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, 2022, 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 the year ended December 31, 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 $150 million notional value was still in effect as of December 31, 2022. During the year ended December 31, 2022, we entered into additional interest rate swaps which fixed the LIBO rate to an annual rate of 2.70% to 3.44% (for an annual effective interest rate of 4.45% to 5.19%, including margin) for an aggregate notional amount of $1,000 million. As of December 31, 2022, we had interest rate swaps of an aggregate notional amount of $1,150 million. These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from three to four years. We classify these instruments as cash flow hedges. Our average variable rate for the remaining notional amount of $1,150 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, 2022 is $48 million. Refer to Note 8 - Financial Instruments for further detail. (in millions) Pay fixed / receive variable notional Average pay rate ⁽¹⁾ 2023 — — 2024 — — 2025 150 2.2 % 2026 1,000 4.8 % Total $ 1,150 (1) Includes 1.75% applicable margin on the one-month LIBO rate. Based on the unhedged outstanding borrowings under the Term Loan Facility as of December 31, 2022, a 100-basis point increase (decrease) in the interest rates under the Term Loan Facility would result in a $10 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. In some instances, we use contracts of varying durations along with strategic pricing mechanisms to manage volatility for a portion of our commodity costs, but derivative instruments are not currently being used to manage these risks. d 40 Table of Contents