Caesars Entertainment, Inc. 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We are exposed to changes in interest rates primarily from long-term variable-rate debt arrangements. As of September 30, 2020, interest on borrowings under our Credit Facility was subject to fluctuation based on changes in short-term interest rates. As of September 30, 2020, our long-term variable-rate borrowings totaled $6.4 billion under the CRC Term Loans and $900 million was outstanding under the CEI Revolving Credit Facility. Long-term variable-rate borrowings under the CRC Term Loans and the CEI Revolving Credit Facility represented approximately 45% of our long-term debt as of September 30, 2020. Of our $16.2 billion face value of debt, as of September 30, 2020, we have entered into ten interest rate swap agreements to fix the interest rate on $3.0 billion of variable rate debt, and $4.3 billion of debt remains subject to variable interest rates for the term of the agreement. During the nine months ended September 30, 2020, the weighted average interest rates on our variable and fixed rate debt were 3.67% and 6.35%, respectively. LIBOR is expected to be discontinued after 2021. The interest rate per annum applicable to loans under our credit facilities is, at our option, either LIBOR plus a margin or a base rate plus a margin. We intend to continue monitoring the developments with respect to the potential phasing out of LIBOR after 2021 and work with our lenders to ensure any transition away from LIBOR will have minimal impact on our financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR. On September 28, 2020, we entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, we would purchase £1.3 billion at a contracted exchange rate. An unrealized loss of $5 million related to the change in fair value during the period from September 28, 2020 and September 30, 2020 was recorded in the consolidated condensed statement of operations. On October 1, 2020 the contract was cancelled. We may continue to utilize similar contracts in the future to hedge the risk of appreciation of the GBP denominated purchase of our possible acquisition of William Hill. We evaluate our exposure to market risk by monitoring interest rates in the marketplace and have, on occasion, utilized derivative financial instruments to help manage this risk. We do not utilize derivative financial instruments for trading purposes. There were no material quantitative changes in our market risk exposure, or how such risks are managed, for the nine months ended September 30, 2020.