First Data 2014 Annual Report Download - page 65
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The Company enters into the following types of derivatives:
Interest rate contracts:
• Interest rate swaps: The Company uses interest rate swaps to mitigate the exposure to interest rate fluctuations on interest payments related to variable
rate debt. The Company uses these contracts in non-qualifying hedging relationships.
• Fixed to floating interest rate swaps: The Company uses fixed to floating interest rate swaps to maintain a desired ratio of fixed rate and floating rate
debt. The Company uses these contracts in non-qualifying hedging relationships.
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:
Foreign exchange contracts
AUD
260.0
$ 41.1
$ —
AUD
215.0
$ 15.4
$ (15.7)
Foreign exchange contracts
EUR
200.0
26.3
—
EUR
200.0
—
(6.0)
Foreign exchange contracts
GBP
250.0
18.0
—
GBP
100.0
—
(8.6)
Foreign exchange contracts
CAD
110.0
9.3
—
CAD
75.0
1.5
—
94.7
—
16.9
(30.3)
Interest rate contracts
USD
5,750.0
47.3
(104.9)
USD
5,750.0
47.2
(119.8)
Foreign exchange contracts
EUR
21.5
0.7
—
EUR
21.5
—
(2.9)
48.0
(104.9)
47.2
(122.7)
$ 142.7
$ (104.9)
$ 64.1
$ (153.0)
(a) Of the balances included in the table above, in aggregate, $142 million of assets and $96 million of liabilities, net $46 million, as of December 31, 2014 and $64 million of assets
and $125 million of liabilities, net $61 million, as of December 31, 2013 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.
The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions excluding
those forecasted transactions related to the payment of variable interest on existing financial instruments is through January 2018.
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
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