| FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments Not Carried at Estimated Fair Value As described above in Note 2 to these condensed consolidated financial statements, as of the Effective Date, the Successor Company accounts for its investments, as well as its collateralized loan obligation secured notes at estimated fair value. Comparatively, the Predecessor Company accounted for certain of its corporate loans and its collateralized loan obligation secured notes at amortized cost. The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of September 30, 2015 (amounts in thousands): Successor Company As of September 30, 2015 Fair Value Hierarchy Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Cash, restricted cash, and cash equivalents $ 837,662 $ 837,662 $ 837,662 $ — $ — Liabilities: Senior notes 413,394 400,036 400,036 — — Junior subordinated notes 248,160 214,190 — — 214,190 The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of December 31, 2014 (amounts in thousands): Successor Company As of December 31, 2014 Fair Value Hierarchy Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Cash, restricted cash, and cash equivalents $ 610,912 $ 610,912 $ 610,912 $ — $ — Liabilities: Senior notes 414,524 413,215 413,215 — — Junior subordinated notes 246,907 228,087 — — 228,087 Fair Value Measurements The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 , and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): Successor Company Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of Assets: Securities: Corporate debt securities $ — $ 189,183 $ 208,116 $ 397,299 Residential mortgage-backed securities — — 50,139 50,139 Total securities — 189,183 258,255 447,438 Corporate loans — 5,112,378 331,626 5,444,004 Equity investments, at estimated fair value 33,263 87,206 158,877 279,346 Interests in joint ventures and partnerships, at estimated fair value — — 655,655 655,655 Derivatives: Foreign exchange forward contracts and options — 34,285 — 34,285 Options — — 481 481 Total derivatives — 34,285 481 34,766 Total $ 33,263 $ 5,423,052 $ 1,404,894 $ 6,861,209 Liabilities: Collateralized loan obligation secured notes $ — $ 4,709,138 $ — $ 4,709,138 Derivatives: Interest rate swaps — 47,504 — 47,504 Foreign exchange forward contracts and options — 2,158 — 2,158 Total derivatives — 49,662 — 49,662 Total $ — $ 4,758,800 $ — $ 4,758,800 The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2014, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): Successor Company Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of December 31, 2014 Assets: Securities: Corporate debt securities $ — $ 266,387 $ 317,034 $ 583,421 Residential mortgage-backed securities — — 55,184 55,184 Total securities — 266,387 372,218 638,605 Corporate loans — 6,159,487 347,077 6,506,564 Equity investments, at estimated fair value 25,692 73,967 81,719 181,378 Interests in joint ventures and partnerships, at estimated fair value — — 718,772 718,772 Other assets — 4,645 — 4,645 Derivatives: Foreign exchange forward contracts and options — 28,354 — 28,354 Options — — 5,212 5,212 Total derivatives — 28,354 5,212 33,566 Total $ 25,692 $ 6,532,840 $ 1,524,998 $ 8,083,530 Liabilities: Collateralized loan obligation secured notes $ — $ — $ 5,501,099 $ 5,501,099 Derivatives: Interest rate swaps — 54,071 — 54,071 Foreign exchange forward contracts and options — 926 — 926 Total rate of return swaps — 130 — 130 Total derivatives — 55,127 — 55,127 Total $ — $ 55,127 $ 5,501,099 $ 5,556,226 Level 3 Fair Value Rollforward The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended September 30, 2015 (amounts in thousands): Successor Company Assets Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Warrants Options Beginning balance as of July 1, 2015 $ 225,891 $ 52,389 $ 341,047 $ 166,879 $ 739,597 $ 411 $ 2,910 Total gains or losses (for the period): Included in earnings(1) (11,727 ) 2,454 (6,882 ) (8,453 ) (63,887 ) (411 ) (2,429 ) Transfers into Level 3 — — — — — — — Transfers out of Level 3 — — — — — — — Purchases — — — — 3,767 — — Sales (9,086 ) — — — — — — Settlements 3,038 (4,704 ) (2,539 ) 451 (23,822 ) — — Ending balance as of September 30, 2015 $ 208,116 $ 50,139 $ 331,626 $ 158,877 $ 655,655 $ — $ 481 Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (11,727 ) $ 581 $ (6,882 ) $ (8,453 ) $ (63,887 ) $ (411 ) $ (2,429 ) (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the nine