v3.25.4
Derivatives and Hedging Activities
 12 Months Ended
Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
Cash Flow Hedges of Interest Rate Risk
2025 New Swaps
In connection with entering into the Credit Agreement in December 2025, the Company entered into 10 interest rate swaps on the $150.0 million Term Loan, which hedge fluctuations in interest payments by converting variable interest rates to fixed interest rates. The interest rate swap instruments are designated as cash flow hedges.
2025 Swap Terminations
In February 2025, in conjunction with the repayment of the underlying hedged loan agreements, the Company received $1.5 million in connection with the partial unwind of an interest rate swap designated as a cash flow hedge. In conjunction with the partial unwind, the Company accelerated the reclassification of gains of $1.5 million from other comprehensive income to earnings as a result of the hedged forecasted transactions becoming probable not to occur. The gains were recorded as a reduction to interest expense in the consolidated statements of operations and comprehensive loss.
In December 2025, in connection with the closing of the Credit Facilities and the repayment of $330.2 million under the Secured Term Loan 2 due 2026, the Company terminated and settled in cash the interest rate swap with $330.2 million in notional value maturing in December 2026 and received $6.1 million from its counterparty. Because the original forecasted transaction underlying the interest rate swap contemplated cash flows from SOFR-based debt until such debt’s maturity and the Company
currently has sufficient other SOFR-based rate debt remaining in lieu of the repaid SOFR-based debt, management determined that the original forecasted transaction is still probable to occur by the end of the originally specified time period. As such, the $6.1 million gain related to the terminated swap will continue to be recorded in accumulated other comprehensive income and amortized over the remaining life of the terminated swap in earnings. During the fourth quarter of 2025, the Company recognized $0.3 million of gain in earnings, which was recorded as a reduction to interest expense in the consolidated statements of operations and comprehensive loss.
The Company estimates that approximately $5.9 million of unrealized gains, which are included in accumulated other comprehensive income as of December 31, 2025, are expected to be reclassified into earnings as a decrease to interest expense within the next 12 months.
As of December 31, 2025, the Company had 10 interest rate swaps, designated as cash flow hedge(s) of interest rate risk (dollars in thousands):
Notional Amount
Index
Pay Rate
Effective Date
Maturity Date
Fair value as of
December 31, 2025
Derivative liabilities, at fair value:
Interest rate “pay-fixed” swaps$150,000USD-SOFR with -5 Day Lookback3.34%12/11/202512/11/2028$(188)
The table below details the location in the financial statements of the gain (loss) recognized on interest rate derivatives designated as cash flow hedges for the periods presented (dollars in thousands):
Year ended December 31,
202520242023
(Loss) gain recognized in accumulated other comprehensive income on interest rate derivatives
$(665)$8,716 $5,324 
Gain (loss) reclassified from accumulated other comprehensive income into earnings as reductions to (increases in) interest expense
$10,371 $15,540 $18,770 
Total interest expense presented in the consolidated statements of operations and comprehensive loss
$61,281 $69,447 $66,078 
Non-Designated Derivatives
The Company had the following derivatives that were not designated as hedges in qualifying hedging relationships as of December 31, 2025 and 2024 (dollars in thousands):
December 31, 2025December 31, 2024
Number of Instruments
Notional Amount (1)
Fair Value
Number of Instruments
Notional Amount (1)
Fair Value
Interest rate caps (2)
6$337,999 $569 8$369,218 $2,554 
__________
(1)Notional amount represents active interest rate cap contracts.
(2)Recorded at fair value in derivative assets, at fair value on the consolidated balance sheets. All of the Company’s interest rate cap agreements limited one-month SOFR to 3.50% with terms through November 2026. The actual one-month SOFR rates during the year ended December 31, 2025 exceeded the strike price rate of 3.50% and the Company received payments under these agreements. While the Company does not apply hedge accounting for these interest rate caps, they are economically hedging the Fannie Mae Secured Debt and other secured debt. Changes in the fair value of, and any cash received from, derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to earnings and are presented within gain (loss) on non-designated derivatives in the consolidated statements of operations and comprehensive loss.
As SOFR has increased beyond 3.50%, the Company received cash payments of $3.3 million and $6.8 million in the years ended December 31, 2025 and 2024, respectively.
In April 2025, the Company terminated two interest rate caps with a notional of $21.7 million related to the OMF Warehouse Facility upon the facility’s full repayment.
In June 2025, the Company purchased three interest rate caps with a notional of $133.8 million for $1.1 million that limit one-month SOFR to 3.50% and mature in November 2026 related to the Fannie Mae Secured Debt. These interest rate caps were purchased in advance of interest rate caps set to expire in July 2025.
In October 2025, the Company purchased two interest rate caps with a notional of $146.1 million for $0.4 million that limit one month SOFR to 3.50% and mature in November 2026 related to the Fannie Mae Secured debt. These interest rate caps were purchased in advance of interest rate caps set to expire in November 2025.
Credit-Risk-Related Contingent Features
The Company has agreements in place with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. The Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions.