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Derivative Instruments | 12 Months Ended
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Dec. 31, 2011
Derivative Instruments [Abstract] |
Derivative Instruments |
13. | Derivative Instruments
The Partnership uses derivative instruments in accordance with its overall risk management policy. The Partnership has not designated these derivative instruments as hedges for accounting purposes. The Partnership enters into interest rate swaps which either exchange a receipt of floating interest for a payment of fixed interest or a payment of floating interest for a receipt of fixed interest to reduce the Partnership’s exposure to interest rate variability on its outstanding floating-rate debt and floating-rate restricted cash deposits. As at December 31, 2011, the Partnership was committed to the following interest rate swap agreements:
|  | Interest Rate Index |  | Principal Amount $ |  |  | Fair Value / Carrying Amount of Assets (Liability) $ |  |  | Weighted- Average Remaining Term (years) |  |  | Fixed Interest Rate (%)(1) |
LIBOR-Based Debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar-denominated interest rate swaps (2) |  | LIBOR |  |  | 423,748 |  |  |  | (119,895 | ) |  |  | 25.1 |  |  |  | 4.9 |
U.S. Dollar-denominated interest rate swaps (2) |  | LIBOR |  |  | 209,812 |  |  |  | (60,441 | ) |  |  | 7.2 |  |  |  | 6.2 |
U.S. Dollar-denominated interest rate swaps |  | LIBOR |  |  | 90,000 |  |  |  | (18,183 | ) |  |  | 6.7 |  |  |  | 4.9 |
U.S. Dollar-denominated interest rate swaps |  | LIBOR |  |  | 100,000 |  |  |  | (21,755 | ) |  |  | 5.0 |  |  |  | 5.3 |
U.S. Dollar-denominated interest rate swaps (3) |  | LIBOR |  |  | 218,750 |  |  |  | (57,996 | ) |  |  | 17.0 |  |  |  | 5.2 |
LIBOR-Based Restricted Cash Deposit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar-denominated interest rate swaps (2) |  | LIBOR |  |  | 470,199 |  |  |  | 159,603 |  |  |  | 25.1 |  |  |  | 4.8 |
EURIBOR-Based Debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euro-denominated interest rate swaps (4) |  | EURIBOR |  |  | 348,905 |  |  |  | (25,796 | ) |  |  | 12.5 |  |  |  | 3.1 |
|  |  |  |  |  |  |  |  | (144,463 | ) |  |  |  |  |  |  |  |
(1) | Excludes the margins the Partnership pays on its drawn floating-rate debt, which, at December 31, 2011, ranged from 0.3% to 2.75%.
(2) | Principal amount reduces quarterly.
(3) | Principal amount reduces semi-annually.
(4) | Principal amount reduces monthly to 70.1 million Euros ($90.9 million) by the maturity dates of the swap agreements.
The Partnership is exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In order to minimize counterparty risk, the Partnership only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 by Moody’s at the time of the transactions. In addition, to the extent practical, interest rate swaps are entered into with different counterparties to reduce concentration risk. In order to reduce the variability of its revenue, the Partnership has entered into an agreement with Teekay Corporation under which Teekay Corporation pays the Partnership any amounts payable to the charterer of the Toledo Spirit as a result of spot rates being below the fixed rate, and the Partnership pays Teekay Corporation any amounts payable to the Partnership by the charterer of the Toledo Spirit as a result of spot rates being in excess of the fixed rate. The fair value of the derivative at December 31, 2011 was a liability of $0.6 million (December 31, 2010 – a liability of $10.0 million). The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the Partnership’s balance sheets.
|  | Accounts receivable |  |  | Current portion of derivative assets |  |  | Derivative assets |  |  | Accrued liabilities |  |  | Current portion of derivative liabilities |  |  | Derivative liabilities |
As at December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  | 4,344 |  |  |  | 15,608 |  |  |  | 139,651 |  |  |  | (11,448 | ) |  |  | (43,973 | ) |  |  | (248,645 | )
Toledo Spirit time-charter derivative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (600 | )
|  |  | 4,344 |  |  |  | 15,608 |  |  |  | 139,651 |  |  |  | (11,448 | ) |  |  | (43,973 | ) |  |  | (249,245 | )
As at December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  | 4,587 |  |  |  | 16,758 |  |  |  | 45,525 |  |  |  | (11,498 | ) |  |  | (50,603 | ) |  |  | (139,362 | )
Toledo Spirit time-charter derivative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (10,000 | )
|  |  | 4,587 |  |  |  | 16,758 |  |  |  | 45,525 |  |  |  | (11,498 | ) |  |  | (50,603 | ) |  |  | (149,362 | )
The following table presents the gains (losses) for those derivative instruments not designated or qualifying as hedging instruments. All gains (losses) are presented as realized and unrealized loss on derivative instruments in the Partnership’s consolidated statements of income.
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | Realized gains (losses) |  |  | Unrealized gains (losses) |  |  | Total |  |  | Realized gains (losses) |  |  | Unrealized gains (losses) |  |  | Total |  |  | Realized gains (losses) |  |  | Unrealized gains (losses) |  |  | Total |
Interest rate swap agreements |  |  | (62,660 | ) |  |  | (9,677 | ) |  |  | (72,337 | ) |  |  | (42,495 | ) |  |  | (34,906 | ) |  |  | (77,401 | ) |  |  | (36,222 | ) |  |  | (11,143 | ) |  |  | (47,365 | )
Toledo Spirit time-charter derivative |  |  | (93 | ) |  |  | 9,400 |  |  |  | 9,307 |  |  |  | (1,919 | ) |  |  | 600 |  |  |  | (1,319 | ) |  |  | (940 | ) |  |  | 7,355 |  |  |  | 6,415 |
|  |  | (62,753 | ) |  |  | (277 | ) |  |  | (63,030 | ) |  |  | (44,414 | ) |  |  | (34,306 | ) |  |  | (78,720 | ) |  |  | (37,162 | ) |  |  | (3,788 | ) |  |  | (40,950 | )

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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