Community Health Systems 2015 Annual Report Download - page 145

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
2018 Senior Secured Notes. Estimated fair value is based on the closing market price for these notes.
2021 Senior Secured Notes. Estimated fair value is based on the closing market price for these notes.
6
7
⁄ 8 % Senior Notes. Estimated fair value is based on the closing market price for these notes.
Receivables Facility and other debt. The carrying amount of the Receivables Facility and all other debt
approximates fair value due to the nature of these obligations.
Interest rate swaps. The fair value of interest rate swap agreements is the amount at which they could be
settled, based on estimates calculated by the Company using a discounted cash flow analysis based on observable
market inputs and validated by comparison to estimates obtained from the counterparty. The Company
incorporates credit valuation adjustments (“CVAs”) to appropriately reflect both its own nonperformance or
credit risk and the respective counterparty’s nonperformance or credit risk in the fair value measurements. In
adjusting the fair value of its interest rate swap agreements for the effect of nonperformance or credit risk, the
Company has considered the impact of any netting features included in the agreements.
The Company assesses the effectiveness of its hedge instruments on a quarterly basis. For the years ended
December 31, 2015 and 2014, the Company completed an assessment of the cash flow hedge instruments and
determined the hedges to be highly effective. The Company has also determined that the ineffective portion of
the hedges do not have a material effect on the Company’s consolidated financial position, operations or cash
flows. The counterparties to the interest rate swap agreements expose the Company to credit risk in the event of
nonperformance. However, at December 31, 2015, all of the swap agreements entered into by the Company were
in a net liability position such that the Company would be required to make the net settlement payments to the
counterparties; the Company does not anticipate nonperformance by those counterparties. The Company does not
hold or issue derivative financial instruments for trading purposes.
Interest rate swaps consisted of the following at December 31, 2015:
Swap #
Notional Amount
(in millions)
Fixed Interest
Rate Termination Date
Fair Value (in
millions)
1 ..... $ 300 3.447 % August 6, 2016 $ 5
2 ..... 100 3.401 % August 19, 2016 2
3 ..... 200 3.429 % August 19, 2016 3
4 ..... 200 3.500 % August 30, 2016 4
5 ..... 100 3.005 % November 30, 2016 2
6 ..... 200 2.055 % July 25, 2019 4
7 ..... 200 2.059 % July 25, 2019 4
8 ..... 400 1.882 % August 30, 2019 3
9 ..... 200 2.515 % August 30, 2019 6
10 .... 200 2.613 % August 30, 2019 6
11 .... 300 2.041 % August 30, 2020 2
12 .... 300 2.738 % August 30, 2020 11
13 .... 300 2.892 % August 30, 2020 14
14 .... 300 2.363 % January 27, 2021 6 (1)
15 .... 200 2.368 % January 27, 2021 4 (1)
(1) This interest rate swap becomes effective February 29, 2016.
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