Derivative Instruments

9 Months Ended

Mar. 31, 2014

Derivative Instruments

Derivative Instruments

19. Derivative Instruments

The Company uses interest rate swaps for the management of interest rate risk exposure. The interest rate swaps effectively convert the Company’s debt from a floating to a fixed rate. To hedge its exposure to changes in interest rates the Company is a party to five floating-to-fixed interest rate swaps with RBS. The Company became a party to these transactions as part of the business combination with Dorian Holdings LLC whereby RBS novated the interest rate swap agreements such that the exact terms of the original agreement with the Predecessor were transferred to the corresponding entities that retain the interests in each of the vessels which are the main collateral. The principal terms of the interest rate swaps are as follows:

Subsidiary	Termination Date	Fixed interest rate		Nominal value March 31, 2014
CMNL(1)	Nov 2018	5.395	%	20,456,000
CMNL(1)	Nov 2018	4.936	%	12,785,000
CJNP(2)	March 2019	4.772	%	33,067,125
CJNP(2)	March 2019	2.960	%	11,132,875
CNML(3)	July 2020	4.350	%	49,880,000
				127,321,000

(1) reduces semi-annually by $1,278,500 with a final settlement of $21,734,500 due in November 2018.

(2) reduces semi-annually by $1,700,000 with a final settlement of $28,900,000 due in March 2019.

(3) RBS exercised its right to extend the interest rate swap until July 2020 and based on the extension reduces semi-annually by $1,720,000 with a final settlement of $27,520,000 due in July 2020.

Tabular disclosure of financial derivatives is as follows:

		March 31, 2014
Derivatives not designated as hedging instruments	Balance sheet Location	Asset derivatives	Liability derivatives
Interest rate swap agreements	Long-term liabilities—Derivatives instruments	—	14,062,416

The effect of derivative instruments on the consolidated statement of operations for the period July 1, 2013 to March 31, 2014 is as follows:

Derivatives not designated as hedging instruments	Location of gain/(loss) recognized	July 1, 2013 to March 31, 2014
Interest Rate Swap—Change in fair value	Loss on derivatives—net	2,623,456
Interest Rate Swap—Realized loss	Loss on derivatives—net	(3,727,457	)
Loss on derivatives—net		(1,104,001	)