Fair Value Measurements

3 Months Ended

Mar. 31, 2020

The following fair value hierarchy table categorizes information regarding our financial assets and liabilities measured at fair value on a recurring basis (in millions):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
As of March 31, 2020
Supplemental executive retirement plan assets	$	21.2	$	—		$	—	$	21.2
Total financial assets	21.2		—			—		21.2
Derivatives, net	—		(12.6		)	—		(12.6		)
Total financial liabilities	$	—	$	(12.6	)	$	—	$	(12.6	)
As of December 31, 2019
Supplemental executive retirement plan assets	$	26.0	$	—		$	—	$	26.0
Derivatives, net	—		5.4			—		5.4
Total financial assets	$	26.0	$	5.4		$	—	$	31.4

Supplemental Executive Retirement Plan Assets

Our Valaris supplemental executive retirement plans (the "SERP") are non-qualified plans that provide eligible employees an opportunity to defer a portion of their compensation for use after retirement. The SERPs were frozen to the entry of new participants in November 2019 and to future compensation deferrals as of January 1, 2020. Assets held in the SERP were marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, on our consolidated balance sheets as of March 31, 2020 and 2019. The fair value measurements of assets held in the SERP were based on quoted market prices.

Derivatives

Our derivatives were measured at fair value on a recurring basis using Level 2 inputs. See "Note 8 - Derivative Instruments" for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value measurements of our derivatives were based on market prices that are generally observable for similar assets or liabilities at commonly quoted intervals.

Other Financial Instruments

The carrying values and estimated fair values of our debt instruments were as follows (in millions):



	March 31, 2020				December 31, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
6.875% Senior notes due 2020	$	124.1	$	27.8	$	124.8	$	117.3
4.70% Senior notes due 2021	100.4		10.4		113.2		95.5
4.875% Senior notes due 2022	601.2		125.9		599.2		460.5
3.00% Exchangeable senior notes due 2024⁽¹⁾	707.7		214.3		699.0		607.4
4.50% Senior notes due 2024	302.0		28.6		302.0		167.2
4.75% Senior notes due 2024	278.6		64.2		276.5		201.4
8.00% Senior notes due 2024	295.5		27.6		295.7		181.7
5.20% Senior notes due 2025	331.8		33.8		331.7		186.7
7.375% Senior notes due 2025	330.2		82.6		329.2		218.6
7.75% Senior notes due 2026	987.7		107.7		987.1		575.1
7.20% Debentures due 2027	111.7		16.6		111.7		70.0
7.875% Senior notes due 2040	372.8		46.9		373.3		153.5
5.40% Senior notes due 2042	263.2		78.8		262.8		194.4
5.75% Senior notes due 2044	974.2		93.5		973.3		450.0
5.85% Senior notes due 2044	269.1		80.6		268.8		194.8
Amounts borrowed under credit facility⁽²⁾	322.9		328.9		—		—
Total debt	$	6,373.1	$	1,368.2	$	6,048.3	$	3,874.1
Less: current maturities	224.5		—		124.8		—
Total long-term debt	$	6,148.6	$	1,368.2	$	5,923.5	$	3,874.1

⁽¹⁾

Our 2024 Convertible Notes were issued with a conversion feature. The 2024 Convertible Notes were separated into their liability and equity components on our condensed consolidated balance sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount that will be amortized to interest expense over the life of the instrument. Excluding the unamortized discount, the carrying value of the 2024 Convertible Notes was $839.2 million and $838.3 million as of March 31, 2020 and December 31, 2019, respectively.


⁽²⁾	Total outstanding borrowings under our credit facility are $328.9 million and are recorded net of $6.0 million of unamortized deferred financing cost on our condensed consolidated balance sheet. In addition, we have $3.2 million in letters of credit issued under our credit facility, leaving $1.3 billion of undrawn borrowing capacity.

The estimated fair values of our senior notes and debentures were determined using quoted market prices, which are level 1 inputs. The estimated fair values of our cash and cash equivalents, accounts receivable, notes receivable, trade payables and other liabilities approximated their carrying values as of March 31, 2020 and December 31, 2019.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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