Derivative Instruments

6 Months Ended

Jun. 30, 2012

Derivative Instruments [Abstract]

Derivative Instruments

Note 6—Derivative Instruments

Derivative Instruments–Interest Rate Swap Agreements

We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of June 30, 2012, we have entered into eight interest rate swap agreements for notional amounts totaling $5,750.0 million. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.

The major terms of the interest rate swap agreements as of June 30, 2012 are as follows:

Effective Date	Notional Amount		Fixed Rate Paid			Variable Rate Received as of June 30, 2012			Next Reset Date	Maturity Date
	(In millions)
April 25, 2011	$	250.0		1.351	%		0.245	%	July 25, 2012	January 25, 2015
April 25, 2011		250.0		1.347	%		0.245	%	July 25, 2012	January 25, 2015
April 25, 2011		250.0		1.350	%		0.245	%	July 25, 2012	January 25, 2015
January 25, 2011		1,000.0		3.068	%		0.245	%	July 25, 2012	January 25, 2015
April 25, 2011		1,000.0		3.150	%		0.245	%	July 25, 2012	January 25, 2015
January 25, 2011		1,000.0		3.750	%		0.245	%	July 25, 2012	January 25, 2015
April 25, 2011		1,000.0		3.264	%		0.245	%	July 25, 2012	January 25, 2015
January 25, 2011		1,000.0		3.814	%		0.245	%	July 25, 2012	January 25, 2015

The variable rate on our interest rate swap agreements did not materially change as a result of the July 25, 2012 reset.

On January 18, 2012, the Company amended the terms of three $1,000.0 million notional value of interest rate swap contracts with a corresponding change in the elected interest rate on $3,000.0 million of term loans under the Credit Facilities. Effective January 25, 2012 through January 25, 2014, the variable rate received on the swaps changed from three-month to one-month LIBOR and the fixed payment rate was reduced by 16.5 basis points. The table above reflects the amended payment rates.

Derivative Instruments–Interest Rate Cap Agreements

We have an interest rate cap agreement to partially hedge the risk of future increases in the variable rate of the CMBS Financing. The CMBS interest rate cap agreement, which was effective in January 2008 and terminates February 13, 2013, is for a notional amount of $6,500.0 million at a LIBOR cap rate of 4.5%. We are amortizing deferred losses from the interest rate cap frozen in accumulated other comprehensive loss (“AOCL”) into income over the original remaining term of the hedged forecasted transactions that are still probable of occurring. For the quarter and six months ended June 30, 2012, we recorded $5.2 million and $10.4 million, respectively, as an increase to interest expense, and we will record an additional $13.9 million as an increase to interest expense and AOCL through the termination date, all related to deferred losses on the interest rate cap. At June 30, 2012, $4,650.2 million of the interest rate cap was designated a cash flow hedging instrument for accounting purposes. Any future changes in fair value of the portion of the interest rate cap not designated as a hedging instrument will be recognized in interest expense during the period in which the changes in value occur.

The hedging relationship between the CMBS Financing and the interest rate cap has remained effective subsequent to each debt extinguishment. In connection with the extinguishments, we reclassified deferred losses out of AOCL and into interest expense associated with the hedge for which the forecasted future transactions are no longer probable of occurring.

Derivative Instruments–Other

During the second quarter of 2012, the Company entered into a $33.2 million written put option (the “Option”) for certain preferred equity interests. The potential future aggregate cash payments of $33.2 million related to the Option may occur from time to time. Based on the structure of this security as a written put option, the obligation for these potential cash payments is not reflected in our consolidated condensed balance sheets. Additionally, the Option is recorded in our consolidated condensed balance sheets at its fair value, which was $0 as of June 30, 2012.

