruments

3 Months Ended

Mar. 31, 2013

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

Refer to Note 12 - "Fair Values of Assets and Liabilities" to the consolidated financial statements in our Form 10-K for further discussion of valuation techniques and fair value measurement levels. The fair value of our foreign exchange swaps use observable quoted prices for inputs and are considered Level 2 financial instruments.

Assets and liabilities itemized below were measured at fair value on a recurring basis, using either the market approach (i), the cost approach (ii) or the income approach (iii) (in thousands):

	March 31, 2013
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
	Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs	Assets/ Liabilities At Fair Value
Assets
Money market funds(i)(a)	$	1,105,275				$	1,105,275
Derivatives not designated as hedging instruments:
Interest rate caps(i)			$	784		784
Foreign exchange swaps(i)			2,221			2,221
Total assets	$	1,105,275	$	3,005	$	$	1,108,280
Liabilities
Derivatives not designated as hedging instruments:
Interest rate caps(i)			$	795		$	795
Foreign exchange swaps(i)			2,257			2,257
Total liabilities	$		$	3,052	$	$	3,052

_________________ 

(a) Excludes cash in banks of $2,642.4 million.

	December 31, 2012
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
	Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Assets/ Liabilities At Fair Value
Assets
Money market funds(i)(a)	$	1,830,261					$	1,830,261
Derivatives not designated as hedging instruments:
Interest rate caps(i)			$	386			386
Interest rate swaps(iii)					$	133	133
Total assets	$	1,830,261	$	386	$	133	$	1,830,780
Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps(iii)					$	133	$	133
Derivatives not designated as hedging instruments:
Interest rate caps(i)			$	394			394
Total liabilities	$		$	394	$	133	$	527

_________________ 

(a) Excludes cash in banks of $227.7 million.

The tables below present a reconciliation for interest rate swap agreements measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

	Three Months Ended
	March 31,
	2013						2012
	Assets			Liabilities			Assets			Liabilities
Balance at beginning of period	$	133		$	(133	)	$	2,004		$	(6,440	)
Total realized and unrealized gains
Included in earnings							128			(40		)
Included in other comprehensive income										(97		)
Settlements	(133		)	133			(346		)	4,452
Balance at end of period	$			$			$	1,786		$	(2,125	)

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. 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, 2013				December 31, 2012
		Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	(a)	1	$	2,896,870	$	2,896,870	$	1,289,494	$	1,289,494
Finance receivables, net	(b)	3	11,502,472		11,799,364		10,998,274		11,313,481
Restricted cash – securitization notes payable	(a)	1	778,213		778,213		728,908		728,908
Restricted cash – credit facilities	(a)	1	53,101		53,101		14,808		14,808
Restricted cash – other	(a)	1	19,522		19,522		24,774		24,774
Interest rate swap agreements	(d)	3					133		133
Interest rate cap agreements purchased	(d)	2	784		784		386		386
Foreign exchange swap agreements	(d)	2	2,221		2,221
Financial liabilities:
Credit facilities	(c)	2	2,719,134		2,719,134		354,203		354,203
Securitization notes payable
Securitization notes payable	(d)	1	8,600,162		8,742,701		8,533,321		8,669,106
Private securitization 2012-PP1	(e)	3	429,532		442,003		489,987		502,332
Senior notes	(d)	2	1,500,000		1,606,250		1,500,000		1,620,000
Interest rate swap agreements	(d)	3					133		133
Interest rate cap agreements sold	(d)	2	795		795		394		394
Foreign exchange swap agreements	(d)	2	2,257		2,257

_________________ 

(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 consumer finance receivables is estimated based upon forecasted cash flows on the receivables discounted using a pre-tax weighted average cost of capital. For commercial finance receivables, carrying value is considered to be a reasonable estimate of fair value because substantially all have variable rates of interest and maturities of one year or less.

(c) The credit 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, securitization notes payable, senior notes and foreign exchange swap agreements 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.

(e) We use observable and unobservable inputs to estimate fair value for the private securitization 2012 - PP1. 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 inputs), which are then applied to the debt classes in order to estimate fair value which would approximate market value.

There were no transfers of recurring fair values between levels.

The fair value of our consumer 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 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 is 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.

Securitization notes payable uses observable inputs to estimate fair value. Observable inputs are used by obtaining active prices based on the securitization debt issued during the same time frame.