v2.4.0.6

DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended
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Jun. 30, 2012
DERIVATIVE FINANCIAL INSTRUMENTS |
6. | DERIVATIVE FINANCIAL INSTRUMENTS
Blackstone enters into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone and the Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain other risk management objectives and for general investment purposes. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments. Fair Value Hedges In June 2012, Blackstone removed the fair value designation of its interest rate swaps that were used to hedge a portion of the interest rate risk on the Partnership’s fixed rate borrowings. The impact to the Condensed Consolidated Statements of Operations for the period up through the date of de-designation is reflected within “Fair Value Hedges” in the table below. Changes in the fair value of the interest rate swaps subsequent to the date of de-designation are reflected within Freestanding Derivatives within Interest Rate Contracts in the table below. Freestanding Derivatives Freestanding derivatives are instruments that Blackstone and certain of the consolidated Blackstone Funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include foreign exchange contracts, equity swaps, options, futures and other derivative contracts. The table below summarizes the aggregate notional amount and fair value of the derivative financial instruments. The notional amount represents the absolute value amount of all outstanding derivative contracts.
|  | June 30, 2012 |  |  | December 31, 2011 |
|  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
|  | Notional |  |  | Fair Value |  |  | Notional |  |  | Fair Value |  |  | Notional |  |  | Fair Value |  |  | Notional |  |  | Fair Value |
Fair Value Hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Swaps |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 450,000 |  |  | $ | 67,668 |  |  | $ | — |  |  | $ | — |
Freestanding Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Blackstone — Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Contracts |  |  | 905,450 |  |  |  | 52,009 |  |  |  | 770,950 |  |  |  | 2,565 |  |  |  | 221,350 |  |  |  | 768 |  |  |  | 502,200 |  |  |  | 1,291 |
Foreign Currency Contracts |  |  | 4,167 |  |  |  | 173 |  |  |  | 7,275 |  |  |  | 125 |  |  |  | 22,698 |  |  |  | 1,016 |  |  |  | 7,293 |  |  |  | 103 |
Credit Default Swaps |  |  | — |  |  |  | — |  |  |  | 600 |  |  |  | 110 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Investments of Consolidated Blackstone Funds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Contracts |  |  | 310,558 |  |  |  | 38,247 |  |  |  | 362,534 |  |  |  | 31,133 |  |  |  | 177,453 |  |  |  | 22,016 |  |  |  | 159,409 |  |  |  | 7,687 |
Interest Rate Contracts |  |  | 176,495 |  |  |  | 8,203 |  |  |  | 176,400 |  |  |  | 4,103 |  |  |  | 95,482 |  |  |  | 7,270 |  |  |  | 191,400 |  |  |  | 10,867 |
Freestanding Derivatives |  |  | 1,396,670 |  |  |  | 98,632 |  |  |  | 1,317,759 |  |  |  | 38,036 |  |  |  | 516,983 |  |  |  | 31,070 |  |  |  | 860,302 |  |  |  | 19,948 |
Total |  | $ | 1,396,670 |  |  | $ | 98,632 |  |  | $ | 1,317,759 |  |  | $ | 38,036 |  |  | $ | 966,983 |  |  | $ | 98,738 |  |  | $ | 860,302 |  |  | $ | 19,948 |
The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
Fair Value Hedges — Interest Rate Swaps |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedge Ineffectiveness |  | $ | 1,342 |  |  | $ | 1,164 |  |  | $ | 548 |  |  | $ | 597 |
Excluded from Assessment of Effectiveness |  | $ | 4,950 |  |  | $ | 7,049 |  |  | $ | (938 | ) |  | $ | (374 | )
Realized Gain |  |  | 22,941 |  |  |  | — |  |  |  | 22,941 |  |  |  | — |
Freestanding Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Realized Gains (Losses) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Contracts |  | $ | (2,687 | ) |  | $ | (1,538 | ) |  | $ | (2,551 | ) |  | $ | (536 | )
Foreign Currency Contracts |  |  | 1,070 |  |  |  | (591 | ) |  |  | 2,795 |  |  |  | (1,291 | )
Other |  |  | 7 |  |  |  | 56 |  |  |  | 7 |  |  |  | (22 | )
Total |  | $ | (1,610 | ) |  | $ | (2,073 | ) |  | $ | 251 |  |  | $ | (1,849 | )
Net Change in Unrealized Gain (Loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Contracts |  | $ | 1,022 |  |  | $ | 3,087 |  |  | $ | 7,619 |  |  | $ | 1,907 |
Foreign Currency Contracts |  |  | (14,386 | ) |  |  | 4,536 |  |  |  | (665 | ) |  |  | 4,266 |
Credit Default Swaps |  |  | (45 | ) |  |  | — |  |  |  | (41 | ) |  |  | — |
Other |  |  | — |  |  |  | (21 | ) |  |  | — |  |  |  | (19 | )
Total |  | $ | (13,409 | ) |  | $ | 7,602 |  |  | $ | 6,913 |  |  | $ | 6,154 |
Since the inception of the above mentioned hedge designation, Blackstone recognized a $64.2 million increase in the fair value of the hedged borrowing. This basis adjustment will be accreted using the effective interest method through August 15, 2019, the remaining term of the hedged borrowing. As of June 30, 2012 and December 31, 2011, the Partnership had not designated any derivatives as cash flow hedges or hedges of net investments in foreign operations.

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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 Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 12: 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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