Derivatives and Hedging Activities

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

5. Derivatives and Hedging Activities

The Company was party to two interest rate swaps with UBS AG designed to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows on a portion of the previous floating rate debt facilities. The swaps fixed the variable interest rate of the debt facilities and provided protection over potential interest rate increases by providing a fixed rate of interest payment in return. The interest rate swaps were for £95 million ($131.3 million) at a fixed rate of 0.9255% based on the 6-month LIBOR rate and for €60 million ($71.2 million) at a fixed rate of 0.102% based on the 6-month EURIBOR rate.

In connection with the issuance of the Senior Secured Notes and the entry into the RCF Agreement, on May 19, 2021, the Company terminated its two interest rate swaps. The termination fees were settled on May 20, 2021, for £1.3 million ($1.9 million) and €0.1 million ($0.2 million), respectively.

Hedges of Multiple Risks

The Company’s objectives in using interest rate derivatives were to add stability to interest and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily used interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in Accumulated Other Comprehensive Income related to derivatives will be reclassified to interest expense over the life of the original instruments. During the next twelve months, the Company estimates that an additional $1.0 million will be reclassified as an increase to interest expense.

As of June 30, 2021, the company did not have any derivatives. As of December 31, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate Derivative	Number of Instruments		Notional
Interest rate swaps		2	£95 million ($131.3 million) at a fixed rate of 0.9255% based on the 6-month LIBOR rate and €60 million ($71.2 million) at a fixed rate of 0.102% based on the 6-month EURIBOR rate

The Company did not have any derivative financial instruments as of June 30, 2021. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the consolidated balance sheet as of December 31, 2020.

	Balance Sheet Classification		Asset Derivatives Fair Value		Balance Sheet Classification		Liability Derivatives Fair Value
			(in millions)				(in millions)
Derivatives designated as hedging instruments:
Interest Rate Products		Fair Value of Hedging Instruments	$	—		Other Current Liabilities and Long Term Derivative Liability	$	(2.6	)
Total derivatives designated as hedging instruments			$	—			$	(2.6	)

The table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the six months ended June 30, 2021.

	Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative			Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	(in millions)			(in millions)
Interest Rate Products	$	0.3	Interest Expense	$	(1.0	)
Total	$	0.3		$	(1.0	)

The table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the six months ended June 30, 2020.

	Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative				Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income
		(in millions)				(in millions)
Interest Rate Products	$	(2.3	)	Interest Expense	$	(0.7	)
Total	$	(2.3	)		$	(0.7	)

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the six months ended June 30, 2021.

	Interest Expense
	(in millions)
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded	$	30.0
Gain/(loss) on cash flow hedging relationships in Subtopic 815-20	$	(1.0	)

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the six months ended June 30, 2020.

	Interest Expense
	(in millions)
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded	$	14.2
Gain/(loss) on cash flow hedging relationships in Subtopic 815-20	$	(0.7	)

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheet.

The ISDA Master Agreement between Gaming Acquisitions Limited, a wholly-owned subsidiary of the Company, and UBS AG was documented using the 2002 Form and the ISDA standard set-off provision in Section 6(f) of the ISDA Master Agreement applied to both parties and was only modified to include Affiliates of the Payee. There was no CSA and thus there was no collateral posting.

Offsetting of Derivative Assets

December 31, 2020  

Gross Amounts

Gross Amounts Offset in the Statement

Net Amounts of Assets presented in the Statement

Gross Amounts Not Offset in the Statement of Financial Position

of Recognized Assets

of Financial Position

of Financial Position

Financial Instruments

Cash Collateral Received

Net Amount

(in millions)

Fair value of hedging instrument

$

—

$

—

$

—

$

—

$

—

$

—

Offsetting of Derivative Liabilities

December 31, 2020

	Gross		Gross Amounts Offset in the Statement		Net Amounts of Assets presented in the Statement		Gross Amounts Not Offset in the Statement of Financial Position
	Amounts of Recognized Assets		of Financial Position		of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(in millions)
Fair value of hedging instrument	$	2.6	$	—	$	2.6	$	—	$	—	$	—