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Derivative Instruments
 12 Months Ended
Dec. 31, 2013
Derivative Instruments (Abstract)  
Derivative Instruments
8. Derivative Instruments
The Partnership had entered into fourteen interest rate swap agreements in order to mitigate the exposure from interest rate fluctuations. Nine of the Partnership's interest rate swap agreements under its $370,000 credit facility expired as of June 29, 2012 and one was terminated upon the disposal of the M/T Attikos and the M/T Aristofanis. During the year ended December 31, 2012, the Partnership terminated one interest rate swap agreement in full and one partially under its $350,000 credit facility. During the year ended December 31, 2013, the Partnership's three remaining swaps with a notional amount of $59,084 expired.
All derivatives are carried at fair value on the consolidated balance sheet at each period end. Balances as of December 31, 2013 and December 31, 2012 are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
December 31, 2013
 
 
December 31, 2012
 
 
  
Interest Rate Swaps
 
 
Total
 
 
Interest Rate Swaps
 
 
Total
 
Short-term liabilities
  
$
-
 
 
$
-
 
 
$
467
 
 
$
467
 
Long-term liabilities
  
$
-
  
 
$
-
  
 
$
-
 
 
$
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
  
$
-
 
 
$
-
 
 
$
467
 
 
$
467
 
Tabular disclosure of financial instruments is as follows:
 
 
 
 
 
 
 
 
 
 
Derivative Liabilities
  
 
 
  
 
 
Balance sheet
location
  
As of December 31,  2013
Fair value
 
  
As of December 31,  2012
Fair value
 
Derivatives designated
as hedging
instruments -
effective hedges
  
 
 
 
  
 
 
 
Derivative instruments
long-term liabilities.
  
$
-
  
  
$
-
  
Derivative instruments
short-term liabilities.
  
$
-
  
  
 $
100
 
 
  
 
 
 
  
 
 
 
Total derivatives not
designated as
hedging instruments
- ineffective hedges
  
 
 
 
  
 
 
 
Derivative instruments
short-term liabilities.
  
$
-
  
  
 $
367
 
 
  
 
 
 
  
 
 
 
Total Derivative
Liabilities
  
$
-
  
  
$
467
  
 
The table below shows the effective portion of the hedging relationship of the Partnership's derivatives designated as hedging instruments recognized in Other Comprehensive Income (“OCI”), the realized losses from net interest rate settlements transferred from OCI into the Partnership's consolidated statements of comprehensive income / (loss) and the amounts recognized in the consolidated statements of comprehensive income / (loss) arising from the hedging relationships not qualifying for hedge accounting for the years ended December 31, 2013, 2012 and 2011, respectively:
 
Derivatives
designated in
cash flow
hedging
relationships
recognized
in OCI
(Effective
Portion)
Change in Fair Value of 
Hedging instrument recognized in OCI
(Effective Portion)
Location of
Gain/(loss)
Reclassified into
consolidated
statements of
comprehensive
/income
(Effective Portion)
Amount of Loss Reclassified from OCI into consolidated statements of comprehensive income (Effective Portion)
Amount of Gain recorded
in OCI (Effective Portion)
Location of
Gain/(loss)
Recognized in
the consolidated
statements of
comprehensive
/income
(ineffective
portion)
Amount of Gain/(Loss)
recognized the
consolidated statements
of comprehensive /
income
 
2013
2012
2011
 
2013
2012
2011
2013
2012
2011
 
2013
2012
2011
Interest
rate swaps
(4
 )(1,903)
(4,234
 )Interest expense and finance cost
(466
 )(12,665)
(21,752
 )462
10,762
17,518
 
4
1,448
2,310
The Partnership follows the accounting guidance for derivative instruments that establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;
Level 3: Inputs are unobservable inputs for the asset or liability.
 
The Partnership's interest rate swap agreements, entered into pursuant to its loan agreements, are based on LIBOR swap rates. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and therefore are considered Level 2 items. The fair values of the interest rate swap determined through Level 2 of the fair value hierarchy are derived principally from or corroborated by observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparable, interest rates, yield curves and other items that allow value to be determined. Fair value of the interest rate swaps is determined using a discounted cash flow method based on market-base LIBOR swap yield curves.
The fair value of the Partnership's interest rate swaps is the estimated value of the swap agreements at the reporting date, taking into account current interest rates and the forward yield curve and the creditworthiness of the Partnership and its counterparties. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives
  
Total
 
    
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
    
Significant
Other
Observable
Inputs
(Level 2)
 
    
Significant
Unobservable
Inputs
(Level 3)
 
December 31, 2012
  
$
467
 
    
 
—  
  
    
$
467
 
    
 
—  
  
 
  
 
 
 
    
 
 
 
    
 
 
 
    
 
 
 
December 31, 2013
  
$
—
 
    
 
—  
  
    
$
—
 
    
 
—  
  
 
  
 
 
 
    
 
 
 
    
 
 
 
    
 
 
 
 
Since March 31, 2012 and May 23, 2012 two out of three interest rate swaps did not qualify as cash flow hedges and the changes in their fair value was recognized in the consolidated statements of comprehensive income / (loss) whilst the third interest rate swap agreement qualified as a cash flow hedge and the changes in its fair value is recognized in accumulated other comprehensive income / (loss). As a result the amount of $1,400 and $50, which was part of the Partnership's accumulated other comprehensive income / (loss) (“OCL”) as of March 31, 2012 and May 23, 2012 respectively, were attributable to the two ineffective hedges and were being amortized over their respective remaining term up to their maturity date March 27, 2013 and March 28, 2013, respectively in the Partnership's consolidated statements of comprehensive income by using the effective interest rate method.
 
The net result of the accumulated OCL amortization and the change of the fair value of certain interest rate swap agreements of $4, $1,448 and $2,310 is presented under other non operating income (expense) net as a “Gain on interest rate swap agreement” in the Partnership's consolidated statements of comprehensive income/(loss)for the years ended December 31, 2013, 2012 and 2011, respectively.