Quarterly report pursuant to Section 13 or 15(d)

Interest Rate Derivatives

v2.3.0.15
Interest Rate Derivatives
9 Months Ended
Sep. 30, 2011
Interest Rate Derivatives  
Interest Rate Derivatives

9.                                      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

 

Fixed

 

Floating Rate

 

Effective

 

Expiration

 

September 30,

 

December 31,

 

Amount

 

Rate

 

Index

 

Date

 

Date

 

2011

 

2010

 

$

120,000

 

1.7600

%

One-Month LIBOR

 

1/2/2009

 

5/1/2012

 

$

(981

)

$

(2,062

)

100,000

 

1.9750

%

One-Month LIBOR

 

1/1/2010

 

5/1/2012

 

(943

)

(2,002

)

100,000

(1)

3.8415

%

Three-Month LIBOR

 

9/30/2011

 

9/30/2021

 

(15,766

)

N/A

 

75,000

(1)

3.8450

%

Three-Month LIBOR

 

9/30/2011

 

9/30/2021

 

(11,847

)

N/A

 

50,000

 

0.5025

%

One-Month LIBOR

 

1/3/2011

 

1/3/2012

 

(26

)

(64

)

50,000

 

0.5025

%

One-Month LIBOR

 

1/3/2011

 

1/3/2012

 

(26

)

(64

)

50,000

 

0.4400

%

One-Month LIBOR

 

1/4/2011

 

1/3/2012

 

(18

)

(34

)

40,000

(2)

3.8300

%

One-Month LIBOR

 

11/2/2010

 

11/2/2015

 

(1,022

)

644

 

 

 

 

 

 

 

 

 

 

 

$

(30,629

)

$

(3,582

)

 

(1) These instruments have a cash settlement date of March 30, 2012.

(2) The notional amount of this instrument is scheduled to amortize to $36.2 million.

 

Each of these interest rate swaps was designated as cash flow hedges 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 sheet (in thousands):

 

Derivatives Designated as 

 

September 30, 2011

 

December 31, 2010

 

Hedging Instruments

 

Balance Sheet Location

 

Fair Value

 

Balance Sheet Location

 

Fair Value

 

Interest rate swaps

 

Prepaid expenses and other assets

 

$

—

 

Prepaid expenses and other assets

 

$

644

 

Interest rate swaps

 

Interest rate derivatives

 

(30,629

)

Interest rate derivatives

 

(4,226

)

 

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

 

For the Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Amount of loss recognized in AOCL (effective portion)

 

$

(21,869

)

$

(1,530

)

$

(30,463

)

$

(5,844

)

Amount of loss reclassified from AOCL into interest expense (effective portion)

 

(1,179

)

(887

)

(3,446

)

(2,684

)

 

Over the next 12 months, we estimate that approximately $3.7 million 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 any 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, 2011, the fair value of interest rate derivatives in a liability position related to these agreements was $30.6 million, excluding the effects of accrued interest. As of September 30, 2011, 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 $31.8 million.