Clearwire 2008 Annual Report Download - page 115

i
npr
i
c
i
ng t
h
e secur
i
ty. T
h
ese
i
nterna
ll
y
d
er
i
ve
d
va
l
ues are compare
d
w
i
t
h
non-
bi
n
di
ng va
l
ues rece
i
ve
df
rom
b
ro
k
ers
or ot
h
er
i
n
d
epen
d
ent sources, as ava
il
a
bl
e.
T
he following table is a description of the pricing assumptions used for instruments measured and recorded a
t
f
a
i
rva
l
ue,
i
nc
l
u
di
n
g
t
h
e
g
enera
l
c
l
ass
ifi
cat
i
on o
f
suc
hi
nstruments pursuant to t
h
eva
l
uat
i
on
hi
erarc
hy
.A
fi
nanc
i
a
l
i
nstrument’s cate
g
orization within the valuation hierarch
y
is based upon the lowest level of input that is si
g
nifican
t
t
o the fair value measurement
.
Fi
nanc
i
al Instrument H
i
erarchy Pr
i
c
i
n
g
Assumpt
i
ons
C
as
h
an
d
cas
h
equ
i
va
l
ents Leve
l
1 Mar
k
et quote
s
I
nvestment: U.S. Treasur
i
es Leve
l
1 Mar
k
et quote
s
I
nvestment: Money market mutual funds Level 1 Market quote
s
I
nvestment: Auction rate securities Level 3 Discount of forecasted cash flows adjuste
d
for default/loss
p
robabilities and estimat
e
o
ffi
na
l
matur
i
ty
D
ebt Instrument: Senior Term Loan
Facilit
y
Level 3 Discount of forecasted cash flows adjuste
d
for default/loss probabilities and estimat
e
o
ffi
na
l
matur
i
ty
D
erivative: Interest rate swaps Level 3 Discount of forecasted cash flows adjuste
d
for risk of non- performance
Investment
S
ecuritie
s
Where
q
uoted
p
rices for identical securities are available in an active market, securities are classified in
L
eve
l
1o
f
t
h
eva
l
uat
i
on
hi
erarc
h
y. Leve
l
1 secur
i
t
i
es
i
nc
l
u
d
e U.S. Treasur
i
es an
d
money mar
k
et mutua
lf
un
d
s
f
o
r
whi
c
h
t
h
ere are quote
d
pr
i
ces
i
n act
i
ve mar
k
ets. In certa
i
n cases w
h
ere t
h
ere
i
s
li
m
i
te
d
act
i
v
i
ty or
l
ess transparency
around in
p
uts to the valuation, investment securities are classified within Level 2 or Level 3 of the valuatio
n
hierarchy
.
D
er
i
vat
i
ve
s
Th
e two
d
er
i
vat
i
ve contracts assume
db
yus
i
nt
h
e Transact
i
ons are “p
l
a
i
nvan
ill
a swaps.” Der
i
vat
i
ves ar
e
c
lassified in Level 3 of the valuation hierarch
y
. To estimate fair value, we use an income approach whereb
y
w
e
e
st
i
mate net cas
hfl
ows an
ddi
scount t
h
e cas
hfl
ows at a r
i
s
k
-a
dj
uste
d
rate. T
h
e
i
nputs
i
nc
l
u
d
et
h
e contractua
l
term
s
o
f
t
h
e
d
er
i
vat
i
ves,
i
nc
l
u
di
n
g
t
h
e per
i
o
d
to matur
i
t
y
,pa
y
ment
f
requenc
y
an
dd
a
y
-count convent
i
ons, an
d
mar
k
et-
based parameters such as interest rate forward curves and interest rate volatilit
y
. A level of sub
j
ectivit
y
is used t
o
e
st
i
mate t
h
er
i
s
k
o
f
our non-per
f
ormance or t
h
at o
f
our counterpart
i
es.
Deb
tIn
s
tr
u
m
e
nt
s
We have $1.41 billion of principal outstandin
g
on our Senior Term Loan Facilit
y
, with a carr
y
in
g
value and an
approximate fair value of $1.36 billion. This liabilit
y
is classified in Level 3 of the valuation hierarch
y
. The Senio
r
Term Loan Fac
ili
ty
i
s not pu
bli
c
l
y tra
d
e
d
. To est
i
mate
f
a
i
rva
l
ue o
f
t
h
e Sen
i
or Term Loan Fac
ili
ty, we use an
i
ncom
e
approach whereb
y
we estimate contractual cash flows and discount the cash flows at a risk-ad
j
usted rate. The inputs
i
nclude the contractual terms of the Senior Term Loan Facilit
y
and market-based parameters such as interest rate
f
orwar
d
curves. A
l
eve
l
o
f
su
bj
ect
i
v
i
ty an
dj
u
d
gment
i
s use
d
to est
i
mate cre
di
t sprea
d
.
T
he Amended Credit A
g
reement was rene
g
otiated and restated on November 21, 2008 b
y
Old Clearwire prio
r
t
o the Closin
g
, with chan
g
es to the economic terms that mana
g
ement believes are consistent with expectations o
f
i
nvestors as mar
k
et part
i
c
i
pants
i
nt
h
e current mar
k
et env
i
ronment.
10
3
C
LEARWIRE
CO
RP
O
RATI
O
N AND
SU
B
S
IDIARIE
S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —
(
Continued
)