Derivative Instruments–Impact on Consolidated Condensed Financial Statements

The following table represents the fair values of derivative instruments in the consolidated condensed balance sheets as of June 30, 2012 and December 31, 2011:

Asset Derivatives

Liability Derivatives

June 30, 2012

December 31, 2011

June 30, 2012

December 31, 2011

(In millions)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments

Interest rate caps

Deferred charges and other

$

*

Deferred charges and other

$

*

Derivatives not designated as hedging instruments

Interest rate swaps

Deferred credits and other

$

(353.2

)

Deferred credits and other

$

(336.1

)

Interest rate caps

Deferred charges and other

*

Deferred charges and other

*

Total derivatives

$

*

$

*

$

(353.2

)

$

(336.1

)

* Amount rounds to zero

The following table represents the effect of derivative instruments in the consolidated condensed statements of comprehensive loss for the quarters ended June 30, 2012 and 2011 for amounts transferred into or out of AOCL:

(In millions)	Amount of (Gain) or Loss Recognized in AOCL (Effective Portion)				Location of (Gain)  or Loss Reclassified From AOCL Into Net Loss (Effective Portion)		Amount of (Gain) or Loss Reclassified from AOCL into Net Loss (Effective Portion)				Location of (Gain) or Loss Recognized in Net Loss  (Ineffective Portion)		Amount of (Gain) or Loss Recognized in Net Loss (Ineffective Portion)
Derivatives designated as hedging instruments	Quarter Ended June 30, 2012		Quarter Ended June 30, 2011				Quarter Ended June 30, 2012		Quarter Ended June 30, 2011				Quarter Ended June 30, 2012		Quarter Ended June 30, 2011
Interest rate contracts	$	—	$	45.8		Interest expense	$	7.2	$	9.2		Interest expense	$	—	$	14.2

(In millions)			Amount of (Gain) or Loss Recognized in Net Loss
Derivatives not designated as hedging instruments	Location of (Gain) or Loss Recognized in Net Loss		Quarter Ended June 30, 2012				Quarter Ended June 30, 2011
Interest rate contracts		Interest expense		$	(17.6	)		$	8.9

The following table represents the effect of derivative instruments in the consolidated condensed statements of comprehensive loss for the six months ended June 30, 2012 and 2011 for amounts transferred into or out of AOCL:

(In millions)	Amount of (Gain) or Loss Recognized in AOCL (Effective Portion)				Location of (Gain) or Loss Reclassified From AOCL Into Net Loss (Effective Portion)		Amount of (Gain) or Loss Reclassified from AOCL into Net Loss (Effective Portion)				Location of (Gain) or Loss Recognized in Net Loss  (Ineffective Portion)		Amount of (Gain) or Loss Recognized in Net Loss (Ineffective Portion)
Derivatives designated as hedging instruments	Six Months Ended June 30, 2012		Six Months Ended June 30, 2011				Six Months Ended June 30, 2012		Six Months Ended June 30, 2011				Six Months Ended June 30, 2012		Six Months Ended June 30, 2011
Interest rate contracts	$	—	$	1.8		Interest expense	$	14.3	$	19.3		Interest expense	$	—	$	4.4

(In millions)			Amount of (Gain) or Loss Recognized in Net Loss
Derivatives not designated                     as hedging instruments	Location of (Gain) or Loss Recognized in Net Loss		Six Months Ended June 30, 2012			Six Months Ended June 30, 2011
Interest rate contracts		Interest expense		$	17.1		$	5.6

In addition to the impact on interest expense from amounts reclassified from AOCL, the difference to be paid or received under the terms of the interest rate swap agreements is recognized as interest expense and is paid quarterly. This cash settlement portion of the interest rate swap agreements increased interest expense for the quarters and six months ended June 30, 2012 and 2011 by approximately $42.2 million and $84.0 million, and $50.8 million and $117.3 million, respectively.

At June 30, 2012, our variable-rate debt, excluding $5,750.0 million of variable-rate debt hedged using interest rate swap agreements, represents 28% of our total debt, while our fixed-rate debt is 72% of our total debt.