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Derivative Instruments | 12 Months Ended
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Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments In general, we enter into derivative instruments to protect against (i) increases in the interest rates on our variable-rate debt, (ii) foreign currency movements, particularly with respect to borrowings that are denominated in a currency other than the functional currency of the borrowing entity, and (iii) decreases in the market prices of certain publicly traded securities that we own. In this regard, through our subsidiaries, we have entered into various derivative instruments to manage interest rate exposure and foreign currency exposure primarily with respect to the U.S. dollar ($), the euro (€), the British pound sterling (£), the Swiss franc (CHF) and the Polish zloty (PLN). We do not apply hedge accounting to our derivative instruments. Accordingly, changes in the fair values of most of our derivative instruments are recorded in realized and unrealized gains or losses on derivative instruments, net, in our consolidated statements of operations. The following table provides details of the fair values of our derivative instrument assets and liabilities:
| December 31, 2019 |  | December 31, 2018
| Current |  | Long-term |  | Total |  | Current |  | Long-term |  | Total
| in millions
Assets (a): |  |  |  |  |  |  |  |  |  |  |
Cross-currency and interest rate derivative contracts (b) | $ | 270.8 |  |  | $ | 886.4 |  |  | $ | 1,157.2 |  |  | $ | 372.7 |  |  | $ | 1,370.1 |  |  | $ | 1,742.8 |
Equity-related derivative instruments (c) | 55.2 |  |  | 608.2 |  |  | 663.4 |  |  | 13.9 |  |  | 732.4 |  |  | 746.3 |
Foreign currency forward and option contracts | 4.6 |  |  | 1.4 |  |  | 6.0 |  |  | 7.2 |  |  | — |  |  | 7.2 |
Other | 0.5 |  |  | 0.4 |  |  | 0.9 |  |  | 0.4 |  |  | — |  |  | 0.4 |
Total | $ | 331.1 |  |  | $ | 1,496.4 |  |  | $ | 1,827.5 |  |  | $ | 394.2 |  |  | $ | 2,102.5 |  |  | $ | 2,496.7 |
Liabilities (a): |  |  |  |  |  |  |  |  |  |  |
Cross-currency and interest rate derivative contracts (b) | $ | 389.2 |  |  | $ | 1,192.3 |  |  | $ | 1,581.5 |  |  | $ | 326.5 |  |  | $ | 1,042.2 |  |  | $ | 1,368.7 |
Equity-related derivative instruments (c) | — |  |  | — |  |  | — |  |  | 1.4 |  |  | — |  |  | 1.4 |
Foreign currency forward and option contracts | 1.2 |  |  | — |  |  | 1.2 |  |  | 0.5 |  |  | — |  |  | 0.5 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
Total | $ | 390.4 |  |  | $ | 1,192.3 |  |  | $ | 1,582.7 |  |  | $ | 328.4 |  |  | $ | 1,042.3 |  |  | $ | 1,370.7 |
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(a) | Our current derivative liabilities, long-term derivative assets and long-term derivative liabilities are included in other current and accrued liabilities, other assets, net, and other long-term liabilities, respectively, on our consolidated balance sheets.
(b) | We consider credit risk relating to our and our counterparties’ nonperformance in the fair value assessment of our derivative instruments. In all cases, the adjustments take into account offsetting liability or asset positions within each of our subsidiary borrowing groups (as defined and described in note 11). The changes in the credit risk valuation adjustments associated with our cross-currency and interest rate derivative contracts resulted in net gains (losses) of $16.6 million, ($71.1 million) and $168.4 million during 2019, 2018 and 2017, respectively. These amounts are included in realized and unrealized gains (losses) on derivative instruments, net, in our consolidated statements of operations. For further information regarding our fair value measurements, see note 9.
(c) | Our equity-related derivative instruments primarily include the fair value of (i) the ITV Collar and (ii) the Lionsgate Forward. The fair values of the ITV Collar and the Lionsgate Forward do not include credit risk valuation adjustments as we assume that any losses incurred by our company in the event of nonperformance by the respective counterparty would be, subject to relevant insolvency laws, fully offset against amounts we owe to such counterparty pursuant to the related secured borrowing arrangements.
