Derivative Financial Instruments

3 Months Ended

Mar. 31, 2014

Derivative Financial Instruments

Derivative Financial Instruments

12. Derivative Financial Instruments

The Company utilizes interest rate swaps to manage its exposure to changes in interest rates related to borrowings on its revolving credit facilities. Hedge accounting has not been applied to any of the Company’s interest rate swaps.

As of March 31, 2014, the Company did not have any outstanding interest rate swaps related to its borrowings on revolving credit facilities. During the three months ended March 31, 2014 and 2013, and in connection with its securitizations, the Company terminated $35.0 million and $55.4 million of interest rate swap notional value, respectively.

The total loss on the terminations of these interest rate swaps for the three months ended March 31, 2014 and 2013 was ($0.6) million and ($0.2) million, respectively, and was recorded in loss on swap terminations, net, in the Company’s unaudited condensed consolidated statements of operations. The unrealized loss for these swaps for the three months ended March 31, 2014 and 2013 was less than ($0.1) million and $0, respectively, and was recorded in unrealized gains on VIE and other finance receivables, long-term debt and derivatives in the Company’s unaudited condensed consolidated statements of operations.

The Company also has interest-rate swaps to manage its exposure to changes in interest rates related to its borrowings on certain VIE long-term debt issued by securitization and permanent financing trusts. As of March 31, 2014, the Company had 8 outstanding swaps with a total notional amount of approximately $277.3 million. The Company pays fixed rates ranging from 4.66% to 5.77% and receives floating rates equal to 1-month LIBOR plus applicable margin.

These interest rate swaps were designed to closely match the borrowings under the respective floating rate asset backed loans in amortization.  As of March 31, 2014, the term of these interest rate swaps range from approximately 8 to approximately 22 years. For the three months ended March 31, 2014 and 2013, the amount of unrealized gain recognized was $0.4 million and $5.7 million, respectively, and was recorded in unrealized gains on VIE and other finance receivables, long-term debt and derivatives in the Company’s unaudited condensed consolidated statements of operations.

Additionally, the Company has interest-rate swaps to manage its exposure to changes in interest rates related to its borrowings under Peachtree Structured Settlements, LLC (“PSS”), a permanent financing VIE (Note 10), and PLMT (Note 9).  As of March 31, 2014, the Company had 162 outstanding swaps with a total notional value of approximately $244.5 million. The Company pays fixed rates ranging from 4.38% to 8.70% and receives floating rates equal to 1-month LIBOR rate plus applicable margin.

The PSS and PLMT interest rate swaps were designed to closely match the borrowings under the respective floating rate asset backed loans in amortization.  As of March 31, 2014, the term of the interest rate swaps for PSS and PLMT range approximately from less than 1 month to approximately 20 years. For the three months ended March 31, 2014 and 2013, the amount of unrealized gain (loss) recognized was ($1.9) million and $5.7 million, respectively, which was included in unrealized gains on VIE and other finance receivables, long-term debt and derivatives in the Company’s unaudited condensed consolidated statements of operations.

The notional amounts and fair values of interest rate swaps as of March 31, 2014 and December 31, 2013 are as follows:

		Notional as of		Fair Market Value as of			Notional as of		Fair Market Value as of
Entity	Securitization	March 31, 2014		March 31, 2014			December 31, 2013		December 31, 2013
				(Dollars in Thousands)
321 Henderson I	2004-A A-1	$	38,207	$	(3,523	)	$	40,734	$	(3,745	)
321 Henderson I	2005-1 A-1	69,861		(8,212		)	73,269		(8,559		)
321 Henderson II	2006-1 A-1	19,320		(1,939		)	20,976		(2,137		)
322 Henderson II	2006-2 A-1	22,433		(3,058		)	23,620		(3,202		)
323 Henderson II	2006-3 A-1	24,534		(2,860		)	25,902		(3,023		)
324 Henderson II	2006-4 A-1	22,620		(2,491		)	23,842		(2,643		)
325 Henderson II	2007-1 A-2	39,364		(5,373		)	39,364		(5,159		)
326 Henderson II	2007-2 A-3	41,004		(8,318		)	41,544		(8,015		)
JGW V, LLC	—	—		—			10,985		16
PSS	—	188,599		(26,877		)	192,444		(25,120		)
PLMT	—	55,906		(8,837		)	56,942		(8,709		)
Total		$	521,848	$	(71,488	)	$	549,622	$	(70,296	)