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FINANCING ARRANGEMENTS
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
FINANCING ARRANGEMENTS FINANCING ARRANGEMENTS
Convertible Senior Notes due 2026
The 2026 Notes bear interest at a rate of 1.125% per annum, payable semiannually in arrears on March 15 and September 15 of each year, with an annual effective interest rate of 1.83%. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.
The carrying amount of the 2026 Notes consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Principal amount$230,000 $230,000 
Less: debt discount(3,138)(3,530)
Net carrying amount of liability$226,862 $226,470 
We classified the fair value of the 2026 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the 2026 Notes and our cost of debt. The estimated fair value of the 2026 Notes as of March 31, 2024 and December 31, 2023 was $181.3 million and $141.9 million and was determined using a lattice model.
During the three months ended March 31, 2024 and 2023, we recognized interest costs on the 2026 Notes as follows (in thousands):
Three Months Ended March 31,
20242023
Contractual interest$730 $647 
Amortization of debt discount391 384 
Total $1,121 $1,031 
Capped Call Transactions
In connection with the 2026 Notes, we entered into privately-negotiated capped call transactions. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the 2026 Notes. The capped call transactions are expected generally to reduce potential dilution to our common stock upon any conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, with such reduction and/or offset subject to a cap initially equal to $104.80 (which represents a premium of 100% over the last reported sale price of our common stock on The Nasdaq Global Select Market on March 22, 2021), subject to certain adjustments under the terms of the capped call transactions.
Revolving Credit Agreement
In February 2024, we prepaid $43.1 million to terminate all commitments to access further credit under the Credit Agreement using a portion of the $80.0 million in proceeds received from the Rights Offering. The Payoff Amount included $42.8 million in principal, $0.1 million in interest and $0.2 million in fees. The terms of the Rights Offering permit the Company to use the proceeds for general corporate purposes, including the repayment of debt. We were not subject to any early termination penalties under the Credit Agreement. The payment of the Payoff Amount terminated our obligations under the Credit Agreement, except for ordinary and customary survival terms. In addition, we retained access to letters of credit, originally available under the Credit Agreement, pursuant to our pre-existing Cash Collateral Agreement.
Amounts committed to letters of credit and outstanding borrowings under the Credit Agreement as of March 31, 2024 and December 31, 2023 were as follows (in thousands):
March 31, 2024December 31, 2023
Letters of credit (1)
$25,102 $25,200 
Borrowings
— 42,776 

(1) Pursuant to the Cash Collateral Agreement, cash collateral is required for all letters of credit and treated as restricted cash on the Condensed Consolidated Balance Sheets. See Note 4, Supplemental Condensed Consolidated Balance Sheets and Statements of Operations Information, for additional information.