7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments has been estimated by the Company using available market information as of December 31, 2019 and 2018, 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):


	December 31, 2019				December 31, 2018
	Carrying		Estimated Fair		Carrying		Estimated Fair
	Amount		Value		Amount		Value
Assets:
Cash and cash equivalents	$	216	$	216	$	196	$	196
Investments in equity securities		141		141		137		137
Available-for-sale debt securities		101		101		93		93
Trading securities		12		12		11		11
Liabilities:
Contingent Value Right		-		-		-		-
Credit Facility		-		-		1,602		1,564
8% Senior Notes due 2019		-		-		155		146
7⅛% Senior Notes due 2020		-		-		121		100
5⅛% Senior Secured Notes due 2021		990		1,003		984		934
6⅞% Senior Notes due 2022		229		188		2,593		1,175
6¼% Senior Secured Notes due 2023		3,074		3,148		3,067		2,819
8⅝% Senior Secured Notes due 2024		1,023		1,099		1,021		1,025
8% Senior Secured Notes due 2026		2,070		2,182		-		-
8% Senior Secured Notes due 2027		691		700		-		-
6⅞% Senior Notes due 2028		1,678		1,700		-		-
9⅞% Junior-Priority Secured Notes due 2023		1,754		1,539		1,750		1,380
8⅛% Junior-Priority Secured Notes due 2024		1,340		1,113		1,338		976
ABL Facility and other debt		285		285		734		734

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 8. 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 through publicly available subscription services such as Bloomberg or from the administrative agent to the Credit Facility to determine fair values 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. Prior to the adoption of ASU 2016-01 on January 1, 2018, such investments were classified as either available-for-sale or trading securities.

Available-for-sale debt 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 was 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 due 2019. Estimated fair value is based on the closing market price for these notes.

7⅛% Senior Notes due 2020. 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 due 2022. Estimated fair value is based on the closing market price for these notes.

6¼% Senior Secured Notes due 2023. Estimated fair value is based on the closing market price for these notes.

8⅝% Senior Secured Notes due 2024. Estimated fair value is based on the closing market price for these notes.

8% Senior Secured Notes due 2026. Estimated fair value is based on the closing market price for these notes.

8% Senior Secured Notes due 2027. Estimated fair value is based on the closing market price for these notes.

6⅞% Senior Secured Notes due 2028. Estimated fair value is based on the closing market price for these notes.

9⅞% Junior-Priority Secured Notes due 2023. Estimated fair value is based on the closing market price for these notes.

8⅛% Junior-Priority Secured Notes due 2024. Estimated fair value is based on the closing market price for these notes.

ABL Facility and other debt. The carrying amount of the ABL 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.

At December 31, 2019, the Company had one interest rate swap with a notional amount of approximately $300 million, a fixed interest rate of 2.892%, a termination date of August 30, 2020, and a fair value of approximately $2 million. The counterparty to the interest rate swap agreement exposes the Company to credit risk in the event of nonperformance by such counterparty. However, at December 31, 2019, the Company does not anticipate nonperformance by the counterparty. The Company does not hold or issue derivative financial instruments for trading purposes.

The Company is exposed to certain risks relating to its ongoing business operations. The risk managed by using derivative instruments is interest rate risk. Companies are required to recognize all derivative instruments as either assets or liabilities at fair value in the consolidated statement of financial position. 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 ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Assuming no change in interest rates in effect as of December 31, 2019, less than $1 million of interest income resulting from the spread between the fixed and floating rates defined in the interest rate swap agreement will be recognized during the next 12 months.

The following tabular disclosure provides the amount of pre-tax (loss) gain recognized as a component of OCI during the years ended December 31, 2019, 2018 and 2017 (in millions):


	Amount of Pre-Tax (Loss) Gain
	Recognized in OCI (Effective Portion)
	Year Ended December 31,
Derivatives in Cash Flow Hedging Relationships	2019		2018		2017
Interest rate swaps	$	(3)	$	17	$	2

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 consolidated statements of loss income during the years ended December 31, 2019, 2018 and 2017 (in millions):


	Amount of Pre-Tax Loss Reclassified
	from AOCL into Income (Effective Portion)
Location of Loss Reclassified from	Year Ended December 31,
AOCL into Income (Effective Portion)	2019		2018		2017
Interest expense, net	$	-	$	2	$	30

The fair values of derivative instruments in the consolidated balance sheets as of December 31, 2019 and 2018 were as follows (in millions):

Asset Derivatives

Liability Derivatives

December 31, 2019

December 31, 2018

December 31, 2019

December 31, 2018

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