Quarterly report pursuant to Section 13 or 15(d)

Interest Rate Derivatives

v3.5.0.2
Interest Rate Derivatives
 9 Months Ended
Sep. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Derivatives
Interest Rate Derivatives
 
The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):
 
 
 



 

 

Fair Value at
Notional Amount
 
Fixed Rate

Floating Rate Index

Effective Date

Expiration Date

September 30,
2016

December 31,
2015
$
100,000


1.6730%

One-Month LIBOR

9/1/2015

8/1/2019

$
(2,339
)

$
(1,217
)
100,000


1.7300%

One-Month LIBOR

9/1/2015

8/1/2019

(2,500
)

(1,429
)
13,676

(1)
1.3900%
 
One-Month LIBOR
 
10/13/2015
 
10/1/2020
 
(236
)
 
53

100,000

 
1.9013%
 
One-Month LIBOR
 
9/1/2016
 
12/1/2022
 
(4,879
)
 
(138
)
100,000

 
1.9050%
 
One-Month LIBOR
 
9/1/2016
 
12/1/2022
 
(4,872
)
 
(45
)
50,000

 
1.9079%
 
One-Month LIBOR
 
9/1/2016
 
12/1/2022
 
(2,446
)
 
(32
)
100,000


0.8055%

One-Month LIBOR

9/2/2014

9/1/2016

—


(148
)
100,000


0.8100%

One-Month LIBOR

9/2/2014

9/1/2016

—


(151
)
 

 
 

 

 

 

$
(17,272
)

$
(3,107
)

(1)
The notional amount of this instrument is scheduled to amortize to $12.1 million.

Each of the interest rate swaps set forth in the table above was designated as a cash flow hedge of interest rate risk.
 
The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):
 
 
 
 
Fair Value at
Derivatives
 
Balance Sheet Location
 
September 30,
2016
 
December 31, 2015
Interest rate swaps designated as cash flow hedges
 
Prepaid expenses and other assets
 
$
—

 
$
53

Interest rate swaps designated as cash flow hedges
 
Interest rate derivatives
 
(17,272
)
 
(3,160
)

 
The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Amount of gain (loss) recognized in accumulated other comprehensive loss (“AOCL”) (effective portion)
 
$
407

 
$
(3,638
)
 
$
(16,581
)
 
$
(6,720
)
Amount of losses reclassified from AOCL into interest expense (effective portion)
 
1,043

 
915

 
2,763

 
2,457

Amount of gain (loss) recognized in interest expense (ineffective portion)
 
1,523

 
—

 
(347
)
 
—



Over the next 12 months, we estimate that approximately $5.2 million of losses will be reclassified from AOCL as an increase to interest expense.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on defined levels of our indebtedness, we could also be declared in default on our derivative obligations.  These agreements also incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties.  Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements.  As of September 30, 2016, the fair value of interest rate derivatives in a liability position related to these agreements was $17.9 million, excluding the effects of accrued interest and credit valuation adjustments. As of September 30, 2016, we had not posted any collateral related to these agreements.  We are not in default with any of these provisions.  If we breached any of these provisions, we could be required to settle our obligations under the agreements at their termination value of $18.4 million.