months ended September 30, 2015 (amounts in thousands): Successor Company Assets Liabilities Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Warrants Options Collateralized Loan Obligation Secured Notes Beginning balance as of January 1, 2015 $ 317,034 $ 55,184 $ 347,077 $ 81,719 $ 718,772 $ — $ 5,212 $ 5,501,099 Total gains or losses (for the period): Included in earnings(1) (23,486 ) 5,469 (64,930 ) (29,567 ) (84,045 ) (2,412 ) (4,731 ) — Transfers into Level 3 — — — — — — — — Transfers out of Level 3(2) — — — — — — — (5,501,099 ) Purchases — — 12,307 — 53,133 — — — Sales (89,665 ) — (25,511 ) — — — — — Settlements 4,233 (10,514 ) 62,683 106,725 (32,205 ) 2,412 — — Ending balance as of September 30, 2015 $ 208,116 $ 50,139 $ 331,626 $ 158,877 $ 655,655 $ — $ 481 $ — Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (26,145 ) $ 758 $ (64,043 ) $ (28,871 ) $ (84,045 ) $ (2,412 ) $ (4,731 ) $ — (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. (2) CLO secured notes were transferred out of Level 3 due to the adoption of accounting guidance effective January 1, 2015, whereby the debt obligations of the Company's consolidated CLOs were measured on the basis of the estimated fair value of the financial assets of the CLOs. As such, as of September 30, 2015, these debt obligations were classified as Level 2. Refer to Note 2 to these condensed consolidated financial statement for further discussion. The following table presents additional information about assets, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three and five months ended September 30, 2014 (amounts in thousands): Successor Company Assets Liabilities Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans, at Estimated Fair Value Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Options Collateralized Loan Obligations Secured Notes Beginning balance as of May 1, 2014 $ 156,500 $ 59,623 $ 294,218 $ 157,765 $ 472,467 $ 8,854 $ 6,684 $ 5,663,665 Total gains or losses (for the period): Included in earnings(1) 2,185 1,359 2,951 2,160 21,690 (1,798 ) (509 ) 28,669 Transfers into Level 3 — — — — — — — — Transfers out of Level 3(2) — — — (1,230 ) — — — — Purchases 20,000 — 1,261 — 27,466 — — 52,594 Sales (3,966 ) — (2,912 ) — — — — — Settlements (5,127 ) (1,740 ) 4,764 (17,535 ) (6,067 ) — — (197,014 ) Ending balance as of June 30, 2014 $ 169,592 $ 59,242 $ 300,282 $ 141,160 $ 515,556 $ 7,056 $ 6,175 $ 5,547,914 Total gains or losses (for the period): Included in earnings(1) (7,751 ) 1,421 (10,084 ) (3,265 ) 8,639 (7,056 ) (137 ) 5,468 Transfers into Level 3 — — — — — — — — Transfers out of Level 3 — — — — — — — — Purchases 29,780 — 1,327 — 15,381 — — 471,441 Sales (6,870 ) — — — (13,795 ) — — — Settlements 29,792 (3,517 ) (3,758 ) (96,125 ) 211,540 — — (581,237 ) Ending balance as of September 30, 2014 $ 214,543 $ 57,146 $ 287,767 $ 41,770 $ 737,321 $ — $ 6,038 $ 5,443,586 Change in unrealized gains or losses for the three months ended September 30, 2014 included in earnings for assets held at the end of the reporting period(1) $ (7,751 ) $ (185 ) $ (10,084 ) $ (3,265 ) $ 8,639 $ — $ (137 ) $ 5,324 Change in unrealized gains or losses for the five months ended September 30, 2014 included in earnings for assets held at the end of the reporting period(1) $ (5,566 ) $ 438 $ (7,092 ) $ 109 $ 26,272 $ — $ (646 ) $ 33,993 (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Amounts for collateralized loan obligation secured notes, which represent liabilities measured at fair value, are included in net realized and unrealized gain (loss) on debt in the condensed consolidated statements of operations. (2) Equity investments, at estimated fair value were transferred out of Level 3 because observable market data became available. The following table presents additional information about assets, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the four months ended April 30, 2014 (amounts in thousands): Predecessor Company Securities Available- For-Sale Other Securities, at Estimated Fair Value Residential Mortgage- Backed Securities Corporate Loans, at Estimated Fair Value Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Options Beginning balance as of January 1, 2014 $ 23,401 $ 107,530 $ 76,004 $ 152,800 $ 138,059 $ 415,247 $ 8,941 $ 6,794 Total gains or losses (for the period): Included in earnings(1) 22 3,059 3,088 (5,123 ) 9,076 22,377 (813 ) (302 ) Included in other comprehensive income 121 — — — — — — — Transfers into Level 3 — — — — — — — — Transfers out of Level 3(3) — — — — (8,751 ) — — — Purchases — 25,000 — 8,822 — 42,683 — — Sales — — (17,810 ) — — — — — Settlements (16 ) (10,078 ) (2,529 ) (3,104 ) 120,593 14,113 — — Ending balance as of March 31, 2014 23,528 125,511 58,753 153,395 258,977 494,420 8,128 6,492 Total gains or losses (for the period): Included in earnings(1) 44 479 1,416 1,240 12,126 (24,158 ) 726 192 Included in other comprehensive income 33 — — — — — — — Transfers into Level 3(2) 6,937 — — — — — — — Transfers out of Level 3(3) — — — — (119,033 ) — — — Purchases — — — — — 1,615 — — Sales — — — — — — — — Settlements (32 ) — (546 ) 2,272 — (1,184 ) — — Ending balance as of April 30, 2014 $ 30,510 $ 125,990 $ 59,623 $ 156,907 $ 152,070 $ 470,693 $ 8,854 $ 6,684 Change in unrealized gains or losses for the period included in earnings for the four months ended April 30, 2014 for assets held at the end of the reporting period(1) $ 66 $ 2,683 $ 5,242 $ 4,445 $ 20,499 $ (1,781 ) $ (87 ) $ (110 ) (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. (2) Securities available-for-sale were transferred into Level 3 because observable market data was no longer available as a result of an asset-restructure. (3) Equity investments, at estimated fair value were transferred out of Level 3 because observable market data became available as a result of asset-restructures. Certain interests in joint ventures and partnerships were transferred from Level 1 to Level 2 during the five months ended September 30, 2014 due to illiquid market conditions. There were no transfers between Level 1 and Level 2 for the Company’s financial assets and liabilities measured at fair value on a recurring and non-recurring basis for the three and nine months ended September 30, 2015 , three months ended September 30, 2014 and four months ended April 30, 2014. Valuation Techniques and Inputs for Level 3 Fair Value Measurements The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivatives, that are measured at fair value and categorized within Level 3 as of September 30, 2015 (dollar amounts in thousands): Successor Company Balance as of Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 208,116 Yield analysis Yield 19% 6% - 23% Decrease Net leverage 7x 6x-12x Decrease EBITDA multiple 6x 5x - 10x Increase Discount margin 845 750bps – 1425bps Decrease Discounted cash flows Weighted average cost of capital 17% 17% Decrease Residential mortgage – backed securities $ 50,139 Discounted cash flows Probability of default 1% 0% - 3% Decrease Loss severity 35% 30% - 50% Decrease Constant prepayment rate 16% 12% - 18% (5 ) Corporate loans $ 331,626 Yield Analysis Yield 12% 3% - 20% Decrease Net leverage 6x 1x - 22x Decrease EBITDA multiple 8x 4x - 17x Increase Equity investments, at estimated fair value(6) $ 158,877 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 0% - 15% Decrease Weight ascribed to market comparables 62% 0% - 100% (7 ) Weight ascribed to discounted cash flows 38% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 5x 1x - 12x Increase Forward EBITDA multiple 8x 4x - 10x Increase Discounted cash flows Weighted average cost of capital 9% 7% - 14% Decrease LTM EBITDA exit multiple 9x 3x - 10x Increase Interests in joint ventures and partnerships(9) $ 655,655 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 34% 0% - 100% (7 ) Weight ascribed to discounted cash flows 66% 0% - 100% (8 ) Market comparables Current capitalization rate 7% 6% - 11% Decrease LTM EBITDA multiple 8x 8x Increase Discounted cash flows Weighted average cost of capital 10% 7% - 20% Decrease Average price per BOE(10) $21.92 $16.85 - $24.81 Increase Yield analysis Yield 16% 16% Decrease Net leverage 5x 1x - 13x Decrease EBITDA multiple 10x 8x - 13x Increase Options(11) $ 481 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 10% Decrease Weight ascribed to market comparables 50% 50% (7 ) Weight ascribed to discounted cash flows 50% 50% (8 ) , Market comparables LTM EBITDA multiple 10x 10x Increase Forward EBITDA multiple 9x 9x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 6x 6x Increase (1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0 - 100% . When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques. (2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities. (3) Weighted average amounts are based on the estimated fair