Charter 2009 Annual Report Download - page 76

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CCH II, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009, 2008, AND 2007
(dollars in millions, except where indicated)
F-28
Upon filing for Chapter 11 bankruptcy, the counterparties to the interest rate swap agreements terminated the
underlying contracts and, upon emergence from bankruptcy, received payment of $495 million for the market value of
the interest rate swap agreements as measured on the date the counterparties terminated plus accrued interest. The
Company does not hold any derivative financial instruments as of December 31, 2009.
The Company’ s hedging policy does not permit it to hold or issue derivative instruments for speculative trading
purposes. The Company did, however, have certain interest rate derivative instruments that were designated as cash
flow hedging instruments. Such instruments effectively converted variable interest payments on certain debt
instruments into fixed payments. For qualifying hedges, derivative gains and losses offset related results on hedged
items in the consolidated statements of operations. The Company formally documented, designated and assessed the
effectiveness of transactions that received hedge accounting.
Changes in the fair value of interest rate agreements that were designated as hedging instruments of the variability of
cash flows associated with floating-rate debt obligations, and that met effectiveness criteria were reported in
accumulated other comprehensive loss. The amounts were subsequently reclassified as an increase or decrease to
interest expense in the same periods in which the related interest on the floating-rate debt obligations affected
earnings (losses).
Certain interest rate derivative instruments were not designated as hedges as they did not meet effectiveness criteria.
However, management believes such instruments were closely correlated with the respective debt, thus managing
associated risk. Interest rate derivative instruments not designated as hedges were marked to fair value, with the
impact recorded as a change in value of derivatives in the Company’ s consolidated statements of operations.
As of December 31, 2008, the Company had outstanding $4.3 billion in notional amounts of interest rate swap
agreements outstanding. The notional amounts of interest rate instruments do not represent amounts exchanged by
the parties and, thus, are not a measure of exposure to credit loss. The amounts exchanged were determined by
reference to the notional amount and the other terms of the contracts.
The effect of derivative instruments on the Company’ s consolidated statements of operations is presented in the
table below.
Year Ended December 31, 2009
Successor Predecessor
One Month
Ended
December 31,
Eleven Months
Ended
November 30,
Predecessor
Year Ended December 31,
2009 2009 2008 2007
Change in value of derivatives:
Loss on interest rate derivatives not
designated as hedges $ -- $ (4)
$ (62) $ (46)
Accumulated other comprehensive loss:
Loss on interest rate derivatives
designated as hedges (effective portion) $ -- $ (9)
$ (180) $ (123)
Amount of loss reclassified from
accumulated other comprehensive loss
into interest expense, reorganization
items, net or gain due to fresh start
accounting adjustments $ --
$ 279
$ (76)
$ 10