Company: IRDM
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001628280-25-005302
Chunk: 136

Company: Iridium Communications Inc.
Filing Date: 2025-02-13
Form: 10-K
Item: Item 8
Chunk 136
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edges. This will reduce the negative impact of increases in the variable rate over the term of the derivative contracts. These contracts are not used for trading or other speculative purposes. Historically, the Company has not incurred, and does not expect to incur in the future, any losses as a result of counterparty default.Hedge effectiveness of the current interest rate cap agreement (the “Cap”) is based on a long-haul hypothetical derivative methodology and includes all changes in value. The Company formally assesses, both at the hedge’s inception and on an ongoing quarterly basis, whether the designated derivative instruments are highly effective in offsetting changes in the cash flows of the hedged items. When the hedging instrument is sold, expires, is terminated, is exercised, no longer qualifies for hedge accounting, is de-designated, or is no longer probable, hedge accounting is discontinued prospectively.Interest Rate CapIn July 2021, the Company entered into the Cap, which had an effective date of December 2021. The Cap manages the Company’s exposure to interest rate movements on a portion of the Term Loan through November 2026. The Cap, as modified to date, currently provides the Company with the right to receive payment from the counterparty if one-month SOFR exceeds 1.436%. The Company pays a fixed monthly premium based on an annual rate of 0.31% for the Cap. The Cap carried a notional amount of $1.0 billion as of December 31, 2024 and 2023.The Cap, which was not affected by the expansion of the Term Loan in July 2024 and March 2024 or the repricing of the Term Loan in June 2024 and September 2023, is designed to mirror the terms of the Term Loan and to offset the cash flows being hedged. The Company designated the Cap as a cash flow hedge of the variability of the SOFR-based rate interest payments on the Term Loan. The effective portion of the Cap’s change in fair value will be recorded in accumulated other comprehensive income (loss). Any ineffective portion of the Cap’s change in fair value will be recorded in current earnings as interest expense.Fair Value of Derivative InstrumentsAs of December 31, 2024 and 2023, the Company had an asset balance of $47.3 million and $66.5 million, respectively, for the fair value of the Cap, and a liability balance of $5.6 million and $8.4 million,