Fair Value of Financial Assets and Liabilities |
13. | Fair Value of Financial Assets and Liabilities |
A three-tier fair value hierarchy has been established which prioritizes the inputs used in measuring fair value. These tiers include: | • | | — defined as observable inputs such as quoted prices in active markets; |
| • | | — defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and |
| • | | — defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Our financial assets and liabilities that are disclosed but not measured at fair value include the 2024 Senior Secured Notes, 2022 Convertible Notes, 2020 Convertible Notes and, while outstanding, the 2022 Senior Secured Notes, which are reflected on the unaudited condensed consolidated balance sheet at cost. The fair value measurements are classified as Level 2 within the fair value hierarchy since they are based on quoted market prices of our instruments in markets that are not active. We estimated the fair value of the 2024 Senior Secured Notes, 2022 Convertible Notes, 2020 Convertible Notes, and, while outstanding, the 2022 Senior Secured Notes by calculating the upfront cash payment a market participant would require to assume these obligations. The upfront cash payment used in the calculations of fair value on our June 30, 2019 unaudited condensed consolidated balance sheet, excluding any issuance costs, is the amount that a market participant would be willing to lend at June 30, 2019 to an entity with a credit rating similar to ours and achieve sufficient cash inflows to cover the scheduled cash outflows under the 2024 Senior Secured Notes, 2022 Convertible Notes and 2020 Convertible Notes. The calculated fair value of our 2022 Convertible Notes and 2020 Convertible Notes is correlated to our stock price and as a result, significant changes to our stock price could have a significant impact on their calculated fair values. The fair value and carrying value of long-term debt as of June 30, 2019 and December 31, 2018 were as follows (in thousands) : | | | | | | | | | | | | | | | | | | | June 30, 2019 | | | December 31, 2018 | | | | Fair Value | | | Carrying Value | | | Fair Value | | | Carrying Value | | 2024 Senior Secured Notes | | $ | 955,000 | | | $ | 920,800 | (2) | | $ | — | | | $ | — | | 2022 Senior Secured Notes | | | — | | | | — | | | | 737,000 | | | | 702,670 | | | | | 221,000 | | | | 195,867 | (4) | | | 216,000 | | | | 190,083 | | | | | 3,000 | | | | 3,046 | | | | 150,000 | | | | 149,195 | (5) |
(1) | Fair value amounts are rounded to the nearest million. |
(2) | Carrying value of the 2024 Senior Secured Notes reflects the unaccreted debt discount of $4.2 million as of June 30, 2019. See Note 9, “Long-Term Debt and Other Liabilities,” for further information. |
(3) | Carrying value of the 2022 Senior Secured Notes reflects the unamortized debt premium and Consent Fees of $12.7 million as of December 31, 2018. See Note 9, “Long-Term Debt and Other Liabilities,” for further information. |
(4) | Carrying value of the 2022 Convertible Notes reflects the unaccreted debt discount of $41.9 million and $47.7 million, respectively, as of June 30, 2019 and December 31, 2018. See Note 9, “Long-Term Debt and Other Liabilities,” for further information. |
(5) | Carrying value of the 2020 Convertible Notes reflects the unaccreted debt discount of $12.8 million as of December 31, 2018. See Note 9, “Long-Term Debt and Other Liabilities,” for further information. |
We have financial instruments where carrying value approximates fair value. There were no fair value adjustments to these financial instruments during the three and six month periods ended June 30, 2019 and 2018.
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