XML 30 R21.htm IDEA: XBRL DOCUMENT
v3.21.2

Derivative Instruments and Hedging Activities | 9 Months Ended
--- | ---
Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Partnership uses derivative instruments in accordance with its overall risk management policy. Foreign Exchange Risk From time to time, the Partnership economically hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. As at September 30, 2021, the Partnership was not committed to any foreign currency forward contracts. The Partnership entered into cross currency swaps concurrently with the issuance of its NOK-denominated senior unsecured bonds (see Note 8), and pursuant to these swaps, the Partnership receives the principal amount in NOK on maturity dates of the swaps in exchange for payments of a fixed U.S. Dollar amount. In addition, the cross currency swaps exchange a receipt of floating interest in NOK based on NIBOR plus a margin for a payment of U.S. Dollar fixed interest. The purpose of the cross currency swaps is to economically hedge the foreign currency exposure on the payment of interest and principal of the Partnership’s NOK-denominated bonds due in 2021, 2023 and 2025, and to economically hedge the interest rate exposure. The following table reflects information relating to the cross currency swaps as at September 30, 2021.
|  |  |  | Floating Rate Receivable |  |  |  |  |  |
Principal Amount NOK |  | Principal Amount $ |  | Reference Rate |  | Margin |  | Fixed Rate Payable |  | Fair Value / Carrying Amount of Asset (Liability) $ |  | Weighted- Average Remaining Term (Years)
1,200,000 |  | 146,500 |  | NIBOR |  | 6.00% |  | 7.72% |  | (9,932) |  | 0.1
850,000 |  | 102,000 |  | NIBOR |  | 4.60% |  | 7.89% |  | (10,601) |  | 1.9
1,000,000 |  | 112,000 |  | NIBOR |  | 5.15% |  | 5.74% |  | 3,891 |  | 3.9
|  |  |  |  |  |  |  |  |  | (16,642) |  |
Interest Rate Risk The Partnership enters into interest rate swaps which exchange a receipt of floating interest for a payment of fixed interest to reduce the Partnership’s exposure to interest rate variability on certain of its outstanding floating-rate debt. As at September 30, 2021, the Partnership was committed to the following interest rate swap agreements:
|  | Interest Rate Index |  | Principal Amount $ |  | Fair Value / Carrying Amount of Asset (Liability) $ |  | Weighted- Average Remaining Term (years) |  | Fixed Interest Rate (i)
LIBOR-Based Debt: |  |  |  |  |  |
U.S. Dollar-denominated interest rate swaps (ii) |  | LIBOR |  | 181,906 |  | 816 |  | 4.4 |  | 0.7%
U.S. Dollar-denominated interest rate swaps (ii)(iii) |  | LIBOR |  | 139,169 |  | (1,963) |  | 3.0 |  | 1.4%
U.S. Dollar-denominated interest rate swaps (ii) |  | LIBOR |  | 283,729 |  | (20,757) |  | 2.3 |  | 3.6%
U.S. Dollar-denominated interest rate swaps (ii) |  | LIBOR |  | 150,761 |  | (7,773) |  | 5.2 |  | 2.3%
EURIBOR-Based Debt: |  |  |  |  |  |
Euro-denominated interest rate swaps (iv) |  | EURIBOR |  | 58,613 |  | (3,901) |  | 1.9 |  | 3.9%
|  |  |  |  |  | (33,578) |  |  |  |
(i)Excludes the margins the Partnership pays on its floating-rate term loans, which, at September 30, 2021, ranged from 0.60% to 3.25%. (ii)Principal amount reduces quarterly. (iii)These interest rate swaps are subject to mandatory early termination in 2024 whereby the swaps will be settled based on their fair value at that time. (iv)Principal amount reduces monthly. As at September 30, 2021, the Partnership had multiple interest rate swaps and cross currency swaps with the same counterparty that are subject to the same master agreement. Each of these master agreements provides for the net settlement of all swaps subject to that master agreement through a single payment in the event of default or termination of any one swap. The fair value of these derivative instruments is presented on a gross basis in the Partnership’s consolidated balance sheets. As at September 30, 2021, these interest rate swaps and cross currency swaps had an aggregate fair value asset of $4.7 million (December 31, 2020 – $4.5 million) and an aggregate fair value liability of $54.9 million (December 31, 2020 – $73.7 million). As at September 30, 2021, the Partnership had $nil (December 31, 2020 – $3.8 million) on deposit as security for swap liabilities under certain master agreements. The deposit is presented in restricted cash – current and restricted cash – long-term on the Partnership's consolidated balance sheets. Credit Risk 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 or better 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. The following table presents the classification and fair value amounts of derivative instruments, segregated by type of contract, on the Partnership’s consolidated balance sheets.
