Annual report pursuant to Section 13 and 15(d)

Interest Rate Derivatives

v3.20.4
Interest Rate Derivatives
 12 Months Ended
Dec. 31, 2020
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, each of which was designated as a cash flow hedge of interest rate risk (dollars in thousands):
Notional Amount Effective Date Expiration Date Fair Value at December 31,
  Fixed Rate Floating Rate Index 2020 2019
$ 100,000  1.901  % One-Month LIBOR 9/1/2016 12/1/2022 $ (3,394) $ (1,028)
100,000  1.905  % One-Month LIBOR 9/1/2016 12/1/2022 (3,401) (1,037)
50,000  1.908  % One-Month LIBOR 9/1/2016 12/1/2022 (1,704) (524)
11,200  (1) 1.678  % One-Month LIBOR 8/1/2019 8/1/2026 (733) (20)
23,000  (2) 0.573  % One-Month LIBOR 4/1/2020 3/26/2025 (290) — 
75,000  (3) 3.176  % Three-Month LIBOR 6/30/2020 N/A —  (8,640)
75,000  (3) 3.192  % Three-Month LIBOR 6/30/2020 N/A —  (8,749)
75,000  (3) 2.744  % Three-Month LIBOR 6/30/2020 N/A —  (5,684)
—  1.390  % One-Month LIBOR 10/13/2015 10/1/2020 —  23 
            $ (9,522) $ (25,659)
(1)The notional amount of this instrument is scheduled to amortize to $10.0 million.
(2)The notional amount of this instrument is scheduled to amortize to $22.1 million.
(3)As discussed below, these instruments were cash settled in September 2020.
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 December 31,
Derivatives Balance Sheet Location 2020 2019
Interest rate swaps designated as cash flow hedges
 Prepaid expenses and other assets, net $ —  $ 23 
Interest rate swaps designated as cash flow hedges
 Interest rate derivatives (liabilities) $ (9,522) $ (25,682)
 
The tables below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):
Amount of Loss Recognized in AOCL on Derivatives Amount of (Loss) Gain Reclassified from AOCL into Interest Expense on Statement of Operations
For the Years Ended December 31, For the Years Ended December 31,
Derivatives in Hedging Relationships 2020 2019 2018 2020 2019 2018
Interest rate derivatives $ (39,454) $ (24,321) $ (2,373) $ (3,725) $ 1,415  $ 407 
Amount of Loss Reclassified from AOCL into Loss on Interest Rate Derivatives on Statement of Operations Amount of Loss Recognized on Undesignated Swaps in Loss on Interest Rate Derivatives on Statement of Operations
For the Years Ended December 31, For the Years Ended December 31,
Derivatives in Hedging Relationships 2020 2019 2018 2020 2019 2018
Interest rate derivatives $ (51,865) $ —  —  $ (1,265) $ —  — 

As described further in Note 10, in September 2020, we completed our issuance of the 2.25% Notes. In August 2020, in anticipation of pursuing such an issuance, we determined that the forecasted transactions hedged by our three interest rate swaps with an effective date of June 30, 2020 and an aggregate notional amount of $225.0 million were no longer probable of occurring, resulting in our discontinuance of hedge accounting on these swaps. When we consummated the note issuance in September 2020, we determined that it was probable that the forecasted transactions would not occur, resulting in our reclassification of $51.9 million in losses from AOCL to loss on interest rate derivatives on our statements of operations. On September 22, 2020, we cash settled these swaps and accrued interest thereon for an aggregate amount of $53.1 million.

Based on the fair value of our derivatives as of December 31, 2020, we estimate that approximately $4.8 million of losses will be reclassified from AOCL as an increase to interest expense over the next 12 months.

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.  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 December 31, 2020, we were not in default with any of these provisions.  As of December 31, 2020, the fair value of interest rate derivatives in a liability position related to these agreements was $9.6 million, excluding the effects of accrued interest and credit valuation adjustments. As of December 31, 2020, we had not posted any collateral related to these agreements. If we breach any of these provisions, we could be required to settle our obligations under the agreements at their termination value, which was $10.0 million as of December 31, 2020.