First Data 2008 Annual Report Download - page 187

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Financial instruments carried at fair value as of December 31, 2008 and measured at fair value on a recurring basis are classified in the table below
according to the hierarchy described above:
Fair Value Measurement Using
December 31, 2008
(in millions)
Quoted prices in
active markets
for identical assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
Assets:
Settlement Assets—student loan auction rate securities — — $ 492.2 $ 492.2
Settlement Assets—other securities $ 0.1 $ 3,293.5 — 3,293.6
Other assets—available-for-sale securities — 12.9 — 12.9
Foreign exchange contracts — 11.7 — 11.7
Total assets at fair value $ 0.1 $ 3,318.1 $ 492.2 $ 3,810.4
Other Liabilities:
Interest rate contracts $ — $ (598.8) $ — $ (598.8)
Foreign exchange contracts — (2.5) — (2.5)
Total liabilities at fair value $ — $ (601.3) $ — $ (601.3)
December 31, 2008 (in millions)
Fair Value Measurement
Using Significant
Unobservable Inputs
(Level 3)
Student loan auction rate
securities
Beginning balance January 1, 2008 —
Total gains or losses (realized or unrealized):
Included in other comprehensive income $ (13.3)
Included in investment income, net (47.6)
Transfers in (out) of Level 3 553.1
Ending balance December 31, 2008 $ 492.2
Settlement Assets
As of December 31, 2008, $3.8 billion of the Company's $8.7 billion of "Settlement assets" were comprised of financial instruments that were carried at
fair value. These investments included student loan auction rate securities ("SLARS") and other available-for-sale securities discussed in more detail below.
Student loan auction rate securities
As of December 31, 2008, the Company held $492.2 million ($553.1 million par value) of SLARS which are long-term debt instruments, issued by
student loan trusts, with variable interest rates that historically reset through a periodic Dutch auction process but do not include a put-back option. Beginning
in mid-February 2008 and due largely to uncertainty in the global credit and capital markets, investment banks and broker dealers became less willing to
support SLARS and other auction rate securities ("ARS") auctions. As a result, multiple auctions failed, including the auctions for the SLARS still held by the
Company. A failed auction does not represent a default by the issuer of the underlying security. As of December 31, 2008, the majority of the SLARS held by
the Company were rated "AAA" or the equivalent and all were collateralized by securitized student loans substantially guaranteed by
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