|  |  |  |  | Current portion of derivative assets $ |  | Derivative assets $ |  | Accrued liabilities $ |  | Current portion of derivative liabilities $ |  | Derivative liabilities $
As at September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  |  |  | — |  | — |  | (62) |  | (3,036) |  | (4,673)
Derivatives not designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  |  |  | — |  | 1,823 |  | (2,203) |  | (12,079) |  | (13,348)
Cross currency swap agreements |  |  |  |  | 465 |  | 3,430 |  | (740) |  | (11,908) |  | (7,889)
|  |  |  |  | 465 |  | 5,253 |  | (3,005) |  | (27,023) |  | (25,910)
As at December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  |  |  | — |  | — |  | (70) |  | (3,162) |  | (9,631)
Derivatives not designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  |  |  | — |  | — |  | (4,823) |  | (42,329) |  | (15,453)
Cross currency swap agreements |  |  |  |  | — |  | 4,505 |  | (701) |  | (11,434) |  | (7,887)
|  |  |  |  | — |  | 4,505 |  | (5,594) |  | (56,925) |  | (32,971)
Realized and unrealized gains (losses) relating to non-designated interest rate swap agreements and foreign currency forward contracts are recognized in earnings and reported in realized and unrealized gain (loss) on non-designated derivative instruments in the Partnership’s consolidated statements of income. The effect of the gain (loss) on these derivatives on the Partnership’s consolidated statements of income is as follows:
|  | Three Months Ended September 30,
|  | 2021 |  | 2020
|  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total |  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total
|  | $ |  | $ |  | $ |  | $ |  | $ |  | $
Interest rate swap agreements |  | (3,919) |  | 4,020 |  | 101 |  | (4,947) |  | 3,620 |  | (1,327)
|  | Nine Months Ended September 30,
|  | 2021 |  | 2020
|  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total |  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total
|  | $ |  | $ |  | $ |  | $ |  | $ |  | $
Interest rate swap agreements |  | (12,317) |  | 34,178 |  | 21,861 |  | (11,520) |  | (18,755) |  | (30,275)
Interest rate swap agreement termination |  | (18,012) |  | — |  | (18,012) |  | — |  | — |  | —
Foreign currency forward contracts |  | — |  | — |  | — |  | (241) |  | 202 |  | (39)
|  | (30,329) |  | 34,178 |  | 3,849 |  | (11,761) |  | (18,553) |  | (30,314)
Realized and unrealized gains (losses) relating to cross currency swap agreements are recognized in earnings and reported in foreign currency exchange gain (loss) in the Partnership’s consolidated statements of income. The effect of the gain (loss) on these derivatives on the Partnership's consolidated statements of income is as follows:
|  | Three Months Ended September 30,
|  | 2021 |  | 2020
|  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total |  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total
|  | $ |  | $ |  | $ |  | $ |  | $ |  | $
Cross currency swap agreements |  | (1,595) |  | (3,952) |  | (5,547) |  | (1,669) |  | 1,490 |  | (179)
|  | Nine Months Ended September 30,
|  | 2021 |  | 2020
|  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total |  | Realized gains (losses) |  | Unrealized gains (losses) |  | Total
|  | $ |  | $ |  | $ |  | $ |  | $ |  | $
Cross currency swap agreements |  | (4,233) |  | (1,085) |  | (5,318) |  | (4,916) |  | (2,169) |  | (7,085)
Cross currency swap agreements maturity |  | — |  | — |  | — |  | (33,844) |  | — |  | (33,844)
|  | (4,233) |  | (1,085) |  | (5,318) |  | (38,760) |  | (2,169) |  | (40,929)
For the periods indicated, the following table presents the gains or losses on interest rate swap agreements designated and qualifying as cash flow hedges and their impact on other comprehensive income (loss) (or OCI). The following table excludes any interest rate swap agreements designated and qualifying as cash flow hedges in the Partnership’s equity-accounted joint ventures.
Three Months Ended September 30, 2021 |  |  | Three Months Ended September 30, 2020
Amount of Gain Recognized in OCI $ |  | Amount of Loss Reclassified from Accumulated OCI to Interest Expense $ |  |  | Amount of Gain Recognized in OCI $ |  | Amount of Loss Reclassified from Accumulated OCI to Interest Expense $
1,040 |  | (840) |  |  | 616 |  | (835)
Nine Months Ended September 30, 2021 |  |  | Nine Months Ended September 30, 2020
Amount of Gain Recognized in OCI $ |  | Amount of Loss Reclassified from Accumulated OCI to Interest Expense $ |  |  | Amount of Loss Recognized in OCI $ |  | Amount of Loss Reclassified from Accumulated OCI to Interest Expense $
5,080 |  | (2,480) |  |  | (9,610) |  | (1,469)

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration