Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

v3.19.3
Fair Value Measurement
9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
At September 30, 2019 and December 31, 2018, the carrying value of receivables, accounts payable, accrued expenses and distributions payable to noncontrolling interests approximates fair value due to their short-term nature and falls under the Level 2 hierarchy. The carrying values and fair values of debt instruments are as follows (in thousands):
 
 
September 30, 2019
 
December 31, 2018
 
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Bank line of credit
 
$
239,035

 
$
239,035

 
$
247,000

 
$
247,000

Senior debt
 
853,293

 
853,749

 
828,517

 
828,309

Subordinated debt
 
374,556

 
389,404

 
273,337

 
272,937

Securitization debt
 
578,425

 
621,571

 
400,068

 
394,756

Total
 
$
2,045,309

 
$
2,103,759

 
$
1,748,922

 
$
1,743,002


At September 30, 2019 and December 31, 2018, the fair value of the Company’s lines of credit, and certain senior, subordinated and SREC loans approximate their carrying values because their interest rates are variable rates that approximate rates currently available to the Company. At September 30, 2019 and December 31, 2018, the fair value of the Company’s other debt instruments are based on rates currently offered for debt with similar maturities and terms. The Company’s fair value of the debt instruments fell under the Level 2 hierarchy. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market.
At September 30, 2019 and December 31, 2018, financial instruments measured at fair value on a recurring basis, based upon the fair value hierarchy, are as follows (in thousands):
 
 
September 30, 2019
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$

 
$
187

 
$

 
$
187

Total
 
$

 
$
187

 
$

 
$
187

Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$

 
$
91,106

 
$

 
$
91,106

Total
 
$

 
$
91,106

 
$

 
$
91,106

Contingent consideration:
 
 
 
 

 
 

 
 

Contingent consideration
 
$

 
$

 
$
20,800

 
$
20,800

Total
 
$

 
$

 
$
20,800

 
$
20,800


 
 
December 31, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$

 
$
6,958

 
$

 
$
6,958

Total
 
$

 
$
6,958

 
$

 
$
6,958

Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$

 
$
11,910

 
$

 
$
11,910

Total
 
$

 
$
11,910

 
$

 
$
11,910


The Company determines the fair value of its interest rate swaps using a discounted cash flow model that incorporates an assessment of the risk of non-performance by the interest rate swap counterparty and an evaluation of the Company’s credit risk in valuing derivative instruments. The valuation model uses various inputs including contractual terms, interest rate curves, credit spreads and measures of volatility.
The Company recorded contingent consideration in connection with a business combination, which is dependent on the achievement of specified deployment milestones associated with the number of solar systems through 2022. The Company determined the fair value of the contingent consideration using a probability-weighted expected return methodology that considers the timing and probabilities of achieving these milestones and uses discount rates that reflect the appropriate cost of capital. Contingent consideration was valued with level 3 inputs. The Company reassesses the valuation assumptions each reporting period, with any changes in the fair value accounted for in the consolidated statements of operations.