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DERIVATIVE INSTRUMENTS
 12 Months Ended
Dec. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS
 
The Company enters into derivative transactions in order to hedge its interest rate and foreign currency exposure to the effects of interest rate and foreign currency changes. Additionally, the Company enters into derivative transactions in the course of its portfolio management activities. The counterparties to the Company’s derivative agreements are major financial institutions with which the Company and its affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, the Company is potentially exposed to losses. The counterparties to the Company’s derivative agreements have investment grade ratings and, as a result, the Company does not anticipate that any of the counterparties will fail to fulfill their obligations.
 
The table below summarizes the aggregate notional amount and estimated net fair value of the derivative instruments as of December 31, 2016 and December 31, 2015 (amounts in thousands):
 
 
As of December 31, 2016
 
As of December 31, 2015
 
Notional
 
Estimated
Fair Value
 
Notional
 
Estimated
Fair Value
Free-Standing Derivatives:
 

 
 

 
 

 
 

Interest rate swaps
$
141,000

 
$
(27,263
)
 
$
297,667

 
$
(41,743
)
Foreign exchange forward contracts and options
(460,282
)
 
38,476

 
(375,524
)
 
38,608

Common stock warrants
—

 
1,528

 
—

 
—

Options
—

 
1,001

 
—

 
95

Total
 

 
$
13,742

 
 

 
$
(3,040
)

 
Cash Flow Hedges
 
Interest Rate Swaps
 
As described above in Note 2 to these consolidated financial statements, in connection with the Merger Transaction and as of the Effective Date, the Company discontinued hedge accounting for its cash flow hedges and records changes in the estimated fair value of the derivative instruments in the consolidated statements of operations. Accordingly, disclosures related to cash flow hedges pertain to the Predecessor Company.
The Company uses interest rate swaps to hedge a portion of the interest rate risk associated with its CLOs as well as certain of its floating rate junior subordinated notes. The Predecessor Company designated these interest rate swaps as cash flow hedges and changes in the estimated fair value of the interest rate swaps were recorded through accumulated other comprehensive income (loss), with gains or losses representing hedge ineffectiveness, if any, recognized in earnings during the reporting period.
The following table presents the net gains (losses) recognized in other comprehensive income (loss) related to derivatives in cash flow hedging relationships (amounts in thousands):
 
 
 
For the four months ended April 30, 2014
Net gains (losses) recognized in accumulated other comprehensive income (loss) on cash flow hedges
 
$
(5,442
)

 
For all hedges where hedge accounting was applied, effectiveness testing and other procedures to ensure the ongoing validity of the hedges were performed at least quarterly. During the four months ended April 30, 2014, the Company did not recognize any ineffectiveness in income on the consolidated statements of operations from its cash flow hedges.

As of December 31, 2016 and December 31, 2015, the Successor Company had interest rate swaps with a notional amount of $141.0 million and $297.7 million, respectively, which were classified as free-standing derivatives, rather than cash flow hedges. 
Free-Standing Derivatives
 
Free-standing derivatives are derivatives that the Company has entered into in conjunction with its investment and risk management activities, but for which the Company has not designated the derivative contract as a hedging instrument for accounting purposes. Such derivative contracts may include commodity derivatives, credit default swaps (“CDS”) and foreign exchange contracts and options. Free-standing derivatives also include investment financing arrangements (total rate of return swaps) whereby the Company receives the sum of all interest, fees and any positive change in fair value amounts from a reference asset with a specified notional amount and pays interest on such notional amount plus any negative change in fair value amounts from such reference asset.
 
Gains and losses on free-standing derivatives are reported in net realized and unrealized gain (loss) on derivatives and foreign exchange in the consolidated statements of operations. Unrealized gains (losses) represent the change in fair value of the derivative instruments and are noncash items.
 
Foreign Exchange Derivatives
 
The Company holds certain positions that are denominated in a foreign currency, whereby movements in foreign currency exchange rates may impact earnings if the United States dollar significantly strengthens or weakens against foreign currencies. In an effort to minimize the effects of these fluctuations on earnings, the Company will from time to time enter into foreign exchange options or foreign exchange forward contracts related to the assets denominated in a foreign currency. As of December 31, 2016 and December 31, 2015, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $460.3 million and $375.5 million, respectively, the majority of which related to certain of our foreign currency denominated assets.

