Derivative Financial Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

14. Derivative Financial Instruments

The Trust has exposure to fluctuations in market interest rates. The Trust seeks to limit its risk to interest rate fluctuations through match financing on its assets as well as through hedging transactions. Under going concern accounting, the Trust’s derivative financial instruments are classified as other assets and other liabilities on the balance sheet. As these instruments will not be converted to cash or other consideration, derivative financial instruments have been valued at $0 as of August 1, 2014 in accordance with liquidation accounting. These financial instruments are still in place and effective as of September 30, 2014. The Trust has accrued the estimated monthly settlement amounts for its swap agreements. The amount is included in the liability for estimated costs in excess of estimated receipts during liquidation.

The Trust’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Trust primarily uses interest rate caps and interest rate swaps as part of its interest rate risk management strategy relating to certain of its variable rate debt instruments.

The effective portion of changes in fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 2014 and 2013 interest rate hedges were used to hedge the variable cash flows associated with existing variable-rate debt. The Trust also assesses, both at its inception and on an ongoing basis, whether the hedging instrument is highly effective in achieving offsetting changes in the cash flows attributable to the hedged item. Under going concern accounting, the ineffective portion of the change, if any, in fair value of the derivatives is recognized directly in earnings. The Trust did not record any hedge ineffectiveness during the one and seven months ended July 31, 2014 or during the three and nine months ended September 30, 2013. The Trust has recorded changes in fair value related to the effective portion of its interest rate hedges designated and qualifying as cash flow hedges totaling $445,000 of comprehensive gain for the one month ended July 31, 2014 and $193,000 of comprehensive loss for the seven months ended July 31, 2014, and $150,000 and $20,000 of comprehensive loss for the three and nine months ended September 30, 2013, respectively.

The table below presents information about the Trust’s interest rate caps and interest rate swaps that were designated as cash flow hedges of interest rate risk at July 31, 2014 (in thousands):

Maturity	Strike Rate			Notional Amount of Hedge		Cost of Hedge		Estimated Fair Value of Hedge			Change in Hedge Valuations Included in Interest Expense for the Seven Months Ended July 31, 2014
Aug 2014		0.50	%	$	12,955	$	22	$	—		$	7
May 2016		0.50	%		41,867		—		(22	)		10
Oct 2016		0.69	%		150,000		—		(62	)		24
Nov 2017		4.00	%		50,000		165		104			(82	)
Nov 2018		5.00	%		50,000		220		96			(152	)

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designed as cash flow hedges for the seven months ended July 31, 2014 and the nine months ended September 30, 2013, respectively (in thousands):

	2014			2013
Amount of gain (loss) recognized in accumulated other comprehensive income on interest rate derivatives (effective portion)	$	(200	)	$	(19	)
Amount of gain (loss) reclassified from accumulated other comprehensive income into income as interest expense (effective portion)	$	7		$	(1	)
Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	$	—		$	—

The table below presents information about the Trust’s interest rate caps and swaps that were not designated as cash flow hedges at July 31, 2014 (in thousands):

Maturity	Strike Rate			Notional Amount of Hedge		Cost of Hedge		Estimated Fair Value		Change in Hedge Valuations Included in Interest Expense for the Seven Months Ended July 31, 2014
Oct 2014		1.00	%	$	5,753	$	174	$	—	$	—
Aug 2015		3.00	%		25,500		10		10		—