Derivatives and hedging activities

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and hedging activities

Derivatives and hedging activities

Cash flow hedges of interest rate risk

As of December 31, 2013 and 2012, OEH had the following outstanding interest rate derivatives stated at their notional amounts in local currency that were designated as cash flow hedges of interest rate risk:

	2013		2012
December 31,	’000		’000
Interest Rate Swaps	€	137,469	€	142,094
Interest Rate Swaps	$	63,700	$	104,259

Non-designated hedges of interest rate risk

Derivatives not designated as hedges are used to manage OEH’s exposure to interest rate movements but do not meet the strict hedge accounting requirements prescribed in the authoritative accounting guidance.  As of December 31, 2013, OEH had interest rate options with a fair value of $2,000 (2012 - $6,000) and a notional amount of €73,344,000 and $59,080,000 (2012 - €76,469,000 and $53,760,000) that were non-designated hedges of OEH’s exposure to interest rate risk.

The table below presents the fair value of OEH’s derivative financial instruments and their classification as of December 31, 2013 and 2012:

		Fair value as of		Fair value as of
		December 31, 2013		December 31, 2012
	Balance sheet location	$’000		$’000
Derivatives designated in a cash flow hedging relationship:
Interest Rate Swaps	Accrued liabilities	(3,012	)	(3,858	)
Interest Rate Swaps	Other liabilities	(1,878	)	(5,021	)
Total		(4,890	)	(8,879	)
Derivatives not designated as hedging instruments:
Interest Rate Options	Other Assets	2		6
Interest Rate Swaps	Accrued liabilities	—		—
Interest Rate Swaps	Other liabilities	—		—
Total		2		6

Offsetting

There was no offsetting within derivative assets or derivative liabilities at December 31, 2013 and 2012. However, these derivatives are subject to master netting arrangements.

Other comprehensive income

Information concerning the movements in other comprehensive income for cash flow hedges of interest rate risk is shown in Note

21. At December 31, 2013, the amount accounted for in other comprehensive income/(loss) which is expected to be reclassified

to interest expense in the next 12 months is $3,003,000. Movement in other comprehensive income/(loss) for net investment hedges recorded through foreign currency translation adjustments for the year ended December 31, 2013 was a $1,016,000 loss (2012 - $806,000 loss; 2011 - $2,748,000 gain).

Derivative movements not included in other comprehensive income for the years ended December 31, 2013, 2012 and 2011 were as follows:

	2013		2012		2011
Year ended December 31,	$’000		$’000		$’000
Amount of gain/(loss) recognized in interest expense for the ineffective portion of derivatives	(37	)	218		(353	)
Amount of gain/(loss) recognized in interest expense for derivatives not designated as hedging instruments	(4	)	(54	)	484

Credit-risk-related contingent features

OEH has agreements with some of its derivative counterparties that contain provisions under which, if OEH defaults on the debt associated with the hedging instrument, OEH could also be declared in default in respect of its derivative obligations.

As of December 31, 2013, the fair value of derivatives in a net liability position, which included accrued interest and an adjustment for non-performance risk, related to these agreements was $4,890,000 (2012 - $8,879,000). If OEH breached any of the provisions, it would be required to settle its obligations under the agreements at their termination value of $4,899,000 (2012 - $8,946,000).

Non-derivative financial instruments — net investment hedges

OEH uses certain of its debt denominated in foreign currency to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. OEH’s designates its euro-denominated indebtedness as a net investment hedge of long-term investments in its euro-functional subsidiaries.  These contracts are included in non-derivative hedging instruments. The fair value of non-derivative hedging instruments was $26,249,000 at December 31, 2013 (2012 - $44,166,000), both being liabilities of OEH.