Derivative Instruments

9 Months Ended

Sep. 30, 2011

Derivative Instruments [Abstract]

Derivative Instruments

Note 13.  Derivative Instruments

We use derivative instruments to manage certain foreign currency and interest rate risk exposures. We do not use derivative instruments for speculative trading purposes.  All derivative instruments are recorded on the balance sheet at fair value.  For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to other comprehensive income, and is reclassified to earnings when the derivative instrument is settled.  Any ineffective portion of changes in the fair value of the derivative is reported in earnings.  None of our derivative contracts contain credit-risk related contingent features that would require us to settle the contract upon the occurrence of such contingency.  However, all of our contracts contain clauses specifying events of default under specified circumstances, including failure to pay or deliver, breach of agreement, default under the specific agreement to which the hedge relates, bankruptcy, misrepresentation and the occurrence of certain transactions.  The remedy for default is settlement in entirety or payment of the fair value of the contracts, which is $9.8 million in the aggregate for all of our contracts, less posted collateral of $193,500 as of September 30, 2011.  The unrealized loss related to our derivative instruments included in accumulated other comprehensive loss was $9.1 million as of September 30, 2011 and $8.7 million as of December 31, 2010.

The notional and fair value amounts of our derivative instruments as of September 30, 2011 were as follows:

(Amounts in thousands)			Asset Derivatives				Liability Derivatives
	Current Notional		Balance Sheet		Fair Value		Balance Sheet		Fair Value
	Amount		Location				Location
Interest Rate Swaps - L/T*	$	158,229		N/A		N/A	Other Liabilities		$	(10,119	)
Foreign Exchange Contracts	$	1,125	Other Current Assets		$	123		N/A		N/A
Foreign Exchange Contracts	$	2,325	Other Asset		$	181
Total Derivatives Designated as Hedging Instruments	$	161,679		-	$	304		-	$	(10,119	)
*We have outstanding a variable-to-fixed interest rate swap with respect to a Yen-based facility for the financing of a PCTC delivered in March 2010.  The notional amount under this contract is $76,081,689 (based on a Yen to USD exchange rate of 77.04 as of September 30, 2011). With the bank exercising its option to reduce the underlying Yen loan from 80% to 65% funding of the vessel's delivery cost, the 15% reduction represents the ineffective portion of this swap, which consists of the portion of the derivative instrument that is no longer supported by underlying borrowings.  The change in fair value related to the ineffective portion of this swap was a $124,000 loss for the quarter ended September 30, 2011 and this amount was included in earnings.

The effect of derivative instruments designated as cash flow hedges on our condensed consolidated statement of operations for the nine months ended September 30, 2011 was as follows:

(Amounts in thousands)	Net Gain / (Loss) Recognized in Other Comprehensive Income	Location of Gain (Loss) Reclassified from AOCI to Income	Amount of (Loss) Gain Reclassified from AOCI to Income	Loss Recognized in Income from Ineffective portion
	2011		2011	2011
Interest Rate Swaps	($535)	Interest Expense	($1,050)	($109)
Foreign Exchange contracts	$95	Voyage Expenses	$49	-
Total	($440)	-	($1,001)	($109)