Derivative Instruments

12 Months Ended

Dec. 31, 2022

Interest Rate Derivatives [Abstract]

17. Derivative Instruments

The Partnership’s derivative instruments are not designated as hedging instruments and are recorded at fair value. Changes in fair value are included in current period earnings as “Interest expense” in the Partnership's consolidated statements of operations. The value of the Partnership’ interest rate swaps are subject to mark-to-market collateral posting provisions in conjunction with the Partnership’s ISDA master agreement with Mizuho (Note 15). See Note 23 for a description of the methodology and significant assumptions for determining the fair value of the derivatives. The derivative instruments are presented within “Other assets” in the Partnership's consolidated balance sheets.

Interest Rate Swap Agreements

During 2022, the Partnership entered into multiple interest rate swap agreements to mitigate interest rate risk associated with the variable rate TOB trust financings (Note 15). No fees were paid to Mizuho upon closing of the interest rate swaps. The following table summarizes the Partnership's interest rate swap agreements as of December 31, 2022:


Trade Date	Notional Amount			Effective Date	Termination Date	Fixed Rate Paid			Period End Variable Rate Received			Variable Rate Index	Variable Debt Financing Hedged (1)	Counterparty	Fair Value as of December 31, 2022
February 2022		55,990,000		2/9/2022	2/1/2024		1.40	%		4.09	%	Compounded SOFR	TOB Trusts	Mizuho Capital Markets	$	2,205,130
March 2022		47,850,000		3/3/2022	3/1/2027		1.65	%		4.09	%	Compounded SOFR	TOB Trusts	Mizuho Capital Markets		4,048,961
October 2022		34,436,088	(2)	4/1/2023	4/1/2025		3.92	%	N/A			Compounded SOFR	TOB Trusts	Mizuho Capital Markets		131,427
December 2022		10,880,000	(3)	1/1/2023	12/1/2029		3.27	%	N/A			Compounded SOFR	TOB Trusts	Mizuho Capital Markets		370,342
December 2022		45,500,000		1/3/2023	1/1/2030		3.47	%	N/A			Compounded SOFR	TOB Trusts	Mizuho Capital Markets		443,339
		194,656,088													$	7,199,199

(1)

See Notes 15 and 23 for additional details.

(2)

The notional amount increases according to a schedule in accordance with the terms of the interest rate swap agreement up to a maximum notional amount of $99.6 million.

(3)

The notional amount increases according to a schedule in accordance with the terms of the interest rate swap agreement up to a maximum notional amount of $47.8 million.

Total Return Swap Agreements

The following table summarizes the terms of the Partnership’s total return swaps as of December 31, 2022 and 2021:


Trade Date	Notional Amount		Effective Date	Termination Date	Period End Variable Rate Paid				Period End Variable Rate Received				Variable Rate Index	Counterparty	Fair Value as of December 31, 2022
December 2022		102,690,670	December 2022	Sept 2025		7.80	%	(1)		13.05	%	(2)	SOFR	Mizuho Capital Markets	$	239,612
															$	239,612

(1)

Variable rate equal to SOFR + 4.00%, subject to an all-in floor of 4.25%.

(2)

Variable rate equal to SOFR + 9.25%.

Trade Date

Notional
Amount

Effective
Date

Termination Date

Period End
Variable
Rate
Paid

Period End
Variable
Rate
Received

Variable Rate
Index

Counterparty

Fair Value as of 
December 31, 2021

September 2020

39,607,744

September 2020

Sept 2025

4.25% (1)

9.20% (3)

3-month LIBOR

Mizuho Capital Markets

77,061

September 2020

63,500,000

September 2020

Mar 2022

1.00% (2)

9.20% (3)

3-month LIBOR

Mizuho Capital Markets

215,267

292,328

(1)

Variable rate equal to 3-month LIBOR + 3.75%, subject to a floor of 4.25%.

(2)

Variable rate equal to 3-month LIBOR + 0.50%, subject to a floor of 1.00%.

(3)

Variable rate equal to 3-month LIBOR + 9.00%.

The total return swap has the Partnership’s Secured Notes with Mizuho as the specified reference security (Note 15), with the total return swap notional amount equal to the outstanding principal on the Secured Notes. The rate received on the total return swap is equal to the interest rate on the Secured Notes such that they offset one another, resulting in a net interest cost equal to the rate paid under the total return swap. Under the total return swap, the Partnership is liable for any decline in the value of the Secured Notes under the ISDA master agreement with Mizuho, when netted with the value of Partnership’s other positions with Mizuho.

The Partnership was required to initially fund cash collateral with Mizuho for each total return swap. The total return swap with a notional amount of $102.7 million, requires the Partnership to maintain cash collateral equal to 35% of the notional amount. The second total return swap, which was terminated in March 2022, required the Partnership to maintain cash collateral equal to 100% of the notional amount. In March 2022, the Partnership allocated the notional amount of $63.5 million from the second total return swap to the first total return swap which resulted in an increase in unrestricted cash of approximately $41.3 million. In December 2022, the Partnership amended certain terms associated with the remaining total return swap, including an update in the variable rate index from 3-month LIBOR to SOFR. There were no fees associated with the amendment.

Interest Rate Cap Agreement

The Partnership has entered into an interest rate cap agreement to mitigate exposure to interest rate risk associated with variable-rate debt financing facilities. The following tables summarize the Partnership’s interest rate cap agreement as of December 31, 2022 and 2021:

Purchase Date

Notional Amount

Maturity
Date

Effective
Capped 
Rate (1)

Index

Variable Debt
Financing
Hedged (1)

Counterparty

Fair Value as of 
December 31, 2022

August 2019

75,014,903

Aug 2024

4.5

SIFMA

M31 TEBS

Barclays Bank PLC

91,627

91,627

(1)

See Notes 15 and 23 for additional details.

Purchase Date

Notional Amount

Maturity
Date

Effective
Capped 
Rate (1)

Index

Variable Debt
Financing
Hedged (1)

Counterparty

Fair Value as of 
December 31, 2021

August 2019

76,544,336

Aug 2024

4.5

SIFMA

M31 TEBS

Barclays Bank PLC

51,090

51,090

(1)

See Notes 15 and 23 for additional details.