Reynolds Consumer Products Inc. 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we are subject to risks from adverse fluctuations in interest rates and commodity prices. Our objective in managing our exposure to market risk is to limit the impact on earnings and cash flow. Interest Rate Risk We had significant variable rate debt commitments outstanding as of December 31, 2021, which accrue interest at the LIBO rate plus an applicable margin of 1.75%. These on-balance sheet financial instruments expose us to interest rate risk. During September 2020, we entered into a series of interest rate swaps which fixed the LIBO rate to an annual rate of 0.18% to 0.47% (for an annual effective interest rate of 1.93% to 2.22%, including margin) for an aggregate notional amount of $1,650 million, of which $800 million notional value is still in effect as of December 31, 2021. These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility. We classified these instruments as cash flow hedges. Our cash flow hedge contracts outstanding as of December 31, 2021 cover periods ranging from one to four years. Our average variable rate for an aggregate remaining notional amount of $800 million is a one month LIBO rate plus an applicable margin of 1.75%. The fair value of our interest rate swaps included on our consolidated balance sheets as of December 31, 2021 was not material. (in millions) Pay fixed / receive variable notional Average pay rate 2022 650 0.2 % 2023 — — 2024 — — 2025 150 0.5 % Total $ 800 Based on the unhedged outstanding borrowings under the Term Loan Facility as of December 31, 2021, a 100 -basis point increase (decrease) in the interest rates under the Term Loan Facility would result in a $13 million increase (decrease) in interest expense, per annum, on our borrowings. Commodity Risk We are exposed to commodity and other price risk principally from the purchase of resin, aluminum, natural gas, electricity, carton board and diesel. We use various strategies to manage cost exposures on certain material purchases with the objective of obtaining more predictable costs for these commodities. From time to time, we enter into hedging agreements, including commodity derivative contracts, to hedge commodity prices primarily related to diesel and benzene. During the year ended December 31, 2021, there were no realized or unrealized gains or losses related to commodity derivatives. 39