The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:
| Year ended December 31,
| 2019 |  | 2018 |  | 2017
| in millions
Cross-currency and interest rate derivative contracts | $ | (207.3 | ) |  | $ | 905.8 |  |  | $ | (1,145.6 | )
Equity-related derivative instruments: |  |  |  |  |
ITV Collar | (84.4 | ) |  | 176.7 |  |  | 215.0 |
Lionsgate Forward | 13.0 |  |  | 30.1 |  |  | (11.4 | )
Sumitomo Collar (a) | — |  |  | (11.8 | ) |  | (77.4 | )
Other | 8.0 |  |  | 2.5 |  |  | (3.9 | )
Total equity-related derivative instruments | (63.4 | ) |  | 197.5 |  |  | 122.3 |
Foreign currency forward and option contracts | 77.4 |  |  | 22.7 |  |  | (30.2 | )
Other | 1.3 |  |  | (0.2 | ) |  | 0.7 |
Total | $ | (192.0 | ) |  | $ | 1,125.8 |  |  | $ | (1,052.8 | )
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(a) | On May 22, 2018, we settled the final tranche of the share collar (the Sumitomo Collar) and related borrowings with a portion of the existing Sumitomo shares held by our company. The aggregate market value of these shares on the transaction date was $159.3 million.
The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity in our consolidated statements of cash flows based on the objective of the derivative instrument and the classification of the applicable underlying cash flows. For derivative contracts that are terminated prior to maturity, the cash paid or received upon termination that relates to future periods is classified as a financing activity. The following table sets forth the classification of the net cash inflows (outflows) of our derivative instruments:
| Year ended December 31,
| 2019 |  | 2018 |  | 2017
| in millions
Operating activities | $ | 179.0 |  |  | $ | 244.4 |  |  | $ | 6.8 |
Investing activities | — |  |  | — |  |  | (0.5 | )
Financing activities | 331.5 |  |  | 112.8 |  |  | (138.1 | )
Total | $ | 510.5 |  |  | $ | 357.2 |  |  | $ | (131.8 | )
Counterparty Credit Risk We are exposed to the risk that the counterparties to the derivative instruments of our subsidiary borrowing groups will default on their obligations to us. We manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with our derivative instruments is spread across a relatively broad counterparty base of banks and financial institutions. With the exception of a limited number of instances where we have required a counterparty to post collateral, neither party has posted collateral under the derivative instruments of our subsidiary borrowing groups. At December 31, 2019, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of $253.2 million. Each of our subsidiary borrowing groups have entered into derivative instruments under master agreements with each counterparty that contain master netting arrangements that are applicable in the event of early termination by either party to such derivative instrument. The master netting arrangements are limited to the derivative instruments and derivative-related debt instruments, governed by the relevant master agreement within each individual borrowing group and are independent of similar arrangements of our other subsidiary borrowing groups. Under our derivative contracts, it is generally only the non-defaulting party that has a contractual option to exercise early termination rights upon the default of the other counterparty and to set off other liabilities against sums due upon such termination. However, in an insolvency of a derivative counterparty, under the laws of certain jurisdictions, the defaulting counterparty or its insolvency representatives may be able to compel the termination of one or more derivative contracts and trigger early termination payment liabilities payable by us, reflecting any mark-to-market value of the contracts for the counterparty. Alternatively, or in addition, the insolvency laws of certain jurisdictions may require the mandatory set off of amounts due under such derivative contracts against present and future liabilities owed to us under other contracts between us and the relevant counterparty. Accordingly, it is possible that we may be subject to obligations to make payments, or may have present or future liabilities owed to us partially or fully discharged by set off as a result of such obligations, in the event of the insolvency of a derivative counterparty, even though it is the counterparty that is in default and not us. To the extent that we are required to make such payments, our ability to do so will depend on our liquidity and capital resources at the time. In an insolvency of a defaulting counterparty, we will be an unsecured creditor in respect of any amount owed to us by the defaulting counterparty, except to the extent of the