18. Financial Instruments and Fair Value Disclosures

Our principal financial assets consist of cash and cash equivalents, amounts due from related parties, trade accounts receivable and derivative instruments. Our principal financial liabilities consist of long term debt, accounts payable, amounts due to related parties and accrued liabilities.

(a)

Concentration of credit risk: Financial instruments, which may subject us to significant concentrations of credit risk, consist principally of amounts due from our charterers, including the receivables from Helios Pool, cash and cash equivalents, and restricted cash. We limit our credit risk with amounts due from our charterers, including those through the Helios Pool, by performing ongoing credit evaluations of our charterers’ financial condition and generally do not require collateral from our charterers. We limit our credit risk with our cash and cash equivalents and restricted cash by placing it with highly-rated financial institutions.

(b)

Interest rate risk: Our long-term bank loans are based on LIBOR and hence we are exposed to movements thereto. We entered into interest rate swap agreements in order to hedge a majority of our variable interest rate exposure related to the 2015 Debt Facility.

The principal terms of our interest rate swaps are as follows:



	Transaction	Termination	Fixed		Nominal value	Nominal value
Interest rate swap	Date	Date	interest rate		March 31, 2018	March 31, 2017
2015 Debt Facility - Citibank(1)	September 2015	March 2022	1.933	%	200,000,000	200,000,000
2015 Debt Facility - ING(2)	September 2015	March 2022	2.002	%	50,000,000	50,000,000
2015 Debt Facility - CBA(3)	October 2015	March 2022	1.428	%	60,025,000	71,250,000
2015 Debt Facility - Citibank(4)	October 2015	March 2022	1.380	%	90,037,500	106,875,000
2015 Debt Facility - Citibank(5)	June 2016	March 2022	1.213	%	59,276,849	67,124,650
2015 Debt Facility - Citibank(6)	June 2016	March 2022	1.161	%	24,358,290	27,583,142
					483,697,639	522,832,792

⁽¹⁾

Non-amortizing with a final settlement of $200 million in March 2022.

⁽²⁾

Non-amortizing with a final settlement of $50 million in March 2022.

⁽³⁾

Reduces quarterly by $2.8 million with a final settlement of $17.9 million due in March 2022.

⁽⁴⁾

Reduces quarterly by $4.2 million with a final settlement of $26.9 million due in March 2022.

⁽⁵⁾

Reduces quarterly by $2.0 million with a final settlement of $29.9 million due in March 2022.

⁽⁶⁾

Reduces quarterly by $0.8 million with a final settlement of $12.3 million due in March 2022.

(c)

Fair value measurements: Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on market‑based LIBOR swap yield rates. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and, therefore, are considered Level 2 items in accordance with the fair value hierarchy. The fair value of the interest rate swap agreements approximates the amount that we would have to pay for the early termination of the agreements. The following table summarizes the location on the balance sheet of the financial assets and liabilities that are carried at fair value on a recurring basis, which comprise our financial derivatives all of which are considered Level 2 items in accordance with the fair value hierarchy:


		March 31, 2018				March 31, 2017
	Other non-current assets		Long-term liabilities		Other non-current assets		Long-term liabilities
Derivatives not designated as hedging instruments	Derivative instruments		Derivative instruments		Derivative instruments		Derivative instruments
Interest rate swap agreements	$	14,264,899	$	—	$	5,843,368	$	—

The effect of derivative instruments within the consolidated statement of operations for the periods presented is as follows:



Derivatives not designated as hedging instruments	Location of gain/(loss) recognized	March 31, 2018		March 31, 2017		March 31, 2016
Interest Rate Swap—Change in fair value	Unrealized gain/(loss) on derivatives	$	8,421,531	$	27,491,333	$	(8,917,503)
Interest Rate Swap—Realized loss	Realized loss on derivatives		(1,328,886)		(13,797,478)		(6,858,126)
Gain/(loss) on derivatives, net		$	7,092,645	$	13,693,855	$	(15,775,629)

As of March 31, 2018 and March 31, 2017, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the accompanying consolidated balance sheets. We did not have any assets or liabilities measured at fair value on a non-recurring basis during the years ended March 31, 2018, 2017 and 2016.

(d)

Book values and fair values of financial instruments. In addition to the derivatives that we are required to record at fair value on our balance sheet (see (c) above), we have other financial instruments that are carried at historical cost. These financial instruments include trade accounts receivable, amounts due from related parties, cash and cash equivalents, accounts payable, amounts due to related parties and accrued liabilities for which the historical carrying value approximates the fair value due to the short-term nature of these financial instruments. We have long-term bank debt for which we believe the historical carrying value approximates their fair value as the loans bear interest at variable interest rates, being LIBOR, which is observable at commonly quoted intervals for the full terms of the loans, and hence are considered as Level 2 items in accordance with the fair value hierarchy. We also have long-term debt related to the refinancing of the Corsair, Concorde, and Corvette that incur interest at a fixed-rate with the initial principal amount amortized to the purchase obligation price of each vessel. The Corsair Japanese Financing, Concorde Japanese Financing, and Corvette Japanese Financing are considered Level 2 items in accordance with the fair value hierarchy and we believe the historical carrying value approximates fair value as of March 31, 2018 as the terms of the transactions are similar, including identical borrowing rates, and represents the market borrowing rate for such transactions as of March 31, 2018. Cash and cash equivalents and restricted cash are considered Level 1 items.