Derivative Financial Instruments

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company enters into the following types of derivatives:

• Floating to fixed interest rate collar contracts: The Company uses interest rate collar contracts to mitigate its exposure to interest rate fluctuations on interest payments related to variable rate debt. No payments or receipts are exchanged on interest rate collar contracts unless interest rates rise or fall to exceed a predetermined ceiling or floor rate. The Company uses these contracts in a qualifying hedging relationship.

• Foreign exchange contracts: The Company uses cross-currency swaps to protect the net investment in certain foreign subsidiaries and/or affiliates with respect to changes in foreign currency exchange rates. The Company uses these contracts in both qualifying and non-qualifying hedging relationships.

The Company held the following derivative instruments as of the dates indicated:

		As of March 31, 2017					As of December 31, 2016
(in millions)	Notional Currency	Notional Value	Assets (a)		Liabilities		Notional Value	Assets (a)		Liabilities
Derivatives designated as hedges of net investments in foreign operations:
Foreign exchange contracts (b)	AUD	211	$	48	$	—	211	$	57	$	—
Foreign exchange contracts (c)	GBP	300	72		—		300	78		—
Foreign exchange contracts (d)	CAD	130	9		—		130	9		—
			129		—			144		—
Derivatives designated as cash flow hedges:
Interest rate collar contracts (e)	USD	4,300	4		—		3,000	3		—
			$	133	$	—		$	147	$	—

(a) Of the balances included in the table above, in aggregate, $133 million of assets as of March 31, 2017 and $147 million of assets as of December 31, 2016 are subject to master netting agreements to the extent that the swaps are with the same counterparty. The terms of those agreements require that the Company net settle the outstanding positions at the option of the counterparty upon certain events of default.

(b) Notional value 111 million AUD, matured in April 2017. See note 13 "Subsequent Events" for additional information.

(c) Notional value 150 million GBP, matured in April 2017. See note 13 "Subsequent Events" for additional information.

(d) Notional value 35 million CAD, matured in April 2017. See note 13 "Subsequent Events" for additional information.

(e) On January 31, 2017, the Company entered into $1.3 billion of zero-cost interest rate collars with an interest rate cap of 1.5% of interest rate floors ranging between 1.160% - 1.168%. The collars will hedge variability in the interest rates on the senior secured term loan facilities.

The maximum length of time over which the Company is hedging its currency exposure of net investments in foreign operations, through utilization of foreign exchange contracts, is through August 2019.

The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions related to the payment of variable interest on existing financial instruments is through January 2019.

Fair Value Measurement

The carrying amounts for the Company's derivative financial instruments are the estimated fair value of the financial instruments. The Company’s derivatives are not exchange listed and therefore the fair value is estimated under an income approach using Bloomberg analytics models that are based on readily observable market inputs. These models reflect the contractual terms of the derivatives, such as notional value and expiration date, as well as market-based observables including interest and foreign currency exchange rates, yield curves, and the credit quality of the counterparties. The models also incorporate the Company’s creditworthiness in order to appropriately reflect non-performance risk. Inputs to the derivative pricing models are generally observable and do not contain a high level of subjectivity and, accordingly, the Company’s derivatives were classified within Level 2 of the fair value hierarchy. While the Company believes its estimates result in a reasonable reflection of the fair value of these instruments, the estimated values may not be representative of actual values that could have been realized or that will be realized in the future.

Effect of Derivative Instruments on the Unaudited Consolidated Financial Statements

Derivative gains and (losses) were as follows for the periods indicated:

	Three months ended March 31,
	2017					2016
(in millions, pretax)	Interest Rate Contracts		Foreign Exchange Contracts			Interest Rate Contracts			Foreign Exchange Contracts
Derivatives designated as hedging instruments:
Loss recognized in "Foreign currency translation adjustment" in the unaudited consolidated statements of comprehensive income (loss) (effective portion)	$	—	$	(14	)	$	—		$	(8	)
Gain recognized in "Derivative instruments" in the unaudited consolidated statements of comprehensive income (loss) (effective portion)	1		—			—			—
Derivatives not designated as hedging instruments:
Loss recognized in "Other (expense) income" in the unaudited consolidated statements of operations	—		—			(4		)	—

Accumulated Derivative Gains and Losses

The following table summarizes activity in other comprehensive income (loss) related to derivative instruments classified as cash flow hedges and net investment hedges held by the Company for the periods presented:

	Three months ended March 31,
(in millions, after tax)	2017			2016
Accumulated gain included in other comprehensive income (loss) as of January 1,	$	124		$	86
Decrease in fair value of derivatives that qualify for hedge accounting, net of tax (a) (b)	(9		)	(5		)
Accumulated gain included in other comprehensive income (loss) as of March 31,	$	115		$	81

(a) Losses are included in "Derivative instruments" and “Foreign currency translation adjustment” in the unaudited consolidated statements of comprehensive income (loss). 

(b) Net of $4 million and $3 million of tax for the three months ended March 31, 2017 and 2016, respectively.