Derivative Instruments

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

In August 2018, the Company entered into interest rate swap agreements (the “IR Swaps”), which qualified and were designated as fair value hedges, swapping fixed-rate for variable-rate interest to hedge changes in the fair value of the SCL Senior Notes. These IR Swaps have a total notional value of $5.50 billion and expire in August 2020.

The total fair value of the IR Swaps as of March 31, 2020, was $43 million. In the accompanying condensed consolidated balance sheet, $33 million was recorded as an asset in prepaid expenses and other with an equal corresponding adjustment recorded against the carrying value of the SCL Senior Notes. The fair value of the IR Swaps was estimated using level 2 inputs from recently reported market forecasts of interest rates. Gains and losses due to changes in fair value of the IR Swaps completely offset changes in the fair value of the hedged portion of the underlying

debt. Additionally, for the three months ended March 31, 2020 and 2019, the Company recorded a $14 million and $2 million reduction to interest expense, respectively, related to the realized amount associated with the IR Swaps.