Free-Standing Derivatives Income (Loss)
 
The following table presents the amounts recorded in net realized and unrealized gain (loss) on derivatives and foreign exchange on the consolidated statements of operations (amounts in thousands):
 
 
Successor Company
 
Year ended December 31, 2016
 
Year ended December 31, 2015
 
Realized
 gains
(losses)
 
Unrealized
gains
(losses)
 
Total
 
Realized
 gains
(losses)
 
Unrealized
gains
(losses)
 
Total
Interest rate swaps
$
(9,316
)
 
$
13,301

 
$
3,985

 
$
(5,297
)
 
$
11,610

 
$
6,313

Foreign exchange forward contracts and options(1)
18,419

 
(15,098
)
 
3,321

 
30,687

 
(27,747
)
 
2,940

Common stock warrants
142

 
(757
)
 
(615
)
 
—

 
(2,412
)
 
(2,412
)
Total rate of return swaps
—

 
—

 
—

 
304

 
130

 
434

Options
—

 
906

 
906

 
—

 
(5,117
)
 
(5,117
)
Net realized and unrealized gains (losses)
$
9,245

 
$
(1,648
)
 
$
7,597

 
$
25,694

 
$
(23,536
)
 
$
2,158

 
 
 
 
 
(1)
Net of foreign exchange remeasurement gain or loss on foreign denominated assets.

 
 
Successor Company
 
 
Predecessor Company
 
 
Eight months ended December 31, 2014
 
 
Four months ended April 30, 2014
 
 
Realized
 gains
(losses)
 
Unrealized
gains
(losses)
 
Total
 
 
Realized
 gains
(losses)
 
Unrealized
gains
(losses)
 
Total
Interest rate swaps
 
$
—

 
$
(6,890
)
 
$
(6,890
)
 
 
$
—

 
$
—

 
$
—

Commodity swaps
 
(962
)
 
(698
)
 
(1,660
)
 
 
(2,515
)
 
(5,856
)
 
(8,371
)
Credit default swaps(1)
 
—

 
—

 
—

 
 
(2,167
)
 
1,986

 
(181
)
Foreign exchange forward contracts and options(2)
 
(6,609
)
 
(1,561
)
 
(8,170
)
 
 
(2,068
)
 
2,784

 
716

Common stock warrants
 
1,237

 
(1,082
)
 
155

 
 
—

 
137

 
137

Total rate of return swaps
 
(286
)
 
(184
)
 
(470
)
 
 
(2,349
)
 
284

 
(2,065
)
Options
 
—

 
(1,472
)
 
(1,472
)
 
 
—

 
(19
)
 
(19
)
Net realized and unrealized gains (losses)
 
$
(6,620
)
 
$
(11,887
)
 
$
(18,507
)
 
 
$
(9,099
)
 
$
(684
)
 
$
(9,783
)
 
 
 
 
 

(1)
Includes related income and expense on the derivatives.

(2)
Net of foreign exchange remeasurement gain or loss on foreign denominated assets.

A master netting arrangement may allow each counterparty to net settle amounts owed between the Company and the counterparty as a result of multiple, separate derivative transactions. The Company has International Swaps and Derivatives Association ("ISDA") agreements or similar agreements with certain financial institutions which contain netting provisions. While these derivative instruments are eligible to be offset in accordance with applicable accounting guidance, the Company has elected to present derivative assets and liabilities on a gross basis in its consolidated balance sheets. As of December 31, 2016, if the Company had elected to offset the asset and liability balances of its derivative instruments, the net positions would total the following with its respective financial institution counterparties: (i) $2.6 million net asset, net of $3.4 million collateral posted, (ii) $1.0 million net asset, net of $8.0 million collateral posted and (iii) $7.5 million net asset, net of $11.3 million collateral held. Comparatively, as of December 31, 2015, if the Company had elected to offset the asset and liability balances of its derivative instruments, the net positions would total the following with its respective financial institution counterparties: (i) $2.4 million net asset, net of $20.7 million collateral posted, (ii) $1.6 million net asset, net of $0.1 million collateral held and (iii) $9.1 million net asset, net of $23.6 million collateral held.