INTEREST RATE SWAP AGREEMENTS

9 Months Ended

Sep. 30, 2014

11 - INTEREST RATE SWAP AGREEMENTS

As of December 31, 2013, the Company had four interest swap agreements outstanding with DNB Bank ASA to manage interest costs and the risk associated with variable interest rates related to the Company’s 2007 Credit Facility. The total notional principal amount of the swaps at December 31, 2013 was $306,233 and the swaps had specified rates and durations. Three of the swaps that were outstanding at December 31, 2013 expired during 2014 prior to the Petition Date.

As of March 31, 2014, the Company was in default under covenants of its 2007 Credit Facility due to the default on the scheduled debt amortization payment due on March 31, 2014. Refer to Note 1 — General Information for additional information regarding defaults relating to the swap. The default under the 2007 Credit Facility requires the Company to elect interest periods of only one-month, therefore the Company no longer qualified for hedge accounting under the original designation and hedge accounting was terminated effective March 31, 2014. Additionally, the filing of the Chapter 11 Cases by the Company on the Petition Date constituted an event of default with respect to the outstanding interest rate swap with DNB Bank ASA. As a result, DNB Bank ASA terminated all transactions under the remaining swap agreement effective April 30, 2014 and filed a secured claim with the Bankruptcy Court of $5,622. The claim was paid to DNB Bank ASA by the Successor Company during the period from July 9 to September 30, 2014.

The following table summarizes the interest rate swaps designated as cash flow hedges that were in place as of December 31, 2013 for the Predecessor Company:

					Predecessor
					December 31, 2013
Interest Rate Swap Detail					Notional
Trade	Fixed		Start Date	End date	Amount
Date	Rate		of Swap	of Swap	Outstanding
9/6/05	4.485	%	9/14/05	7/29/15	$	106,233
3/29/06	5.25	%	1/2/07	1/1/14	50,000
1/9/09	2.05	%	1/22/09	1/22/14	100,000
2/11/09	2.45	%	2/23/09	2/23/14	50,000

					$	306,233

The following table summarizes the derivative asset and liability balances at December 31, 2013 for the Predecessor Company:

	Liability Derivatives
	Balance	Fair Value		Balance	Fair Value
	Sheet Location	December 31, 2013		Sheet Location	December 31, 2013
Derivatives designated as hedging instruments
Interest rate contracts	Fair value of derivative instruments (Current Assets)	$	—	Fair value of derivative instruments (Current Liabilities)	$	6,975
Interest rate contracts	Fair value of derivative instruments (Noncurrent Assets)	—		Fair value of derivative instruments (Noncurrent Liabilities)	—

Total derivatives designated as hedging instruments		—			6,975

Total Derivatives		$	—		$	6,975

The differentials to be paid or received for these swap agreements are recognized as an adjustment to interest expense as incurred. The Company utilized cash flow hedge accounting for these swaps through March 31, 2014, whereby the effective portion of the change in the 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. On March 31, 2014, the cash flow hedge accounting on the remaining swap agreement was discontinued. Once cash flow hedge accounting was discontinued, the changes in the fair value of the interest rate swaps are recorded in the Condensed Consolidated Statement of Operations in interest expense and the remaining amounts included in AOCI are amortized to interest expense over the original term of the hedging relationship for the Predecessor Company.

The following tables present the impact of derivative instruments and their location within the Condensed Consolidated Statement of Operations for the Predecessor Company: