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Derivative Instruments | 3 Months Ended
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Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes. We may seek to control a portion of these risks through a risk management program that includes the use of derivative instruments. The interest and principal payments for Laureate’s senior long-term debt arrangements are to be paid primarily in USD. Our ability to make debt payments is subject to fluctuations in the value of the USD against foreign currencies, since a majority of our operating cash used to make these payments is generated by subsidiaries with functional currencies other than USD. As part of our overall risk management policies, Laureate has at times entered into foreign currency swap contracts and floating-to-fixed interest rate swap contracts. In addition, we occasionally enter into foreign exchange forward contracts to reduce the impact of other non-functional currency-denominated receivables and payables. We do not enter into speculative or leveraged transactions, nor do we hold or issue derivatives for trading purposes. We generally intend to hold our derivatives until maturity. Laureate reports all derivatives at fair value. These contracts are recognized as either assets or liabilities, depending upon the derivative’s fair value. Gains or losses associated with the change in the fair value of these swaps are recognized in our Consolidated Statements of Operations on a current basis over the term of the contracts, unless designated and effective as a hedge. For swaps that are designated and effective as cash flow hedges, gains or losses associated with the change in fair value of the swaps are recognized in our Consolidated Balance Sheets as a component of AOCI and amortized into earnings as a component of Interest expense over the term of the related hedged items. Upon early termination of an effective interest rate swap designated as a cash flow hedge, unrealized gains or losses are deferred in our Consolidated Balance Sheets as a component of AOCI and are amortized as an adjustment to Interest expense over the period during which the hedged forecasted transaction affects earnings. For derivatives that are both designated and effective as net investment hedges, gains or losses associated with the change in fair value of the derivatives are recognized on our Consolidated Balance Sheets as a component of AOCI. The reported fair values of our derivatives, which are classified in Prepaid expenses and other current assets on our Consolidated Balance Sheets, were as follows:
| March 31, 2020 |  | December 31, 2019
Derivatives not designated as hedging instruments: |  |  |
Current assets: |  |  |
Cross currency swaps | $ | 802 |  |  | $ | — |
Total derivative instrument assets | $ | 802 |  |  | $ | — |
The table below shows the total recorded unrealized (loss) gain in Comprehensive income for the derivatives designated as hedging instruments. The impact of these derivative instruments on Comprehensive income, Interest expense and AOCI for the three months ended March 31, 2020 and 2019 were as follows:
| (Loss) Gain Recognized in Comprehensive Income (Effective Portion) |  |  | Income Statement Location |  | Gain Reclassified from AOCI to Income (Effective Portion) |  |  |  | Total Consolidated Interest Expense |
| 2020 |  | 2019 |  |  | 2020 |  | 2019 |  | 2020 | 2019
Cash flow hedge |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | (1,212) |  | Interest expense |  | $ | — |  |  | $ | 1,212 |  |  |  |
Net investment hedge |  |  |  |  |  |  |  |  |  |  |
Cross currency swaps | — |  |  | 3,821 |  | N/A |  | — |  |  | — |  |  |  |
Total | $ | — |  |  | $ | 2,609 |  |  |  | $ | — |  |  | $ | 1,212 |  |  | $ | (36,110) |  | $ | (54,653) |
AUD to USD Foreign Currency Swaps In March 2020, Laureate entered into an AUD to USD swap agreement with a maturity date of April 15, 2020, in connection with an intercompany funding transaction. The terms of the swap stated that on the maturity date, Laureate would deliver the notional amount of AUD 21,000 and receive USD $13,713 at a rate of exchange of 0.6530 USD per 1 AUD. On April 8, 2020, Laureate entered into a net settlement agreement for this swap to deliver USD $12,999 and receive the notional amount of AUD 21,000 at a rate of exchange of 0.6190 USD per 1 AUD. This net settlement was executed on April 15, 2020, which resulted in a gain and proceeds received of $714. As of March 31, 2020, this swap had an estimated value of $802 which was recorded in Prepaid expenses and other current assets on our Consolidated Balance Sheets. This swap was not designated as a hedge for accounting purposes. On April 8, 2020, Laureate entered into a new AUD to USD swap agreement with a notional amount of AUD 21,000. On the maturity date of June 15, 2020, Laureate will deliver the notional amount and receive USD $12,921 at a rate of exchange of 0.6153 USD per 1 AUD. This swap was not designated as a hedge for accounting purposes. EUR to USD Foreign Currency Swaps—Spain and Portugal In