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Derivative Instruments and Hedging Activities (Tables)
 6 Months Ended
Jun. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Commitment of Foreign Currency Forward Contracts
As at June 30, 2016, the Company was committed to the following foreign currency forward contracts:
 
 
 
 
 
Fair Value /
Carrying
Amount
Of Asset
(Liability)
$
 
Expected Maturity
 
Contract Amount in
Foreign Currency
 
Average
Forward Rate (1)
 
 
2016
 
2017
 
 
 
 
$
 
$
Euro
4,500

 
0.92

 
124

 
4,886

 
—

Norwegian Kroner
762,500

 
8.02

 
(3,869
)
 
47,151

 
47,947

Singapore Dollar
19,637

 
1.35

 
(17
)
 
14,592

 
—

 
 
 
 
 
(3,762
)
 
66,629

 
47,947

 
(1)
Average contractual exchange rate represents the contracted amount of foreign currency one U.S. Dollar will buy.
Commitment of Cross Currency Swaps
As at June 30, 2016, the Company was committed to the following cross currency swaps:
 
 
 
 
 
 
 
 
 
 
Fair Value /
Carrying
Amount of
Asset /
(Liability)
$
 
 
Notional
Amount
NOK
 
Notional
Amount
USD
 
Floating Rate Receivable
 
 
 
 
 
 
 
Reference
Rate
 
Margin
 
Fixed Rate
Payable
 
 
Remaining
(Term (years)
700,000
 
125,000

 
NIBOR
 
5.25
%
 
6.88
%
 
(44,079
)
 
0.8
900,000
 
150,000

 
NIBOR
 
4.35
%
 
6.43
%
 
(48,959
)
 
2.2
1,000,000
 
134,000

 
NIBOR
 
3.70
%
 
5.92
%
 
(20,923
)
 
3.9
      600,000 (1)(2)
 
101,351

 
NIBOR
 
5.75
%
 
8.84
%
 
(34,817
)
 
2.4
      800,000 (1)(3)
 
143,536

 
NIBOR
 
5.75
%
 
7.58
%
 
(55,132
)
 
2.5
1,000,000
 
162,200

 
NIBOR
 
4.25
%
 
7.45
%
 
(54,658
)
 
2.6
 
 
 
 
 
 
 
 
 
 
(258,568
)
 
 

(1)
Notional amount reduces equally with NOK bond repayments (see note 8).
(2)
Excludes an economic hedge on the foreign currency exposure for a three percent premium upon maturity of the NOK bonds which exchanges NOK 7.2 million for $1.2 million (see note 8).
(3)
Excludes an economic hedge on the foreign currency exposure for a three percent premium upon maturity of the NOK bonds which exchanges NOK 19.2 million for $3.4 million (see note 8).
Interest Rate Swap Agreements
As at June 30, 2016, the Company was committed to the following interest rate swap agreements related to its LIBOR-based debt and EURIBOR-based debt, whereby certain of the Company’s floating-rate debt were swapped with fixed-rate obligations:
 
 
Interest
Rate
Index
 
Principal
Amount
 
Fair Value /
Carrying
Amount of
Asset /
(Liability)
$
 
Weighted-
Average
Remaining
Term
(years)
 
Fixed
Interest
Rate
(%) (1)
LIBOR-Based Debt:
 
 
 
 
 
 
 
 
 
U.S. Dollar-denominated interest rate swaps (2)
LIBOR
 
3,219,730

 
(411,210
)
 
4.9
 
3.3
U.S. Dollar-denominated interest rate swaps (3)
LIBOR
 
762,957

 
(47,498
)
 
4.9
 
2.6
U.S. Dollar-denominated interest rate swaption (4)
LIBOR
 
155,000

 
(8,404
)
 
0.8
 
2.2
U.S. Dollar-denominated interest rate swaption (4)
LIBOR
 
155,000

 
113

 
0.8
 
3.3
U.S. Dollar-denominated interest rate swaption (5)
LIBOR
 
160,000

 
(7,168
)
 
