Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

We may be exposed to the risk associated with variability of interest rates that might impact our cash flows and the results of our operations.  Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements.  To accomplish this objective, we have used interest rate swaps as part of our interest rate risk management strategy.  Our interest rate swaps involve the receipt of variable-rate amounts from counterparties in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  Our hedging strategy of entering into interest rate swaps, therefore, is to eliminate or reduce, to the extent possible, the volatility of cash flows.

The following table summarizes the notional values of our derivative financial instruments (in thousands) as of March 31, 2015. The notional values provide an indication of the extent of our involvement in these instruments at March 31, 2015, but do not represent exposure to credit, interest rate, or market risks.

Type/Description	Notional Value		Index	Strike Rate		Effective Date	Maturity Date
Interest rate swap - cash flow hedge	$	125,000	one-month LIBOR	1.6775	%	12/31/14	10/31/19
Interest rate swap - cash flow hedge	$	125,000	one-month LIBOR	1.6935	%	04/30/15	10/31/19
Interest rate swap - cash flow hedge	$	125,000	one-month LIBOR	1.7615	%	06/30/15	05/31/22
Interest rate swap - cash flow hedge	$	150,000	one-month LIBOR	1.7695	%	06/30/15	05/31/22

The table below presents the fair value of our derivative financial instruments, included in “other liabilities” on our consolidated balance sheets, as of March 31, 2015, and December 31, 2014 (in thousands):

Derivatives designated as hedging instruments:	March 31, 2015			December 31, 2014
Interest rate swaps	$	(5,345	)	$	(789	)

The tables below present the effect of the change in fair value of derivative financial instruments in our consolidated statements of operations and comprehensive loss for the three months ended March 31, 2015 and 2014 (in thousands):

Derivatives in Cash Flow Hedging Relationship

	Gain (loss) recognized in OCI on derivative (effective portion)
	For the Three Months Ended
	March 31, 2015			March 31, 2014
Interest rate swap	$	(4,556	)	$	—

	Amount reclassified from OCI into income (effective portion)
	For the Three Months Ended
Location	March 31, 2015		March 31, 2014
Interest expense (1)	$	471	$	—

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(1) Increases in fair value as a result of accrued interest associated with our swap transactions are recorded in accumulated OCI and subsequently reclassified into income. Such amounts are shown net in the statements of changes in equity and offset dollar for dollar.

Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments and accruals are made on our variable-rate debt. During the next twelve months, we estimate that approximately $6.1 millionwill be reclassified as an increase to interest expense.

We have agreements with our derivative counterparties that contain provisions where if we default on any of our indebtedness for at least 30 days, during which time such default has not been remedied, and in all cases provided that the aggregate amount of all such default is not less than $10.0 million for recourse debt or $75.0 million for non-recourse debt, then we could also be declared in default on our derivative obligations.

As of March 31, 2015, the fair value of our derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was approximately $5.4 million. As of March 31, 2015, we have not posted any collateral related to these agreements. If we had breached any of these provisions at March 31, 2015, we could have been required to settle our obligations under the agreements at the termination value of approximately $5.4 million.