Derivative Financial Instruments |
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| Derivative Financial Instruments | Note 13 – Derivative Financial Instruments Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings. The Company’s objectives in using interest rate derivative financial instruments are to add stability to interest expense and to manage the Company’s exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate caps and swaps as part of its interest rate risk management strategy. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company has not designated any of the interest rate derivatives as hedges. Although these derivative financial instruments were not designated or did not qualify for hedge accounting, the Company believes the derivative financial instruments mitigate increases in interest rates. The Company does not use derivative financial instruments for trading or speculative purposes. At March 31, 2026, the Company had interest rate caps and swaps which effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying interest rate for $92.4 million of the Company’s debt. The following table summarizes the Company’s derivative financial instruments at March 31, 2026 ($ in thousands):
(1)In April 2026, the Company executed a new interest rate cap agreement associated with the DB loan (refer to Note 11 for more information). The new agreement became effective upon the expiration of the prior rate cap in May 2026. The new rate cap provides for a notional amount of $55.0 million and carries a maturity date of May 2027. The table below presents the classification and fair value of the Company’s derivative financial instruments on its consolidated balance sheets at March 31, 2026 and December 31, 2025 (amounts in thousands):
The table below presents the classification and effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2026 and 2025 (amounts in thousands):
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