Derivative Instruments

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swaps / Caps

The Company enters into derivative agreements to manage interest rate risk exposure. Interest rate swap agreements are utilized to limit the Company's exposure to interest rate risk by converting a portion of its floating-rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed rate interest payments over the lives of the agreements without an exchange of the underlying principal amounts. The Company also utilizes interest rate cap agreements to manage interest rate risk exposure. Interest rate cap agreements place a ceiling on the Company's exposure to rising interest rates.

The counterparties to these agreements are highly rated financial institutions. In the unlikely event that the counterparties fail to meet the terms of these agreements, the Company's exposure is limited to the interest rate differential on the notional amount at each monthly settlement period over the life of the agreements. The Company does not anticipate any non-performance by the counterparties. Substantially all of the assets of certain indirect, wholly-owned subsidiaries of the Company have been pledged as collateral for the underlying indebtedness and the amounts payable under the agreements for each of these entities. In addition, certain assets of the Company's subsidiaries are pledged as collateral for various credit facilities and the amounts payable under certain agreements.

As of March 31, 2020, the Company had interest rate swap and cap agreements in place to fix or limit the floating interest rates on a portion of the borrowings under its debt facilities summarized below:



Derivatives	Notional Amount	Weighted Average Fixed Leg (Pay) Interest Rate	Cap Rate	Weighted Average Remaining Term
Interest Rate Swap⁽¹⁾	$1,786.8 million	2.02%	n/a	4.9 years
Interest Rate Cap	$200.0 million	n/a	5.5%	1.8 years


(1)	The impact of forward starting swaps with total notional amount of $550.0 million will increase the weighted average remaining term to 6.5 years.

The following table summarizes the impact of derivative instruments on the consolidated statements of operations and the consolidated statements of comprehensive income on a pretax basis (in thousands):



		Three Months Ended March 31,
Derivative Instrument	Financial statement caption	2020			2019
Non-designated derivative instruments	Realized (gain) loss on derivative instruments, net	$	(235	)	$	(704	)
Non-designated derivative instruments	Unrealized (gain) loss on derivative instruments, net	$	297		$	986
Designated derivative instruments	Interest and debt (income) expense	$	1,259		$	(2,355	)
Designated derivative instruments	Comprehensive loss	$	129,614		$	16,467

Fair Value of Derivative Instruments

The Company has elected to use the income approach to value its interest rate swap and cap agreements, using Level 2 market expectations at the measurement date and standard valuation techniques to convert future values to a single discounted present value. The Level 2 inputs for the interest rate swap and cap valuations are inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR and swap rates and credit risk at commonly quoted intervals). In response to the expected phase out of LIBOR, the Company continues to work with its counterparties to identify an alternative reference rate. Many of the Company's debt agreements already include transition language, and the Company also adopted various practical expedients which will facilitate the transition.

The Company presents its derivative financial instruments on a gross basis on the consolidated balance sheet. Any amounts of cash collateral received or posted related to derivative instruments are included in Other Assets on the consolidated balance sheet and are presented in operating activities of the consolidated statements of cash flows. As of March 31, 2020, there was cash collateral of $35.8 million related to interest rate swap contracts.

The fair value of derivative instruments on the Company's consolidated balance sheets as of March 31, 2020 and December 31, 2019 was as follows (in thousands):



	Asset Derivatives				Liability Derivatives
Derivative Instrument	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Interest rate hedges, designated	$	35	$	10,562	$	153,152	$	36,087
Interest rate hedges, non-designated	—		286		11		—
Total derivatives	$	35	$	10,848	$	153,163	$	36,087