Company: PRMB
Filing Date: 2025-02-07
Form Type: S-1/A
Source: 0001193125-25-022806
Chunk: 391

Company: Primo Brands Corp
Filing Date: 2025-02-07
Form: S-1/A
Chunk 391
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 the hedge transaction. In addition, we formally assess both at the inception and at least quarterly thereafter, whether the financial
instruments used in hedging transactions are highly effective at offsetting changes in either the fair values or cash flows of the related underlying exposures.

We estimate the fair values of our derivatives based on quoted market prices or pricing models using current market rates. The notional
amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by
reference to the notional amounts and by other terms of the derivatives, such as interest rates, foreign currency exchange rates or other financial indices. We do not view the fair values of our derivatives in isolation, but rather in relation to
the fair values or cash flows of the underlying hedged transactions. All of our derivatives are over-the-counter instruments with liquid markets.

Credit Risk Associated with Derivatives

We have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or
better. We monitor counterparty exposures regularly and review promptly any downgrade in counterparty credit rating. We mitigate pre-settlement risk by being permitted to net settle for transactions with the
same counterparty. To minimize the concentration of credit risk, we enter into derivative transactions with a portfolio of financial institutions. Based on these factors, we consider the risk of counterparty default to be minimal.

Fair Value Hedging Strategy

On
January 2, 2024, we entered into foreign exchange contracts with a notional amount of €450.0 million ($502.1 million at exchange rates in effect on September 28, 2024) and a maturity date of October 31, 2025. We are
utilizing the derivative financial instruments to hedge foreign exchange risk associated with our 2028 Notes.

We designated the foreign
exchange contracts as fair value hedges. The foreign exchange contracts are recognized in the Consolidated Balance Sheets at fair value and changes in the fair value of the foreign exchange contracts are recorded in the same line as the hedged item,
which is Other expense (income), net in the Consolidated Statements of Operations. We exclude forward points from our assessment of hedge effectiveness and amortize them on a straight-line basis over the life of the hedging instruments in Other
expense (income), net in the Consolidated Statements of Operations. The difference between fair value changes of the excluded component and the amount amortized to Other