Derivatives and hedging activities

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and hedging activities

Derivatives and hedging activities

Cash flow hedges of interest rate risk

As of June 30, 2015 and December 31, 2014, Belmond 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: 

	June 30, 2015		December 31, 2014
	’000		’000
Interest rate swaps	€	74,063	€	74,438
Interest rate swaps	$	213,344	$	214,206
Interest rate caps	$	17,200	$	17,200

Fair value

The table below presents the fair value of Belmond’s derivative financial instruments and their classification as of June 30, 2015 and December 31, 2014: 

		Fair value as of June 30, 2015		Fair value as of December 31, 2014
	Balance sheet location	$’000		$’000
Derivatives designated in a cash flow hedging relationship:
Interest rate derivatives	Other assets	4		13
Interest rate derivatives	Accrued liabilities	(2,916	)	(2,984	)
Interest rate derivatives	Other liabilities	(1,168	)	(618	)
Total		(4,080	)	(3,589	)

Offsetting

There was no offsetting within derivative assets or derivative liabilities at June 30, 2015 and December 31, 2014. However, these derivatives are subject to master netting arrangements.

Other comprehensive loss

Information concerning the movements in other comprehensive income/(loss) for cash flow hedges of interest rate risk is shown in Note 20. At June 30, 2015, the amount accounted for in other comprehensive income/(loss) which is expected to be reclassified to interest expense in the next 12 months is $2,854,000. Movement in other comprehensive income/(loss) for net investment hedges recorded through foreign currency translation adjustments for the three and six months endedJune 30, 2015 was a loss of $6,488,000 (June 30, 2014 - gain of $1,359,000) and a gain of $13,666,000 (June 30, 2014 - gain of $1,039,000), respectively.

Credit-risk-related contingent features

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

As of June 30, 2015, the fair value of derivatives in a net liability position, which includes accrued interest and an adjustment for non-performance risk, related to these agreements was $4,084,000 (December 31, 2014 - $3,602,000). If Belmond breached any of the provisions, it would be required to settle its obligations under the agreements at their termination value of $4,085,000 (December 31, 2014 - $3,615,000).

Non-derivative financial instruments — net investment hedges

Belmond 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. Belmond 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 notional value of non-derivative hedging instruments was $165,626,000 at June 30, 2015, being a liability of Belmond (December 31, 2014 - $180,149,000).