Derivatives

The Company's use of derivative financial instruments is primarily limited to the utilization of interest rate swaps, interest rate caps and foreign exchange contracts. The principal objective of such financial instruments is to minimize the risks and/or costs associated with the Company's operating and financial structure and to manage its exposure to interest rates and foreign exchange rates. Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to interest rate movements, foreign exchange rate movements, and other identified risks, but may not meet the strict hedge accounting requirements.

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheets ($ in thousands):



	Derivative Assets as of						Derivative Liabilities as of
	March 31, 2017			December 31, 2016			March 31, 2017			December 31, 2016
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives Designated in Hedging Relationships
Foreign exchange contracts	N/A	$	—	N/A	$	—	Other Liabilities	$	307	Other Liabilities	$	8
Interest rate swaps	Other assets	58		N/A	—		N/A	—		Other Liabilities	39
Total		$	58		$	—		$	307		$	47

Derivatives not Designated in Hedging Relationships
Foreign exchange contracts	N/A	$	—	Other Assets	$	702	Other Liabilities	$	264	N/A	$	—
Interest rate cap	Other Assets	71		Other Assets	25		N/A	—		N/A	—
Total		$	71		$	727		$	264		$	—

The tables below present the effect of the Company's derivative financial instruments in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) ($ in thousands):



Derivatives Designated in Hedging Relationships	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Ineffective Portion)
For the Three Months Ended March 31, 2017
Interest rate swaps	Interest Expense	467		(30	)	N/A
Interest rate cap	Earnings from equity method investments	(5	)	(5	)	N/A
Interest rate swap	Earnings from equity method investments	78		(87	)	N/A
Foreign exchange contracts	Earnings from equity method investments	(299	)	—		N/A
For the Three Months Ended March 31, 2016
Interest rate cap	Interest Expense	—		(185	)	N/A
Interest rate cap	Earnings from equity method investments	(1	)	—		N/A
Interest rate swaps	Interest Expense	(502	)	25		N/A
Interest rate swap	Earnings from equity method investments	(459	)	(97	)	N/A
Foreign exchange contracts	Earnings from equity method investments	(87	)	—		N/A



		Amount of Gain (Loss) Recognized in Income
	Location of Gain (Loss) Recognized in Income	For the Three Months Ended March 31,
Derivatives not Designated in Hedging Relationships	Location of Gain (Loss) Recognized in Income	2017			2016
Interest rate cap	Other Expense	$	47		$	(803	)
Foreign exchange contracts	Other Expense	(125		)	(182		)

Foreign Exchange Contracts—The Company is exposed to fluctuations in foreign exchange rates on investments it holds in foreign entities. The Company uses foreign exchange contracts to hedge its exposure to changes in foreign exchange rates on its foreign investments. Foreign exchange contracts involve fixing the U.S. dollar ("USD") to the respective foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. The foreign exchange contracts are typically cash settled in USD for their fair value at or close to their settlement date.

For derivatives designated as net investment hedges, the effective portion of changes in the fair value of the derivatives are reported in Accumulated Other Comprehensive Income as part of the cumulative translation adjustment. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts are reclassified out of Accumulated Other Comprehensive Income into earnings when the hedged foreign entity is either sold or substantially liquidated. As of March 31, 2017, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations that were designated ($ and Rs in thousands):



Derivative Type	Notional Amount		Notional (USD Equivalent)		Maturity
Sells Indian rupee ("INR")/Buys USD Forward	₨	350,000	$	5,089	April 2017

For derivatives not designated as net investment hedges, the changes in the fair value of the derivatives are reported in the Company's consolidated statements of operations within "Other Expense." As of March 31, 2017, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations that were not designated ($, €, and £ in thousands):



Derivative Type	Notional Amount		Notional (USD Equivalent)		Maturity
Sells euro ("EUR")/Buys USD Forward	€	6,300	$	6,549	April 2017
Sells pound sterling ("GBP")/Buys USD Forward	£	3,400	$	4,168	April 2017

The Company marks its foreign investments each quarter based on current exchange rates and records the gain or loss through "Other expense" in its consolidated statements of operations for loan investments or "Accumulated other comprehensive income (loss)," on its consolidated balance sheets for net investments in foreign subsidiaries. The Company recorded net gains related to foreign investments of $0.1 million during the three months ended March 31, 2017 and 2016 in its consolidated statements of operations.

Interest Rate Hedges—For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivatives are reported in Accumulated Other Comprehensive Income (Loss). The ineffective portion of the change in fair value of the derivatives is recognized directly in the Company's consolidated statements of operations. As of March 31, 2017, the Company had the following outstanding interest rate swap that was used to hedge its variable rate debt that was designated as a cash flow hedge ($ in thousands):

Derivative Type

Notional

Amount

Variable Rate

Fixed Rate

Effective Date

Maturity

Interest rate swap

26,254

LIBOR + 2.00%

3.47%

October 2012

November 2019

During the three months ended March 31, 2017, the Company entered into and settled a rate lock swap in connection with the 2017 Secured Financing. As a result of the settlement, the Company recorded a $0.4 million unrealized gain in “Accumulated other comprehensive income” on the Company’s consolidated balance sheets. The unrealized gain will be amortized from accumulated other comprehensive as a reduction to interest expense over the term of the 2017 Secured Financing.

For derivatives not designated as cash flow hedges, the changes in the fair value of the derivatives are reported in the Company's consolidated statements of operations within "Other Expense." As of March 31, 2017, the Company had the following outstanding interest rate cap that was used to hedge its variable rate debt that was not designated as a cash flow hedge ($ in thousands):

Derivative Type

Notional

Amount

Variable Rate

Fixed Rate

Effective Date

Maturity

Interest rate cap

500,000

LIBOR

1.00%

July 2014

July 2017

Over the next 12 months, the Company expects that $0.1 million related to terminated cash flow hedges will be reclassified

from "Accumulated other comprehensive income (loss)" into interest expense and $0.3 million related to cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" into earnings.

Credit Risk-Related Contingent Features—The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

The Company reports derivative instruments on a gross basis in the consolidated financial statements. In connection with its foreign currency derivatives which were in a liability position as of March 31, 2017 and December 31, 2016, the Company has posted collateral of $1.8 million and $0.4 million, respectively, and is included in "Deferred expenses and other assets, net" on the Company's consolidated balance sheets. The Company's net exposure under these contracts was zero as of March 31, 2017.