December 2018, Laureate entered into two EUR to USD swap agreements in connection with the signing of the sale agreement for the subsidiaries in Spain and Portugal. The purpose of the swaps was to mitigate the risk of foreign currency exposure on the sale proceeds. The first swap was deal contingent, with the settlement date occurring on the second business day following the completion of the sale. On the settlement date, Laureate delivered the notional amount of EUR 275,000 and received USD $314,573 at a rate of exchange of 1.1439, which resulted in a realized gain of $5,088. The second swap was a put/call option with a maturity date of April 8, 2019, where Laureate could put the notional amount of EUR 275,000 and call the USD amount of $310,750 at an exchange rate of 1.13. Based on expected timing of the sale transaction, the swap was terminated on April 2, 2019, resulting in a payment to the counterparty of $980 that included a deferred premium payment net of proceeds received. These swaps were not designated as hedges for accounting purposes. In addition to the swaps above, in order to continue to mitigate the risk of foreign currency exposure on the expected sale proceeds for Spain and Portugal in advance of the May 31, 2019 sale closing date, in April 2019, Laureate also entered into seven EUR to USD swap agreements with a combined notional amount of EUR 375,000. On the maturity date of May 15, 2019, Laureate paid the EUR notional amount and received a combined total of USD $423,003 at a rate of exchange of 1.128007, resulting in a gain of $1,644. In May 2019, Laureate entered into nine EUR to USD swap agreements with a combined notional amount of EUR 532,000. On the maturity date of June 4, 2019, Laureate paid the EUR notional amount and received a combined total of $597,149 at a rate of exchange of 1.122461, resulting in a realized loss of approximately $565. These swaps were not designated as hedges for accounting purposes. CLP to Unidad de Fomento (UF) Cross Currency and Interest Rate Swaps The cross currency and interest rate swap agreements are intended to provide a better correlation between our debt obligations and operating currencies. In 2010, one of our subsidiaries in Chile entered into four cross currency and interest rate swap agreements with an aggregate notional amount of approximately $31,000, and convert CLP-denominated, floating-rate debt to fixed-rate UF-denominated debt. The UF is a Chilean inflation-adjusted unit of account. One of the swaps was scheduled to mature on December 1, 2024, and the remaining three were scheduled to mature on July 1, 2025 (the CLP to UF cross currency and interest rate swaps); however, during the first quarter 2019, the Company elected to settle all four swaps for a net cash payment of approximately USD $8,200. In addition, at that time, Chile also elected to repay a portion of the principal balance outstanding for certain notes payable. This payment was included in Payments for settlement of derivative contracts on the consolidated statement of cash flows for the three months ended March 31, 2019. The CLP to UF cross currency and interest rate swaps were not designated as hedges for accounting purposes. Components of the reported Gain on derivatives not designated as hedging instruments in the Consolidated Statements of Operations were as follows:
For the three months ended March 31, |  |  |  |  | 2020 |  | 2019
Unrealized Gain |  |  |  |  |  |  |
Cross currency and interest rate swaps |  |  |  |  | $ | 802 |  |  | $ | 6,576 |
|  |  |  |  | 802 |  |  | 6,576 |
Realized Loss |  |  |  |  |  |  |
Cross currency and interest rate swaps |  |  |  |  | — |  |  | (1,393) |
|  |  |  |  | — |  |  | (1,393) |
Total Gain |  |  |  |  |  |  |
Cross currency and interest rate swaps |  |  |  |  | 802 |  |  | 5,183 |
Gain on derivatives, net |  |  |  |  | $ | 802 |  |  | $ | 5,183 |
Credit Risk and Credit-Risk-Related Contingent Features Laureate’s derivatives expose us to credit risk to the extent that the counterparty may possibly fail to perform its contractual obligation. The amount of our credit risk exposure is equal to the fair value of the derivative when any of the derivatives are in a net gain position. As of March 31, 2020 and December 31, 2019, the estimated fair values of derivatives in a gain position were $802 and $0, respectively. Laureate has limited its credit risk by only entering into derivative transactions with highly rated major financial institutions. We have not entered into collateral agreements with our derivatives’ counterparties. At March 31, 2020, one institution was rated A1 and accounted for all of Laureate’s derivative credit risk exposure. Laureate’s agreements with its derivative counterparties contain a provision under which we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to a default on the indebtedness. As of March 31, 2020 and December 31, 2019, we did not hold any derivatives in a net loss position, and thus had no derivative obligations.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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