DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

Prepaid Forward Contracts

The Company has entered into various transactions to limit the exposure against equity price risk on its shares of Comcast Corporation ("Comcast") common stock.  The Company has monetized all of its stock holdings in Comcast through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock.  At maturity, the contracts provide for the option to deliver cash or shares of Comcast stock with a value determined by reference to the applicable stock price at maturity.  These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing the Company to retain upside appreciation from the hedge price per share to the relevant cap price.  

The Company received cash proceeds upon execution of the prepaid forward contracts discussed above which has been reflected as collateralized indebtedness in the accompanying consolidated balance sheets.  In addition, the Company separately accounts for the equity derivative component of the prepaid forward contracts.  These equity derivatives have not been designated as hedges for accounting purposes.  Therefore, the net fair values of the equity derivatives have been reflected in the accompanying consolidated balance sheets as an asset or liability and the net

increases or decreases in the fair value of the equity derivative component of the prepaid forward contracts are included in gain (loss) on derivative contracts in the accompanying consolidated statements of operations.

All of the Company's monetization transactions are obligations of its wholly-owned subsidiaries that are not part of the Restricted Group; however, CSC Holdings has provided guarantees of the subsidiaries' ongoing contract payment expense obligations and potential payments that could be due as a result of an early termination event (as defined in the agreements).  If any one of these contracts was terminated prior to its scheduled maturity date, the Company would be obligated to repay the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and equity collar, calculated at the termination date.  As of March 31, 2020, the Company did not have an early termination shortfall relating to any of these contracts.

The Company monitors the financial institutions that are counterparties to its equity derivative contracts.  All of the counterparties to such transactions carry investment grade credit ratings as of March 31, 2020.

Interest Rate Swap Contracts

To manage interest rate risk, we have from time to time entered into interest rate swap contracts to adjust the proportion of total debt that is subject to variable and fixed interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to provide an economic hedge against the risk of rising rates and/or effectively convert fixed rate borrowings to variable rates to permit the Company to realize lower interest expense in a declining interest rate environment. We monitor the financial institutions that are counterparties to our interest rate swap contracts and we only enter into interest rate swap contracts with financial institutions that are rated investment grade. All such contracts are carried at their fair market values on our consolidated balance sheet, with changes in fair value reflected in the consolidated statement of operations. As of March 31, 2020, the Company did not hold and has not issued derivative instruments for trading or speculative purposes.

The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the consolidated balance sheets:

Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	Fair Value at
		March 31, 2020		December 31, 2019
Asset Derivatives:
Interest rate swap contracts	Derivative contracts, long-term	$	372	$	—
Prepaid forward contracts	Derivative contracts, long-term	378,001		25,207
		378,373		25,207
Liability Derivatives:
Interest rate swap contracts	Other current liabilities	(850)		(469)
Prepaid forward contracts	Liabilities under derivative contracts, long-term	(7,728)		(94,795)
Interest rate swap contracts	Liabilities under derivative contracts, long-term	(283,711)		(160,871)
		$	(292,289)	$	(256,135)

The following table presents certain statement of operations data related to our derivative contracts and the underlying common stock:

	Three Months Ended March 31,
	2020		2019
Gain (loss) on derivative contracts related to change in the value of equity derivative    contracts related to Comcast common stock	$	439,861	$	(177,029)
Change in the fair value of Comcast common stock included in gain (loss) on investments	(454,896)		254,725
Loss on interest rate swap contracts, net of a gain of $74,835 recorded in the    2020 period in connection with the early termination of the swap agreements    discussed below	(54,832)		(23,672)

In March 2020, the Company terminated two swap agreements whereby the Company was paying a floating rate of interest and receiving a fixed rate of interest on an aggregate notional value of $1,500,000. These contracts were due to mature in May 2026. In connection with the early termination, the Company received cash of $74,835 which has

been recorded in loss on interest swap contracts, net in our consolidated statement of operations and presented in operating activities in our consolidated statement of cash flows.

In addition, in March 2020, the Company executed amendments to two interest swap contracts that reduced the fixed rate of interest that the Company was paying on an aggregate notional value of $1,000,000 and extended the maturity date of the contracts to January 15, 2025 from January 15, 2022. The difference in the fair value of the amended contracts and the original contracts on the date of the transaction of $5,689 (an increase in the liability) will be amortized to loss on derivative contracts over the remaining term of the contracts.

Also, the Company entered into two new interest rate swap contracts on an aggregate notional value of $1,000,000. See table below.

The following is a summary of interest rate swap contracts outstanding at March 31, 2020:

Trade Date	Maturity Date	Notional Amount		Company Pays	Company Receives
December 2018	January 2025	$	500,000	Fixed rate of 1.53%	Three-month LIBOR
December 2018	January 2022	500,000		Fixed rate of 2.733%	Three-month LIBOR
December 2018	January 2025	500,000		Fixed rate of 1.625%	Three-month LIBOR
December 2018	December 2026	750,000		Fixed rate of 2.9155%	Three-month LIBOR
December 2018	December 2026	750,000		Fixed rate of 2.9025%	Three-month LIBOR
April 2019	April 2020	1,255,513		Three-month LIBOR minus 0.1075%	One-month LIBOR
March 2020	January 2025	500,000		Fixed rate of 1.458%	Three-month LIBOR
March 2020	January 2022	500,000		Three-month LIBOR	Fixed rate of 2.733%