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INTEREST RATE SWAP AGREEMENTS | 12 Months Ended
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Dec. 31, 2011
INTEREST RATE SWAP AGREEMENTS |
INTEREST RATE SWAP AGREEMENTS |
11 - INTEREST RATE SWAP AGREEMENTS The Company has eight and ten interest rate swap agreements with DnB NOR Bank ASA to manage interest costs and the risk associated with changing interest rates related to the Company’s 2007 Credit Facility, which were outstanding at December 31, 2011 and 2010, respectively. The total notional principal amount of the swaps at December 31, 2011 and 2010 is $606,233 and $756,233, respectively, and the swaps have specified rates and durations. The following table summarizes the interest rate swaps designated as cash flow hedges that are in place as of December 31, 2011 and 2010:
Interest Rate Swap Detail |  | December 31, 2011 |  | December 31, 2010 |
Trade Date |  | Fixed Rate |  | Start Date of Swap |  | End date of Swap |  | Notional Amount Outstanding |  | Notional Amount Outstanding |
9/6/05 |  | 4.485 | % | 9/14/05 |  | 7/29/15 |  | $ | 106,233 |  | $ | 106,233 |
3/29/06 |  | 5.25 | % | 1/2/07 |  | 1/1/14 |  | 50,000 |  | 50,000 |
3/24/06 |  | 5.075 | % | 1/2/08 |  | 1/2/13 |  | 50,000 |  | 50,000 |
7/31/07 |  | 5.115 | % | 11/30/07 |  | 11/30/11 |  | — |  | 100,000 |
8/9/07 |  | 5.07 | % | 1/2/08 |  | 1/3/12 |  | 100,000 |  | 100,000 |
8/16/07 |  | 4.985 | % | 3/31/08 |  | 3/31/12 |  | 50,000 |  | 50,000 |
8/16/07 |  | 5.04 | % | 3/31/08 |  | 3/31/12 |  | 100,000 |  | 100,000 |
1/22/08 |  | 2.89 | % | 2/1/08 |  | 2/1/11 |  | — |  | 50,000 |
1/9/09 |  | 2.05 | % | 1/22/09 |  | 1/22/14 |  | 100,000 |  | 100,000 |
2/11/09 |  | 2.45 | % | 2/23/09 |  | 2/23/14 |  | 50,000 |  | 50,000 |
|  |  |  |  |  |  |  | $ | 606,233 |  | $ | 756,233 |
The differentials to be paid or received for these swap agreements are recognized as an adjustment to interest expense as incurred. The Company is currently utilizing cash flow hedge accounting for these swaps whereby the effective portion of the change in value of the swaps is reflected as a component of AOCI. The ineffective portion is recognized as other expense, which is a component of other (expense) income. The interest expense pertaining to the interest rate swaps for the years ended December 31, 2011, 2010 and 2009 was $28,854, $30,204 and $28,585, respectively. The swap agreements, with effective dates prior to December 31, 2011, synthetically convert variable rate debt to fixed rate debt at the fixed interest rate of the swap plus the Applicable Margin, as defined in the “2007 Credit Facility” section above in Note 9 — Long-Term Debt. The following table summarizes the derivative asset and liability balances at December 31, 2011 and 2010:
|  | Asset Derivatives |  | Liability Derivatives |
|  | Balance |  | Fair Value |  | Balance |  | Fair Value |
|  | Sheet Location |  | December 31, 2011 |  | December 31, 2010 |  | Sheet Location |  | December 31, 2011 |  | December 31, 2010 |
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | Fair value of derivative instruments (Current Assets) |  | $ | — |  | $ | — |  | Fair value of derivative instruments (Current Liabilities) |  | $ | 1,686 |  | $ | 4,417 |
Interest rate contracts |  | Fair value of derivative instruments (Noncurrent Assets) |  | — |  | — |  | Fair value of derivative instruments (Noncurrent Liabilities) |  | 23,654 |  | 38,880 |
Total derivatives designated as hedging instruments |  |  |  | $ | — |  | $ | — |  |  |  | $ | 25,340 |  | $ | 43,297 |
Total Derivatives |  |  |  | $ | — |  | $ | — |  |  |  | $ | 25,340 |  | $ | 43,297 |
The following tables present the impact of derivative instruments and their location within the Consolidated Statement of Operations: The Effect of Derivative Instruments on the Consolidated Statement of Operations For the Year Ended December 31, 2011
Derivatives in Cash Flow Hedging |  | Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) |  | Location of Gain (Loss) Reclassified from AOCI into income (Effective |  | Amount of Gain (Loss) Reclassified from AOCI into income (Effective Portion) |  | Location of Gain (Loss) Recognized in Income on Derivative (Ineffective |  | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |
Relationships |  | 2011 |  | Portion) |  | 2011 |  | Portion) |  | 2011 |
Interest rate contracts |  | $ | (10,947 | ) | Interest Expense |  | $ | (28,854 | ) | Other Income (Expense) |  | $ | 51 |
The Effect of Derivative Instruments on the Consolidated Statement of Operations For the Year Ended December 31, 2010
Derivatives in Cash Flow Hedging |  | Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) |  | Location of Gain (Loss) Reclassified from AOCI into income (Effective |  | Amount of Gain (Loss) Reclassified from AOCI into income (Effective Portion) |  | Location of Gain (Loss) Recognized in Income on Derivative (Ineffective |  | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |
Relationships |  | 2010 |  | Portion) |  | 2010 |  | Portion) |  | 2010 |
Interest rate contracts |  | $ | (31,536 | ) | Interest Expense |  | $ | (30,204 | ) | Other Income (Expense) |  | $ | 66 |
The Effect of Derivative Instruments on the Consolidated Statement of Operations For the Year Ended December 31, 2009
Derivatives in Cash Flow Hedging |  | Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) |  | Location of Gain (Loss) Reclassified from AOCI into income (Effective |  | Amount of Gain (Loss) Reclassified from AOCI into income (Effective Portion) |  | Location of Gain (Loss) Recognized in Income on Derivative (Ineffective |  | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |
Relationships |  | 2009 |  | Portion) |  | 2009 |  | Portion) |  | 2009 |
Interest rate contracts |  | $ | (4,390 | ) | Interest Expense |  | $ | (28,585 | ) | Other Income (Expense) |  | $ | (288 | )
At December 31, 2011, ($12,279) of AOCI is expected to be reclassified into interest expense over the next 12 months associated with interest rate swaps. The Company is required to provide collateral in the form of vessel assets to support the interest rate swap agreements, excluding vessel assets of Baltic Trading. At December 31, 2011, the Company’s 35 vessels mortgaged under the 2007 Credit Facility served as collateral in the aggregate amount of $100,000.

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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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