Derivatives and hedging activities

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and hedging activities

Derivatives and hedging activities

Belmond hedges its interest rate risk, ensuring that an element of its floating rate interest is fixed by using interest rate derivatives. Belmond designates these derivatives as cashflow hedges. Additionally, Belmond designates its foreign currency borrowings and currency derivatives as net investment hedges of overseas operations.

Cash flow hedges of interest rate risk

As of December 31, 2016 and 2015, 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:

	2016		2015
December 31,	’000		’000
Interest rate swaps	€	72,938	€	73,688
Interest rate swaps	$	210,756	$	212,481
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 December 31, 2016 and 2015:

		Fair value as of		Fair value as of
		December 31, 2016		December 31, 2015
	Balance sheet location	$’000		$’000
Derivatives designated in a cash flow hedging relationship:
Interest rate derivatives	Other assets	—		4
Interest rate derivatives	Accrued liabilities	(2,310	)	(2,731	)
Interest rate derivatives	Other liabilities	(1,054	)	(1,733	)
Total		(3,364	)	(4,460	)

Offsetting

There was no offsetting within derivative assets or derivative liabilities at December 31, 2016 and 2015. However, derivatives are subject to master netting arrangements.

Other comprehensive income

Information concerning the movements in other comprehensive income/(loss) for cash flow hedges of interest rate risk is shown in Note 22. At December 31, 2016, the amount accounted for in other comprehensive income/(loss) which is expected to be reclassified to interest expense in the next 12 months is $2,266,000. Movement in other comprehensive income/(loss) for net investment hedges recorded through foreign currency translation adjustments for the year ended December 31, 2016 was a $4,975,000 gain (2015 - $18,221,000 gain; 2014 - $24,816,000 gain).

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 December 31, 2016, 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 $3,364,000 (2015 - $4,464,000). If Belmond breached any of the provisions, it would be required to settle its obligations under the agreements at their termination value of $3,370,000 (2015 - $4,513,000).

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’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 notional value of non-derivative hedging instruments was $153,472,000 at December 31, 2016 (2015 - $160,138,000), being a liability of Belmond.