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11 - INTEREST RATE SWAP AGREEMENTS
As of September 30, 2012 and December 31, 2011, the Company had five and eight interest rate swap agreements outstanding, respectively, with DnB NOR Bank ASA to manage interest costs and the risk associated with changing interest rates related to the Company’s 2007 Credit Facility. The total notional principal amount of the swaps at September 30, 2012 and December 31, 2011 was $356,233 and $606,233, respectively, and the swaps have specified rates and durations.
The following table summarizes the interest rate swaps designated as cash flow hedges that were in place as of September 30, 2012 and December 31, 2011:
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September 30,
2012 |
|
December 31,
2011 |
|
|
Interest Rate Swap Detail |
|
Notional |
|
Notional |
|
|
Trade |
|
Fixed |
|
Start Date |
|
End Date |
|
Amount |
|
Amount |
|
|
Date |
|
Rate |
|
of Swap |
|
of Swap |
|
Outstanding |
|
Outstanding |
|
|
9/6/05 |
|
4.485 |
% |
9/14/05 |
|
7/29/15 |
|
$ |
106,233 |
|
$ |
106,233 |
|
|
3/29/06 |
|
5.25 |
% |
1/2/07 |
|
1/1/14 |
|
50,000 |
|
50,000 |
|
|
3/24/06 |
|
5.075 |
% |
1/2/08 |
|
1/2/13 |
|
50,000 |
|
50,000 |
|
|
8/9/07 |
|
5.07 |
% |
1/2/08 |
|
1/3/12 |
|
— |
|
100,000 |
|
|
8/16/07 |
|
4.985 |
% |
3/31/08 |
|
3/31/12 |
|
— |
|
50,000 |
|
|
8/16/07 |
|
5.04 |
% |
3/31/08 |
|
3/31/12 |
|
— |
|
100,000 |
|
|
1/9/09 |
|
2.05 |
% |
1/22/09 |
|
1/22/14 |
|
100,000 |
|
100,000 |
|
|
2/11/09 |
|
2.45 |
% |
2/23/09 |
|
2/23/14 |
|
50,000 |
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
356,233 |
|
$ |
606,233 |
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The following table summarizes the derivative asset and liability balances at September 30, 2012 and December 31, 2011:
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|
|
Asset Derivatives |
|
Liability Derivatives |
|
|
|
|
Balance |
|
Fair Value |
|
Balance |
|
Fair Value |
|
|
|
|
Sheet
Location |
|
September 30,
2012 |
|
December
31, 2011 |
|
Sheet
Location |
|
September 30,
2012 |
|
December
31, 2011 |
|
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
Fair value of derivative instruments (Current Assets) |
|
$ |
— |
|
$ |
— |
|
Fair value of derivative instruments (Current Liabilities) |
|
$ |
609 |
|
$ |
1,686 |
|
|
Interest rate contracts |
|
Fair value of derivative instruments (Noncurrent Assets) |
|
— |
|
— |
|
Fair value of derivative instruments (Noncurrent Liabilities) |
|
18,261 |
|
23,654 |
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|
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|
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|
|
|
|
|
|
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|
Total derivatives designated as hedging instruments |
|
|
|
— |
|
— |
|
|
|
18,870 |
|
25,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives |
|
|
|
$ |
— |
|
$ |
— |
|
|
|
$ |
18,870 |
|
$ |
25,340 |
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The following tables present the impact of derivative instruments and their location within the Condensed Consolidated Statement of Operations:
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
For the Three-Month Period Ended September 30, 2012
|
Derivatives in Cash
Flow Hedging |
|
Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion) |
|
Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective |
|
Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion) |
|
Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective |
|
Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion) |
|
|
Relationships |
|
2012 |
|
Portion) |
|
2012 |
|
Portion) |
|
2012 |
|
|
Interest rate contracts |
|
$ |
(1,434 |
) |
Interest Expense |
|
$ |
2,959 |
|
Other Income (Expense) |
|
$ |
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
For the Three-Month Period Ended September 30, 2011
|
Derivatives in Cash
Flow Hedging |
|
Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion) |
|
Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective |
|
Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion) |
|
Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective |
|
Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion) |
|
|
Relationships |
|
2011 |
|
Portion) |
|
2011 |
|
Portion) |
|
2011 |
|
|
Interest rate contracts |
|
$ |
(5,021 |
) |
Interest Expense |
|
$ |
7,438 |
|
Other Income (Expense) |
|
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
For the Nine-Month Period Ended September 30, 2012
|
Derivatives in Cash
Flow Hedging |
|
Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion) |
|
Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective |
|
Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion) |
|
Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective |
|
Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion) |
|
|
Relationships |
|
2012 |
|
Portion) |
|
2012 |
|
Portion) |
|
2012 |
|
|
Interest rate contracts |
|
$ |
(3,999 |
) |
Interest Expense |
|
$ |
10,392 |
|
Other Income (Expense) |
|
$ |
76 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
For the Nine-Month Period Ended September 30, 2011
|
Derivatives in Cash
Flow Hedging |
|
Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion) |
|
Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective |
|
Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion) |
|
Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective |
|
Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion) |
|
|
Relationships |
|
2011 |
|
Portion) |
|
2011 |
|
Portion) |
|
2011 |
|
|
Interest rate contracts |
|
$ |
(11,705 |
) |
Interest Expense |
|
$ |
22,038 |
|
Other Income (Expense) |
|
$ |
38 |
|
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At September 30, 2012, ($10,082) of AOCI is expected to be reclassified into interest expense over the next 12 months associated with interest rate derivatives.
The Company is required to provide collateral in the form of vessel assets to support the interest rate swap agreements, excluding vessel assets of Baltic Trading. At September 30, 2012, the Company’s 35 vessels mortgaged under the 2007 Credit Facility served as collateral in the aggregate amount of $100,000.
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