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| FAIR VALUE MEASUREMENTS | NOTE 8—FAIR VALUE MEASUREMENTS Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts business. The inputs used to develop these fair value measurements are established in a hierarchy, which ranks the quality and reliability of the information used to determine the fair values. The fair value classification is based on levels of inputs. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:
Recurring Fair Value Measurements. The following table summarizes the Company’s financial instruments carried at fair value on a recurring basis as of June 30, 2026:
6.00%/8.00% Cash/PIK Toggle Senior Secured Exchangeable Notes due 2030 embedded derivative. The Existing Exchangeable Notes have conversion features that required bifurcation from their respective host instruments pursuant to ASC 815—Derivatives and Hedging. The conversion features embedded within the notes were combined into a derivative that comprises all features requiring bifurcation. The embedded derivative has been valued using binomial lattice models. The binomial lattice models consist of simulated Common Stock prices from the valuation date to the maturity of the notes. The significant inputs used to value the derivative include the share price of the Common Stock, the volatility of the share price, time to maturity, risk-free interest rate, credit spread, and discount yield. The Company measures the derivative at fair value at the end of each reporting period with any changes in fair value recorded to other expense (income) in the condensed consolidated statements of operations. Non-recurring Fair Value Measurements. The following table summarizes the fair value hierarchy of the bifurcated embedded derivative of the Senior Secured Exchangeable Notes due 2030 as of May 4, 2026:
Senior Secured Notes due 2030 embedded derivative valuation technique. The embedded derivative was valued by determining the as-converted value of the New Exchangeable Notes and then subtracting the estimated fair value of the New Exchangeable Notes without the conversion feature. The as-converted value of the New Exchangeable Notes was calculated from the number of shares expected to be exchanged multiplied by the closing price of the Common Stock as of May 4, 2026. The estimated fair value of the New Exchangeable Notes without the conversion feature was determined using a discounted cash flow method using a discount yield derived from the risk-free rate and an interpolated credit spread. Other Fair Value Measurement Disclosures. The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value:
Valuation Technique. Quoted market prices and observable market-based inputs were used to estimate fair value for Level 2 inputs. The Company valued these notes at principal value less an estimated discount reflecting a market yield to maturity. See Note 5—Corporate Borrowings and Finance Lease Liabilities for further information. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments. |
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