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INTEREST RATE SWAP AGREEMENTS
9 Months Ended
Sep. 30, 2012
INTEREST RATE SWAP AGREEMENTS  
INTEREST RATE SWAP AGREEMENTS

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:

 

 

 

 

 

 

 

 

 

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

 

 

The following table summarizes the derivative asset and liability balances at September 30, 2012 and December 31, 2011:

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivatives designated as hedging instruments

 

 

 

 

 

 

 

18,870

 

25,340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Derivatives

 

 

 

$

 

$

 

 

 

$

18,870

 

$

25,340

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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.