11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments has been estimated by the Company using available market information as of March 31, 2018 and December 31, 2017, and valuation methodologies considered appropriate. The estimates presented in the table below are not necessarily indicative of amounts the Company could realize in a current market exchange (in millions):


	March 31, 2018				December 31, 2017
	Carrying		Estimated Fair		Carrying		Estimated Fair
	Amount		Value		Amount		Value
Assets:
Cash and cash equivalents	$	424	$	424	$	563	$	563
Investments in equity securities		149		149		-		-
Available-for-sale securities		119		119		252		252
Trading securities		-		-		37		37
Liabilities:
Contingent Value Right		3		3		2		2
Credit Facility		2,899		2,848		2,902		2,826
8% Senior Notes		1,922		1,738		1,922		1,637
7⅛% Senior Notes		1,192		978		1,192		897
5⅛% Senior Secured Notes due 2021		979		933		978		902
6⅞% Senior Notes		2,946		1,743		2,943		1,729
6¼% Senior Secured Notes		3,063		2,855		3,061		2,800
Receivables Facility and other debt		589		589		611		611

The carrying value of the Company’s long-term debt in the above table is presented net of unamortized deferred debt issuance costs. The estimated fair value is determined using the methodologies discussed below in accordance with accounting standards related to the determination of fair value based on the U.S. GAAP fair value hierarchy as discussed in Note 12. The estimated fair value for financial instruments with a fair value that does not equal its carrying value is considered a Level 1 valuation. The Company utilizes the market approach and obtains indicative pricing from the administrative agent to the Credit Facility to determine fair values or through publicly available subscription services such as Bloomberg where relevant.

Cash and cash equivalents. The carrying amount approximates fair value due to the short-term maturity of these instruments (less than three months).

Investments in equity securities. Estimated fair value is based on closing price as quoted in public markets.

Available-for-sale securities. Estimated fair value is based on closing price as quoted in public markets or other various valuation techniques.

Trading securities. Estimated fair value is based on closing price as quoted in public markets.

Contingent Value Right. Estimated fair value is based on the closing price as quoted on the public market where the CVR is traded.

Credit Facility. Estimated fair value is based on publicly available trading activity and supported with information from the Company’s bankers regarding relevant pricing for trading activity among the Company’s lending institutions.

8% Senior Notes. Estimated fair value is based on the closing market price for these notes.

7⅛% Senior Notes. Estimated fair value is based on the closing market price for these notes.

5⅛% Senior Secured Notes due 2021. Estimated fair value is based on the closing market price for these notes.

6⅞% Senior Notes. Estimated fair value is based on the closing market price for these notes.

6¼% Senior Secured 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 three months ended March 31, 2018 and 2017, 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 condensed 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 March 31, 2018, most 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 March 31, 2018:



						Asset (Liability)
	Notional Amount					Fair Value
Swap #	(in millions)		Fixed Interest Rate		Termination Date	(in millions)
1	$	400	1.882	%	August 30, 2019	$	3
2		200	2.515	%	August 30, 2019		-
3		200	2.613	%	August 30, 2019		(1)
4		300	2.041	%	August 30, 2020		4
5		300	2.738	%	August 30, 2020		(1)
6		300	2.892	%	August 30, 2020		(2)
7		300	2.363	%	January 27, 2021		2
8		200	2.368	%	January 27, 2021		1

The Company is exposed to certain risks relating to its ongoing business operations. The risk managed by using derivative instruments is interest rate risk. Interest rate swaps are entered into to manage interest rate fluctuation risk associated with the term loans in the Credit Facility. Companies are required to recognize all derivative instruments as either assets or liabilities at fair value in the condensed consolidated statement of financial position. The Company designates its interest rate swaps as cash flow hedges. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Assuming no change in March 31, 2018 interest rates, approximately $9 million of interest expense resulting from the spread between the fixed and floating rates defined in each interest rate swap agreement will be recognized during the next 12 months. If interest rate swaps do not remain highly effective as a cash flow hedge, the derivatives’ gains or losses resulting from the change in fair value reported through OCI will be reclassified into earnings.

The following tabular disclosure provides the amount of pre-tax gain recognized as a component of OCI during the three months ended March 31, 2018 and 2017 (in millions):


	Amount of Pre-Tax Gain
	Recognized in OCI (Effective Portion)
Derivatives in Cash Flow Hedging Relationships	Three Months Ended March 31,
	2018		2017
Interest rate swaps	$	17	$	-

The following tabular disclosure provides the location of the effective portion of the pre-tax loss reclassified from accumulated other comprehensive loss (“AOCL”) into interest expense on the condensed consolidated statements of loss during the three months ended March 31, 2018 and 2017 (in millions):



	Amount of Pre-Tax Loss Reclassified
Location of Loss Reclassified from	from AOCL into Income (Effective Portion)
AOCL into Income (Effective Portion)	Three Months Ended March 31,
	2018		2017
Interest expense, net	$	5	$	9

The fair values of derivative instruments in the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 were as follows (in millions):

Asset Derivatives

Liability Derivatives

March 31, 2018

December 31, 2017

March 31, 2018

December 31, 2017

Balance

Sheet

Location

Fair Value

Location

Fair Value

Location

Fair Value

Location

Fair Value

Derivatives

designated as

Other

hedging

assets,

long-term

instruments

net

liabilities