value of any collateral we have obtained from that counterparty. In addition, where a counterparty is in financial difficulty, under the laws of certain jurisdictions, the relevant regulators may be able to (i) compel the termination of one or more derivative instruments, determine the settlement amount and/or compel, without any payment, the partial or full discharge of liabilities arising from such early termination that are payable by the relevant counterparty or (ii) transfer the derivative instruments to an alternative counterparty. Details of our Derivative Instruments Cross-currency Derivative Contracts We generally match the denomination of our subsidiaries’ borrowings with the functional currency of the supporting operations or, when it is more cost effective, we provide for an economic hedge against foreign currency exchange rate movements by using derivative instruments to synthetically convert unmatched debt into the applicable underlying currency. At December 31, 2019, substantially all of our debt was either directly or synthetically matched to the applicable functional currencies of the underlying operations. The following table sets forth the total notional amounts and the related weighted average remaining contractual lives of our cross-currency swap contracts at December 31, 2019:
Borrowing group |  |  | Notional amount due from counterparty |  | Notional amount due to counterparty |  | Weighted average remaining life
|  |  | in millions |  |  | in years
Virgin Media |  | $ | 10,857.5 |  |  | £ | 8,003.6 |  |  | (a) | 5.6
|  |  | £ | 2,296.2 |  |  | $ | 3,300.0 |  |  | (b) | 5.1
|  |  | € | 246.3 |  |  | $ | 271.1 |  |  |  | 3.0
UPC Holding |  | $ | 775.0 |  |  | € | 643.1 |  |  |  | 4.3
|  |  | $ | 1,200.0 |  |  | CHF | 1,107.5 |  |  | (a) | 5.2
|  |  | € | 2,824.4 |  |  | CHF | 3,221.2 |  |  | (a) | 4.3
|  |  | € | 742.8 |  |  | PLN | 3,149.5 |  |  |  | 1.9
Telenet |  | $ | 3,940.0 |  |  | € | 3,489.6 |  |  | (a) | 6.0
|  |  | € | 291.5 |  |  | $ | 350.0 |  |  | (b) | 6.0
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(a) | Includes certain derivative instruments that are “forward-starting,” such that the initial exchange occurs at a date subsequent to December 31, 2019. These instruments are typically entered into in order to extend existing hedges without the need to amend existing contracts.
(b) | Includes certain derivative instruments that do not involve the exchange of notional amounts at the inception and maturity of the instruments. Accordingly, the only cash flows associated with these derivative instruments are coupon-related payments and receipts. At December 31, 2019, the total U.S. dollar equivalents of the notional amount of these derivative instruments were $3.4 billion.
Interest Rate Swap Contracts The following table sets forth the total U.S. dollar equivalents of the notional amounts and the related weighted average remaining contractual lives of our interest rate swap contracts at December 31, 2019:
|  | Borrowing group pays fixed rate |  | Borrowing group receives fixed rate
Borrowing group |  | Notional amount |  | Weighted average remaining life |  | Notional amount |  | Weighted average remaining life
|  | in millions |  | in years |  | in millions |  | in years
Virgin Media | $ | 21,715.5 |  | (a) |  | 2.7 |  | $ | 11,542.6 |  | (a) |  | 4.4
UPC Holding | $ | 7,237.1 |  | (a) |  | 3.5 |  | $ | 5,312.1 |  |  |  | 5.9
Telenet | $ | 3,239.1 |  | (a) |  | 5.2 |  | $ | 1,602.4 |  |  |  | 3.7
______________
(a) | Includes forward-starting derivative instruments.
Interest Rate Swap Options We have entered into various interest rate swap options (swaption s), which give us the right, but not the obligation, to enter into certain interest rate swap contracts at set dates in the future, with each such contract having a life of no more than three years. At the transaction date, the strike rate of each of these contracts was above the corresponding market rate. The following table sets forth certain information regarding our swaption s at December 31, 2019:
Borrowing group |  | Notional amount |  | Underlying swap currency |  | Weighted average option expiration period (a) |  | Weighted average strike rate (b)
|  | in millions |  |  |  | in years |  |
Virgin Media | $ | 7,085.7 |  |  | £ |  | 1.0 |  | 2.40%
|  | $ | 482.7 |  |  | € |  | 0.6 |  | 1.96%
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(a) | Represents the weighted average period until the date on which we have the option to enter into the interest rate swap contracts.
(b) | Represents the weighted average interest rate that we would pay if we exercised our option to enter into the interest rate swap contracts.