1.6
 
2.0
U.S. Dollar-denominated interest rate swaption (5)
LIBOR
 
160,000

 
742

 
1.6
 
3.1
U.S. Dollar-denominated interest rate swaption (6)
LIBOR
 
160,000

 
(6,091
)
 
2.0
 
1.8
U.S. Dollar-denominated interest rate swaption (6)
LIBOR
 
160,000

 
1,268

 
2.0
 
2.9
EURIBOR-Based Debt:
 
 
 
 
 
 
 
 
 
Euro-denominated interest rate swaps (7) (8)
EURIBOR
 
239,792

 
(41,247
)
 
4.5
 
3.1
 
 
 
 
 
(519,495
)
 
 
 
 

(1)
Excludes the margins the Company pays on its variable-rate debt, which, as of June 30, 2016, ranged from 0.3% to 4.00%.
(2)
Includes a swap in which the principal amount of $200 million is fixed at 2.14%, unless LIBOR exceeds 6%, in which case the Company pays a floating rate of interest.
(3)
Inception dates range from July 2016 to April 2018. Interest rate swaps with an aggregate principal amount of $320 million are being used to economically hedge expected interest payments on new debt that is planned to be outstanding from 2017 to 2024. These interest rate swaps are subject to mandatory early termination in 2017 and 2018 whereby the swaps will be settled based on their fair value at that time.
(4)
During June 2015, as part of its hedging program, Teekay LNG entered into interest rate swaption agreements whereby it has a one-time option in April 2017 to enter into an interest rate swap at a fixed rate of 3.34% with a third party, and the third party has a one-time option in April 2017 to require Teekay LNG to enter into an interest swap at a fixed rate of 2.15%. If Teekay LNG or the third party exercises its option, there will be a cash settlement in April 2017 for the fair value of the interest rate swap, in lieu of taking delivery of the actual interest rate swap.
(5)
During August 2015, as part of its hedging program, Teekay LNG entered into interest rate swaption agreements whereby it has a one-time option in January 2018 to enter into an interest rate swap at a fixed rate of 3.10% with a third party, and the third party has a one-time option in January 2018 to require Teekay LNG to enter into an interest rate swap at a fixed rate of 1.97%. If Teekay LNG or the third party exercises its option, there will be a cash settlement in January 2018 for the fair value of the interest rate swap in lieu of taking delivery of the actual interest rate swap.
(6)
During October 2015, as part of its hedging program, Teekay LNG entered into interest rate swaption agreements whereby it has a one-time option in July 2018 to enter into an interest rate swap at a fixed rate of 2.935% with a third party, and the third party has a one-time option in July 2018 to require Teekay LNG to enter into an interest rate swap at a fixed rate of 1.83%. If Teekay LNG or the third party exercises its option, there will be a cash settlement in July 2018 for the fair value of the interest rate swap in lieu of taking delivery of the actual interest rate swap.
(7)
Principal amount reduces monthly to 70.1 million Euros ($77.9 million) by the maturity dates of the swap agreements.
(8)
Principal amount is the U.S. Dollar equivalent of 215.9 million Euros.
Location and Fair Value Amounts of Derivative Instruments
The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s consolidated balance sheets.
 
Prepaid Expenses and Other
 
Other Non-Current Assets
 
Accrued
Liabilities
 
Current
Portion of
Derivative
Liabilities
 
Derivative
Liabilities
 
$
 
$
 
$
 
$
 
$
As at June 30, 2016
 
 
 
 
 
 
 
 
 
Derivatives designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements
—

 
—

 
(184
)
 
(760
)
 
(14,436
)
Derivatives not designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Foreign currency contracts
432

 
347

 
—

 
(4,513
)
 
(28
)
Interest rate swap agreements
113

 
2,009

 
(14,891
)
 
(79,293
)
 
(412,053
)
Cross currency swap agreements
—

 
—

 
(3,048
)
 
