XML 28 R18.htm IDEA: XBRL DOCUMENT v3.26.1
Hedging Activity and Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Hedging Activity and Fair Value Measurements

Note 9. Hedging Activity and Fair Value Measurements

 

Hedging Activity

 

During the quarter ended March 31, 2022, we entered into several interest rate swap contracts to hedge the interest rate fluctuations related to our outstanding debt. The effective date of the contract is December 31, 2022 and, as a result, the Company has payment dates each quarter, commencing March 31 2023. During the quarter ended December 31, 2024, we entered into several foreign currency non-delivery option contracts to hedge the fluctuations in the exchange rate between the Colombian Peso and the U.S. Dollar. Our contracts are designated as cash flow hedges since they are highly effective in offsetting changes in the cash flows attributable to forecasted LIBOR and Colombian Peso denominated costs and expenses, respectively.

 

We record our hedge contracts at fair value and consider our credit risk for contracts in a liability position, and our counter-party’s credit risk for contracts in an asset position, in determining fair value. We assess our counter-party’s risk of non-performance when measuring the fair value of financial instruments in an asset position by evaluating their financial position, including cash on hand, as well as their credit ratings.

 

Due to the Libor discontinuation, on June 21, 2023, the Company amended the Interest Rate Swap contract from Libor 1 Month plus spread to SOFR 3 Months plus spread. The settlements of the instruments remain under the existing conditions; however, the fixed leg goes from 1.93% to 1.87%. Regarding the conditions of our outstanding debt, only Libor was replaced by SOFR, maintaining the other initial conditions.

 

On September 04,2025 Tecnoglass, Inc amended its senior secured revolving credit facility to (i) increase the borrowing capacity under its committed Line of credit from $150 million to $500 million, (ii) reduce its borrowing costs by an approximate 25 basis points, and (iii) extend the initial maturity date by five years to the end of 2030. Borrowings under the credit facility will now bear interest at the Secured Overnight Financing Rate (SOFR) with no floor plus a spread of 1.25%, based on the Company’s net leverage ratio, compared to a prior spread of 1.50%. The facility was led by Wells Fargo Bank N.A. as Administrative Agent; with BMO Bank N.A, Citibank N.A, Citizens Bank N.A, First Citizens Bank & Trust Company and J.P. Morgan Chase Bank N.A, as Joint Lead Arrangers.

 

As of March 31, 2026, the fair value of the Company’s interest rate swap and foreign currency non-delivery option contracts was in a net asset position of $2.2 million. We had 3 outstanding interest rate swap contracts of $110 million through November 2026 as an economic hedge and 9 non-delivery option contracts to exchange $45 million U.S. Dollars to Colombian Pesos through December 2026.

 

In the first quarter of 2026, the Company did not assess the effectiveness of foreign currency non-delivery option contracts due to the contracts the Company entered into on February 27,2026 which did not qualify for hedge accounting and were not designated as hedging instruments.

 

Because of the discontinuation of the hedge accounting for the interest rate swap in the third quarter of 2025, The Company did not assess the effectiveness of this instrument.

 

The gain or loss on the Company’s foreign currency non-delivery option contracts are reported as a component of the earnings. The change in the fair value of the interest rate swap designated as an economic hedge will be included in earnings at the moment of its valuation.

 

As of March 31,2026, there are not no gains or losses, net, recognized in the “accumulated other comprehensive income” for non-delivery option and interest rate swap contracts.

 

The fair value of interest rate swap and foreign currency non-delivery option hedges is classified in the accompanying consolidated balance sheets, as of March 31, 2026, as follows:

 

   Derivative Assets  Derivative Liabilities
Derivatives designated as hedging instruments  March 31, 2026  March 31, 2026
under Subtopic 815-20: 

Balance Sheet 

Location

  Fair Value  

Balance Sheet 

Location

  Fair Value 
               
Derivative instruments:                
Interest Rate Swap Contracts  Other current assets  $1,231   Accrued liabilities  $- 
foreign currency non-delivery forwards      997       - 
Total derivative instruments  Total derivative assets  $2,228   Total derivative liabilities  $- 

 

The ending accumulated balance for foreign currency non-delivery option contracts included in earnings, net of tax, was $997 as of March 31,2026, comprised of a derivative gain of $997. No deferred income tax was calculated because the amounts accrued as of March 31,2026 are the same as the compensation received.

 

 

The following table presents the gains (losses) on derivative financial instruments, and their classifications within the accompanying consolidated financial statements, for the three months ended March 31, 2026, and 2025:

  

   Derivatives in Cash Flow Hedging Relationships 
   Amount of Gain or (Loss)   Location of Gain or (Loss) Reclassified from Accumulated 

Amount of Gain or (Loss)

Reclassified from

 
   Recognized in earnings on   OCI (Loss) into  Accumulated 
   Derivatives   Income  OCI (Loss) into Income 
   Three Months Ended      Three Months Ended 
   March 31,   March 31,      March 31,   March 31, 
   2026   2025      2026   2025 
                        
Interest Rate Swap and foreign currency non-delivery forwards Contracts  $974   $(636)  Interest income (expense), net and deferred cost of financing and operating revenues  $-   $992 

 

Fair Value Measurements

 

The Company accounts for financial assets and liabilities in accordance with accounting standards that define fair value and establish a framework for measuring fair value. The hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

 

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and advances from customers approximate their fair value due to their relatively short-term maturities. The Company bases its fair value estimate for long term debt obligations on its internal valuation that all debt is floating rate debt based on current interest rates in Colombia.

 

The fair values of derivatives used to manage interest rate risks are based on SOFR rates and interest rate swap curves. Measurement of our derivative assets and liabilities is considered a level 2 measurement. To carry out the swap valuation, the definition of the fixed leg (obligation) and variable leg (right) is used. Once the projected flows are obtained in both fixed and variable rates, the regression analysis is performed for prospective effectiveness test. The projection curve contains the forward interest rates to project flows at a variable rate and the discount curve contains the interest rates to discount future flows, using the one-month USD Libor curve.

 

As of March 31, 2026, financial instruments carried at amortized cost that do not approximate fair value consist of long-term debt. See Note 8 – Debt. The fair value of long-term debt was calculated based on an analysis of future cash flows discounted at current market rates (which are level 2 inputs).

 

The following table summarizes the fair value and carrying amounts of our long-term debt:

 

   March 31,
2026		   December 31,
2025		 
Fair Value  $192,287   $170,727 
Carrying Value  $194,386   $171,202