Basis Swaps Our basis swaps involve the exchange of attributes used to calculate our floating interest rates, including (i) the benchmark rate, (ii) the underlying currency and/or (iii) the borrowing period. We typically enter into these swaps to optimize our interest rate profile based on our current evaluations of yield curves, our risk management policies and other factors. The following table sets forth the total U.S. dollar equivalents of the notional amounts and related weighted average remaining contractual lives of our basis swap contracts at December 31, 2019:
Borrowing group |  | Notional amount due from counterparty |  | Weighted average remaining life
|  | in millions |  | in years
Virgin Media | $ | 4,493.7 |  |  | 0.5
Telenet | $ | 2,295.0 |  |  | 0.5
Interest Rate Caps, Floors and Collars From time to time, we enter into interest rate cap, floor and collar agreements. Purchased interest rate caps and collars lock in a maximum interest rate if variable rates rise, but also allow our company to benefit, to a limited extent in the case of collars, from declines in market rates. Purchased interest rate floors protect us from interest rates falling below a certain level, generally to match a floating rate floor on a debt instrument. At December 31, 2019, we had no interest rate collar agreements, and the total U.S. dollar equivalents of the notional amounts of our purchased interest rate caps and floors were $1,107.4 million and $1,246.4 million, respectively. Impact of Derivative Instruments on Borrowing Costs The impact of the derivative instruments that mitigate our foreign currency and interest rate risk, as described above, on our borrowing costs is as follows:
|  |  | Decrease to borrowing costs at December 31, 2019 (a)
Virgin Media | (0.20 | )%
UPC Holding | (0.15 | )%
Telenet | (0.58 | )%
Total decrease to borrowing costs | (0.27 | )%
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(a) | Represents the effect of derivative instruments in effect at December 31, 2019 and does not include forward-starting derivative instruments or swaption s.
Foreign Currency Forwards and Options Certain of our subsidiaries enter into foreign currency forward and option contracts with respect to non-functional currency exposure. As of December 31, 2019, the total U.S. dollar equivalent of the notional amounts of our foreign currency forward and option contracts was $415.4 million. Equity-related Derivative Instruments ITV Collar and Secured Borrowing. The ITV Collar comprises (i) purchased put options exercisable by our company and (ii) written call options exercisable by the counterparty. The ITV Collar effectively hedges the value of our investment in ITV shares from losses due to market price decreases below the put option price while retaining a portion of the gains from market price increases up to the call option price. The ITV Collar has settlement dates ranging from 2020 to 2022. The ITV Collar and related agreements also provide our company with the ability to borrow against the value of its ITV shares. At December 31, 2019, borrowings under the ITV Collar Loan were secured by all 398,515,510 of our ITV shares, which have been placed into a custody account. The ITV Collar Loan, which has maturity dates consistent with the ITV Collar and contains no financial covenants, provides for customary representations and warranties, events of default and certain adjustment and termination events. Under the terms of the ITV Collar, the counterparty has the right to re-use the pledged ITV shares held in the custody account, but we have the right to recall the shares that are re-used by the counterparty subject to certain costs. In addition, the counterparty retains dividends on the ITV shares that the counterparty would need to borrow from the custody account to hedge its exposure under the ITV Collar (an estimated 390 million shares at December 31, 2019). As of December 31, 2019, the fair value of the ITV Collar was a net asset of $619.6 million and principal borrowings outstanding under the ITV Collar Loan were $1,435.5 million. Lionsgate Forward and Secured Borrowing. The Lionsgate Forward has economic characteristics similar to a collar plus a loan initially collateralized by a pledge of 1.25 million of our voting and 1.25 million of our non-voting Lionsgate shares (the Lionsgate Loan). Under the terms of the Lionsgate Forward, the counterparty does not have the right to re-use the pledged Lionsgate shares without permission from Liberty Global. The Lionsgate Forward effectively hedges the value of our pledged Lionsgate shares from losses due to market price decreases below the put option price while retaining a portion of the gains from market price increases up to the call option price. The Lionsgate Forward has settlement dates through March 2022, the first of which occurred during the third quarter of 2019, as further described below. As of December 31, 2019, the fair value of the Lionsgate Forward was a net asset of $37.2 million and principal borrowings outstanding under the Lionsgate Loan were $55.3 million. During the third quarter of 2019, we cash settled the first 25 tranches of the Lionsgate Forward with respect to certain of our voting and non-voting Lionsgate shares. Subsequent to the settlement of these tranches of the Lionsgate Forward ($18.1 million asset value on the relevant settlement dates) and the related borrowings under the Lionsgate Loan ($27.6 million liability on the relevant settlement dates), the shares collateralized under the Lionsgate Loan were reduced to a pledge of 833,333 of our voting and 833,334 of our non-voting Lionsgate shares. For additional information regarding our investments in ITV and Lionsgate, see note 7.

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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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