(69,600
)
 
(185,920
)
Stock purchase warrants
—

 
1,833

 
—

 
—

 
—

Time-charter swap agreement
1,345

 
—

 
—

 
—

 
—

 
1,890

 
4,189

 
(18,123
)
 
(154,166
)
 
(612,437
)
As at December 31, 2015
 
 
 
 
 
 
 
 
 
Derivatives designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements
—

 
—

 
—

 
(338
)
 
(777
)
Derivatives not designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Foreign currency contracts
80

 
—

 
—

 
(16,372
)
 
(2,534
)
Interest rate swap agreements
—

 
7,516

 
(18,348
)
 
(198,196
)
 
(154,673
)
Cross currency swap agreements
—

 
—

 
(3,377
)
 
(52,633
)
 
(256,100
)
Stock purchase warrants
—

 
10,328

 
—

 
—

 
—

 
80

 
17,844

 
(21,725
)
 
(267,539
)
 
(414,084
)
Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)
For the periods indicated, the following table presents the effective portion of gains (losses) on interest rate swap agreements designated and qualifying as cash flow hedges:

Three Months Ended June 30, 2016

Effective Portion

Effective Portion
Ineffective

Recognized in AOCI(1)

Reclassified from AOCI(2)
Portion(3)

$
 
$
$
 
(5,458
)

—

1,291

Interest expense
(5,458
)

—

1,291







Six Months Ended June 30, 2016

Effective Portion

Effective Portion
Ineffective

Recognized in AOCI(1)

Reclassified from AOCI(2)
Portion(3)

(14,025
)

—

(56
)
Interest expense
(14,025
)

—

(56
)


(1) Recognized in accumulated other comprehensive (loss) income (or AOCI).
(2) Recorded in AOCI during the term of the hedging relationship and reclassified to earnings.
(3) Recognized in the ineffective portion of gains (losses) on derivative instruments designated and qualifying as cash flow hedges.
Effect of Gain (Loss) on Derivatives Not Designated as Hedging Instruments
The effect of the gains and (losses) on derivatives not designated as hedging instruments in the consolidated statements of (loss) income are as follows:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
 
$
 
$
 
$
 
$
Realized (losses) gains relating to:
 
 
 
 
 
 
 
Interest rate swap agreements
(22,409
)
 
(27,205
)
 
(45,589
)
 
(55,094
)
Interest rate swap agreement terminations
—

 
—

 
(8,140
)
 
—

Foreign currency forward contracts
(2,336
)
 
(4,232
)
 
(7,332
)
 
(9,660
)
Time charter swap agreement
126

 
—

 
126

 
—

 
(24,619
)
 
(31,437
)
 
(60,935
)
 
(64,754
)
Unrealized (losses) gains relating to:
 
 
 
 
 
 
 
Interest rate swap agreements
(62,817
)
 
83,986

 
(143,871
)
 
40,326

Foreign currency forward contracts
1,093

 
9,386

 
15,064

 
3,057

Stock purchase warrants
(4,274
)
 
1,817

 
(8,496
)
 
1,737

Time charter swap agreement
1,345

 
—

 
1,345

 
—

 
(64,653
)
 
95,189

 
(135,958
)
 
45,120

Total realized and unrealized (losses) gains on derivative instruments
(89,272
)
 
63,752

 
(196,893
)
 
(19,634
)
Effect of Gains (Losses) on Cross Currency Swaps
The effect of the gains (losses) on cross currency swaps on the consolidated statements of income (loss) is as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
 
$
 
$
 
$
 
$
Realized losses on termination of cross currency swaps
—

 
—

 
(32,628
)
 
—

Realized losses
(5,000
)
 
(3,771
)
 
(9,939
)
 
(7,934
)
Unrealized (losses) gains
(20,993
)
 
13,501

 
53,213

 
(42,152
)
Total realized and unrealized (losses) gains on cross currency swaps
(25,993
)
 
9,730

 
10,646

 
(50,086
)