Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement (Tables)

v3.21.2
Fair Value Measurement (Tables)
9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Carrying values and fair values of assets and liabilities recorded at fair value on a recurring and non-recurring basis
The carrying values and fair values of Sunlight’s assets and liabilities recorded at fair value on a recurring or non-recurring basis, as well as other financial instruments for which fair value is disclosed, at September 30, 2021 and December 31, 2020 were as follows:

Principal Balance or Notional Amount Carrying Value Fair Value
Level 1 Level 2 Level 3 Total
September 30, 2021 (Successor)
Assets:
Financing Receivables:
Loan participations, held-for-investment $ 4,893  $ 4,484  $ —  $ —  $ 4,480  $ 4,480 
Loans, held-for-investment 341  305  —  —  300  300 
Cash and cash equivalents 72,786  72,786  72,786  —  —  72,786 
Restricted cash 2,259  2,259  2,259  —  —  2,259 
Contract derivatives 63,479  1,262  —  —  1,262  1,262 
Liabilities:
Debt 20,613  20,613  —  —  20,613  20,613 
Warrants 312,225  31,474  —  —  31,474  31,474 
Guarantee obligation n.a. 250  —  —  250  250 
December 31, 2020 (Predecessor)
Assets:
Financing Receivables:
Loan participations, held-for-investment 5,997  5,029  —  —  5,140  5,140 
Loans, held-for-investment 354  304  —  —  310  310 
Cash and cash equivalents 49,583  49,583  49,583  —  —  49,583 
Restricted cash 3,122  3,122  3,122  —  —  3,122 
Contract derivatives 59,770  1,435  —  —  1,435  1,435 
Liabilities:
Debt 14,625  14,625  —  —  14,625  14,625 
Warrants 4,700  5,643  —  —  5,643  5,643 
Guarantee obligation n.a. 839  —  —  839  839 
Change in assets measured at fair value on a recurring basis
Sunlight’s assets and liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:

Assets Liabilities
Contract Derivatives Warrants
December 31, 2020 (Predecessor) $ 1,435  $ 5,643 
Transfers(a)
Transfers to Level 3 —  41,591 
Transfers from Level 3 —  (11,148)
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  (4,612)
Included in change in fair value of contract derivatives, net (173) — 
Included in realized gains on contract derivatives, net 4,369  — 
Payments, net (4,369) — 
September 30, 2021 (Successor) $ 1,262  $ 31,474 
December 31, 2019 (Predecessor) $ —  $ 133 
Transfers(a)
Transfers to Level 3 —  — 
Transfers from Level 3 —  — 
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  66 
Included in change in fair value of contract derivatives, net 846  — 
Included in realized gains on contract derivatives, net 291  — 
Payments, net (291) — 
September 30, 2020 (Predecessor) $ 846  $ 199 
a.Transfers are assumed to occur at the beginning of the respective period.
b.Changes in the fair value of liabilities shown as losses included in net income.
Change in liabilities measured at fair value on a recurring basis
Sunlight’s assets and liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:

Assets Liabilities
Contract Derivatives Warrants
December 31, 2020 (Predecessor) $ 1,435  $ 5,643 
Transfers(a)
Transfers to Level 3 —  41,591 
Transfers from Level 3 —  (11,148)
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  (4,612)
Included in change in fair value of contract derivatives, net (173) — 
Included in realized gains on contract derivatives, net 4,369  — 
Payments, net (4,369) — 
September 30, 2021 (Successor) $ 1,262  $ 31,474 
December 31, 2019 (Predecessor) $ —  $ 133 
Transfers(a)
Transfers to Level 3 —  — 
Transfers from Level 3 —  — 
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  66 
Included in change in fair value of contract derivatives, net 846  — 
Included in realized gains on contract derivatives, net 291  — 
Payments, net (291) — 
September 30, 2020 (Predecessor) $ 846  $ 199 
a.Transfers are assumed to occur at the beginning of the respective period.
b.Changes in the fair value of liabilities shown as losses included in net income.
Significant inputs and assumptions used in the valuation of contract derivatives, share-based compensation, and warrants Significant inputs used in the valuation of Sunlight’s contract derivatives include:
Contract Derivative Significant Inputs
1 Inputs include expected cash flows from the financing and sale of applicable Indirect Channel Loans and discount rates that market participants would expect for the Indirect Channel Loans. Significant increases (decreases) in the discount rates in isolation would result in a significantly lower (higher) fair value measurement.
2 Inputs include expected prepayment rate of applicable Indirect Channel Loans sold to the Indirect Channel Loan Purchaser. Significant increases (decreases) in the expected prepayment rate in isolation would result in a significantly higher (lower) fair value measurement.
The following significant assumptions were used to value Sunlight’s contract derivative:

Successor Predecessor
September 30, 2021 December 31, 2020
Contract Derivative 1
Discount rate 9.9  % 8.1  %
Weighted average life (in years) 0.2 0.3
Contract Derivative 2
Expected prepayment rate 75.0  % n.a.
Sunlight uses the observed market price of its publicly-traded Class A common shares and the warrants thereon to measure the value of RSU awards on the grant date and the value of Public Warrants, respectively. For Private Placement Warrants, Sunlight uses an independent third-party valuation firm to value those warrants using a Monte Carlo option pricing model, which includes the following estimates of underlying asset value, volatility, dividend rates, expiration dates, and risk-free rates:
Successor
Assumption September 30, 2021
Class A common share value per share(a)
$ 5.31 
Implied volatility(a)
52.0  %
Dividend yield(b)
—  %
Time to expiry (in years)(a)
4.8 
Risk free rate(a)
1.0  %
a.Significant increases in these assumptions in isolation would result in a higher fair value measurement.
b.Significant increases in these assumptions in isolation would result in a lower fair value measurement.
The following significant assumptions were used to value Sunlight’s equity and warrants thereon, on a weighted-average basis:
Predecessor
Assumption December 31, 2020
Cost of equity 22.5  %
Volatility 46.0  %
Tax rate 26.0  %
Term (in years) 3.0