values. (4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. (5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips. (6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $7.0 million was valued solely using a discounted cash flow technique, while $46.4 million was valued solely using a market comparables technique. (7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. (8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. (9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $168.2 million was valued solely using a discounted cash flow technique, while $33.0 million was valued solely using a market comparables technique and $18.4 million was valued solely using a yield analysis. (10) Natural resources assets with an estimated fair value of $134.4 million as of September 30, 2015 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 25% liquids and 75% natural gas. (11) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. The following table presents additional information about valuation techniques and inputs used for assets, including derivatives, that are measured at fair value and categorized within Level 3 as of December 31, 2014 (dollar amounts in thousands): Successor Company Balance as of December 31, 2014 Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 317,034 Yield analysis Yield 17% 3% - 19% Decrease Net leverage 6x 5x - 12x Decrease EBITDA multiple 7x 4x - 11x Increase Discount margin 905bps 625bps - 1100bps Decrease Broker quotes Offered quotes 101 101 Increase Residential mortgage-backed securities $ 55,184 Discounted cash flows Probability of defaults 8% 0% - 21% Decrease Loss severity 26% 12% - 45% Decrease Constant prepayment rate 12% 4% - 19% (5 ) Corporate loans, at estimated fair value $ 347,077 Yield Analysis Yield 12% 3% - 21% Decrease Net leverage 6x 1x - 13x Decrease EBITDA multiple 9x 5x - 12x Increase Equity investments, at estimated fair value(6) $ 81,719 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 97% 0% - 100% (7 ) Weight ascribed to discounted cash flows 83% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 4x 1x - 12x Increase Forward EBITDA multiple 7x 4x - 11x Increase Discounted cash flows Weighted average cost of capital 13% 9% - 16% Decrease LTM EBITDA exit multiple 8x 5x - 10x Increase Interests in joint ventures and partnerships(9) $ 718,772 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 54% 0% - 100% (7 ) Weight ascribed to discounted cash flows 79% 0% - 100% (8 ) Market comparables Current capitalization rate 7% 4% - 15% Decrease LTM EBITDA multiple 11x 10x - 13x Increase Control Premium 15% 15% Increase Discounted cash flows Weighted average cost of capital 12% 7% - 20% Decrease Average Price per BOE(10) $30.16 $21.46 - $35.67 Increase Options(11) $ 5,212 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 50% 50% (7 ) Weight ascribed to discounted cash flows 50% 50% (8 ) Market comparables LTM EBITDA multiple 9x 9x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 11x 11x Increase Liabilities: Collateralized loan obligation secured notes $ 5,501,099 Yield analysis Discount margin 255bps 95bps - 1000bps Decrease Discounted cash flows Probability of default 3% 2% - 3% Decrease Loss Severity 32% 30% - 37% Decrease (1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0 - 100% . When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques. (2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities. (3) Weighted average amounts are based on the estimated fair values. (4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. (5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips. (6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value , $9.5 million was valued solely using a discounted cash flow technique, while $67.4 million was valued solely using a market comparables technique. (7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. (8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. (9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interests in joint ventures and partnerships, $207.6 million was valued solely using a discounted cash flow technique, while $20.4 million was valued solely using a market comparables technique. (10) Natural resources assets with an estimated fair value of $176.4 million as of December 31, 2014 were valued using commodity prices.Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 23% liquids and 77% natural gas. (11) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. |
