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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Iridium Communications Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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We had an outstanding aggregate balance of $1,774.7 million under the Term Loan as of June 30, 2026. Under the Term Loan, we pay interest at an annual rate equal to SOFR, plus 2.25%, with a 0.75% SOFR floor. Accordingly, we have been and continue to be subject to interest rate fluctuations. The Cap began in December 2021 and manages our exposure to interest rate movements on a notional amount of $1.0 billion of the Term Loan through November 2026. The Cap provides the right for us to receive payment from the counterparty if one-month SOFR exceeds 1.436%. The interest rate was above the level of the Cap during each of the six months ended June 30, 2026 and for the full year 2025. For every SOFR increase of 25 basis points above the level of the Cap, we expect our annual interest expense to increase by an additional $1.9 million related to the unhedged portion of the Term Loan.
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As of June 30, 2026, the Revolving Facility was undrawn. The Revolving Facility bears interest at SOFR plus 2.5%, without a SOFR floor. As of July 1, 2026, we fully drew our Revolving Facility and as drawn for every SOFR increase of 25 basis points, we expect our annual interest expense to increase by an additional $0.3 million.
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, as well as accounts receivable. We maintain our cash and cash equivalents with financial institutions with high credit ratings and maintain deposits in excess of federally insured limits. The majority of our cash is invested into a money market fund invested in U.S. treasuries, agency mortgage-backed securities and/or U.S. government-guaranteed debt. Accounts receivable are due from both domestic and international customers. We perform credit evaluations of our customers’ financial condition and record reserves to provide for estimated credit losses. Accounts payable are owed to both domestic and international vendors.