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SEC Filings

10-K
TERRAFORM GLOBAL, INC. filed this Form 10-K on 12/21/2016
Entire Document
 

The Company has entered into interest rate swap agreements that economically hedge the cash flows for project level debt. These interest rate swaps pay a fixed rate and the counterparties to the agreements pay a variable interest rate. The changes in fair value are recorded in interest expense, net in the consolidated statement of operations as these hedges are not accounted for under hedge accounting.
Foreign Currency Contracts
The Company transacts business in various foreign currencies and has established a program that primarily utilizes foreign currency contracts to offset the risks associated with the effects of certain foreign currency exposures. The Company does not use these foreign currency contracts for trading purposes nor does it designate these forward contracts as hedging instruments pursuant to ASC 815. As of December 31, 2015, the notional amounts of the foreign currency contracts the Company held to purchase U.S. dollars in exchange for other major international currencies were $493.7 million. Included in the Company’s non-operating income was $33.1 million of net losses related to these foreign currency contracts for the year ended December 31, 2015 that hedge the purchase of foreign currencies for investments in acquisitions and debt extinguishments was a result of devaluation as compared to the U.S. dollar in the Brazilian real (BRL), Chinese yuan renminbi (CNY), Indian rupee (INR), Malaysian ringgit (MYR), South African rand (ZAR), and Thai baht (THB). The fair value of the Company’s outstanding foreign currency forward contracts was a net asset of $21.4 million as of December 31, 2015. The cash flow related to foreign currency contracts that remain outstanding are classified as operating activities. The cash flows associated with foreign currency contract settlements are classified as investing activities. The net loss relating to investments is partially offset by the lower cost associated with the cash flows associated with the acquisitions and debt extinguishments that were hedged.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of assets and liabilities are determined using either unadjusted quoted prices in active markets (Level 1) or pricing inputs that are observable (Level 2) whenever that information is available and using unobservable inputs (Level 3) to estimate fair value only when relevant observable inputs are not available.
The Company uses valuation techniques that maximize the use of observable inputs. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. If the inputs into the valuation are not corroborated by market data, in such instances, the valuation for these contracts is established using techniques including extrapolation from or interpolation between actively traded contracts as well as the calculation of implied volatilities. When such inputs have a significant impact on the measurement of fair value, the instrument is categorized as Level 3. The Company regularly evaluates and validates the inputs used to determine fair value by using pricing services to support the underlying market price of interest rates and foreign currency exchange rates.
Recurring Fair Value Measurements
The following table summarizes the financial instruments measured at fair value on a recurring basis classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation in the accompanying consolidated balance sheets:
 
As of December 31, 2015
 
As of December 31, 2014
Assets (liabilities) in thousands
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Interest rate swaps
$

 
$
11,404

 
$

 
$
11,404

 
$

 
$
(4,780
)
 
$

 
$
(4,780
)
Foreign currency forward swaps
21,383

 

 

 
21,383

 

 

 

 

Cross currency swaps

 
64,083

 

 
64,083

 

 
18,183

 

 
18,183

Total
$
21,383

 
$
75,487

 
$

 
$
96,870

 
$

 
$
13,403

 
$

 
$
13,403

The Company uses a discounted valuation technique to fair value its derivative assets and liabilities. The primary inputs into the valuation of interest rate swaps, cross currency swaps and foreign currency contracts are forward interest rates, foreign currency exchange rates, and to a lesser degree, credit spreads. The Company’s interest rate swaps and cross currency swaps are considered Level 2, since all significant inputs are corroborated by market observable data. There were no transfers into or out of Level 1, Level 2 and Level 3 during the years ended December 31, 2015 or 2014.
Fair Value of Long-Term Debt


168