Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Derivative financial instruments

v3.19.3.a.u2
Derivative financial instruments
12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative financial instruments Derivative financial instruments
We have entered into interest rate derivatives to hedge the current and future interest rate payments on our variable rate debt. These derivative financial instruments can include interest rate swaps, caps, floors, options and forward contracts.
As of December 31, 2019, we had interest rate caps and swaps outstanding, with underlying variable benchmark interest rates ranging from one to six-month U.S. dollar LIBOR.
Some of our agreements with derivative counterparties require a two-way cash collateralization of derivative fair values. As of December 31, 2019 and 2018, we had cash collateral of $0.6 million and $5.5 million, respectively, from various counterparties and the obligation to return such collateral was recorded in accounts payable, accrued expenses and other liabilities. We had not advanced any cash collateral to counterparties as of December 31, 2019 or 2018.
The counterparties to our interest rate derivatives are primarily major international financial institutions. We continually monitor our positions and the credit ratings of the counterparties involved and limit the amount of credit exposure to any one party. We could be exposed to potential losses due to the credit risk of non-performance by these counterparties. We have not experienced any losses to date.
Our derivative assets are recorded in other assets and our derivative liabilities are recorded in accounts payable, accrued expenses and other liabilities in our Consolidated Balance Sheets. The following tables present notional amounts and fair values of derivatives outstanding as of December 31, 2019 and 2018:
 
As of December 31,
 
2019
 
2018
 
Notional
amount (a)
 
Fair value
 
Notional
amount (a)
 
Fair value
Derivative assets not designated as accounting hedges:
 
 
 
 
 
 
 
Interest rate caps
$
2,442,000

 
$
3,727

 
$
2,523,500

 
$
32,547

Derivative assets designated as accounting cash flow hedges:
 
 
 
 
 
 
 
Interest rate swaps
$
488,616

 
$
1,578

 
$
1,900,957

 
$
36,558

Interest rate caps
400,000

 
6,359

 

 

Total derivative assets
 
 
$
11,664

 
 
 
$
69,105

 
(a)
The notional amount is excluded for caps and swaps which are not yet effective.
 
As of December 31,
 
2019
 
2018
 
Notional
amount (a)
 
Fair value
 
Notional
amount (a)
 
Fair value
Derivative liabilities designated as accounting cash flow hedges:
 
 
 
 
 
 
 
Interest rate swaps
$
3,776,000

 
$
97,066

 
$
1,375,000

 
$
29,321

Total derivative liabilities
 
 
$
97,066

 
 
 
$
29,321


 
(a)
The notional amount is excluded for swaps which are not yet effective.

11. Derivative financial instruments (Continued)
We recorded the following in other comprehensive income related to derivative financial instruments for the years ended December 31, 2019, 2018 and 2017:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Gain (Loss)
 
 
 
 
 
Effective portion of change in fair market value of derivatives designated as accounting cash flow hedges:
 
 
 
 
 
Interest rate swaps
$
(102,725
)
 
$
(16,639
)
 
$
17,049

Interest rate caps
(38
)
 

 

Income tax effect
12,845

 
2,080

 
(2,131
)
Net changes in cash flow hedges, net of tax
$
(89,918
)
 
$
(14,559
)
 
$
14,918

We expect to reclassify approximately $22 million from AOCI as an increase in interest expense in our Consolidated Income Statements over the next 12 months. The following table presents the effect of derivatives recorded as reductions to or (increases) in interest expense in our Consolidated Income Statements for the years ended December 31, 2019, 2018 and 2017.
 
Year Ended December 31,
 
2019
 
2018
 
2017
Gain (Loss)
 
 
 
 
 
Derivatives not designated as accounting hedges:
 
 
 
 
 
Interest rate caps
$
(29,714
)
 
$
5,158

 
$
(14,178
)
Reclassification to Consolidated Income Statements:
 
 
 
 
 
Reclassification of amounts previously recorded in AOCI
3,381

 
6,874

 

Effect from derivatives on interest expense
$
(26,333
)
 
$
12,032

 
$
(14,178
)