XML 31 R23.htm IDEA: XBRL DOCUMENT
v3.20.2

Derivative Instruments and Hedging Activities | 6 Months Ended
--- | ---
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company uses derivative instruments to manage certain risks in accordance with its overall risk management policies. Foreign Exchange Risk From time to time, the Company economically hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. As at June 30, 2020, the Company was committed to the following foreign currency forward contracts:
| Contract Amount in Foreign Currency |  | Average Forward Rate (1) |  | Fair Value / Carrying Amount Of Asset (Liability) $ |  | Expected Maturity
|  |  |  | 2020
|  |  |  | $
GBP | 4,000 |  | 0.81 |  | 53 |  | 4,908
(1) | Average contractual exchange rate represents the contracted amount of foreign currency one U.S. Dollar will buy.
The Company enters into cross currency swaps, and pursuant to these swaps the Company receives the principal amount in NOK on the maturity dates of the swaps, in exchange for payment of a fixed U.S. Dollar amount. In addition, the cross currency swaps exchange a receipt of floating interest in NOK based on NIBOR plus a margin for a payment of U.S. Dollar fixed interest. The purpose of the cross currency swaps is to economically hedge the foreign currency exposure on the payment of interest and principal amounts of the Company’s NOK-denominated bonds due in 2021 and 2023. In addition, the cross currency swaps economically hedge the interest rate exposure on the NOK bonds due in 2021 and 2023. The Company has not designated, for accounting purposes, these cross currency swaps as cash flow hedges of its NOK-denominated bonds due in 2021 and 2023. As at June 30, 2020, the Company was committed to the following cross currency swaps:
|  |  |  |  |  |  |  |  |  | Fair Value / Carrying Amount of Asset / (Liability) $ |  |
Notional Amount NOK |  | Notional Amount USD |  | Floating Rate Receivable |  |  |  |  |
|  | Reference Rate |  | Margin |  | Fixed Rate Payable |  |  | Remaining Term (years)
1,200,000 |  |  | 146,500 |  |  | NIBOR |  | 6.00% |  | 7.72% |  | (24,681 | ) |  | 1.3
850,000 |  |  | 102,000 |  |  | NIBOR |  | 4.60% |  | 7.89% |  | (21,498 | ) |  | 3.2
|  |  |  |  |  |  |  |  |  | (46,179 | ) |  |
Interest Rate Risk The Company enters into interest rate swap agreements, which exchange a receipt of floating interest for a payment of fixed interest, to reduce the Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company designates certain of its interest rate swap agreements as cash flow hedges for accounting purposes. As at June 30, 2020, the Company was committed to the following interest rate swap agreements related to its LIBOR-based debt and EURIBOR-based debt, whereby certain of the Company’s floating-rate debts were swapped with fixed-rate obligations:
| Interest Rate Index |  | Principal Amount |  | Fair Value / Carrying Amount of Asset / (Liability) $ |  | Weighted- Average Remaining Term (years) |  | Fixed Swap Rate (%)(1)
LIBOR-Based Debt: |  |  |  |  |  |  |  |  |
U.S. Dollar-denominated interest rate swaps (2) | LIBOR |  | 847,832 |  |  | (77,586 | ) |  | 4.2 |  | 3.0 |
EURIBOR-Based Debt: |  |  |  |  |  |  |  |  |
Euro-denominated interest rate swaps | EURIBOR |  | 70,220 |  |  | (6,967 | ) |  | 3.2 |  | 3.9 |
|  |  |  |  | (84,553 | ) |  |  |  |
(1) | Excludes the margins the Company pays on its variable-rate debt which, as of June 30, 2020, ranged from 0.3% to 3.95%.
(2) | Includes interest rate swaps with the notional amount reducing quarterly or semi-annually. Three interest rate swaps are subject to mandatory early termination in 2021 and 2024, at which time the swaps will be settled based on their fair value.
Stock Purchase Warrants Prior to the 2019 Brookfield Transaction, Teekay held 15.5 million Brookfield Transaction Warrants and 1,755,000 Series D Warrants of Teekay Offshore (see Note 4). As part of the 2019 Brookfield Transaction, Teekay sold to Brookfield all of the Company’s remaining interests in Teekay Offshore, which included, among other things, both the Brookfield Transaction Warrants and Series D Warrants. Tabular Disclosure The following tables present the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s unaudited consolidated balance sheets.
| Prepaid Expenses and Other |  | Other Non-Current Assets |  | Accrued Liabilities and Other (1) |  | Accrued Liabilities and Other (2) |  | Other Long-Term Liabilities
| $ |  | $ |  | $ |  | $ |  | $
As at June 30, 2020 |  |  |  |  |  |  |  |  |
Derivatives designated as a cash flow hedge: |  |  |  |  |  |  |  |  |
Interest rate swap agreements | — |  |  | — |  |  | (63 | ) |  | (3,085 | ) |  | (11,453 | )
Derivatives not designated as a cash flow hedge: |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | 53 |  |  | — |  |  | — |  |  | — |  |  | — |
Interest rate swap agreements | — |  |  | — |  |  | (3,809 | ) |  | (27,130 | ) |  | (39,013 | )
Cross currency swap agreements | — |  |  | — |  |  | (872 | ) |  | (5,995 | ) |  | (39,312 | )
Forward freight agreements | — |  |  | — |  |  | — |  |  | (165 | ) |  | — |
| 53 |  |  | — |  |  | (4,744 | ) |  | (36,375 | ) |  | (89,778 | )
| Prepaid Expenses and Other |  | Other Non-Current Assets |  | Accrued Liabilities and Other (1) |  | Accrued Liabilities and Other (2) |  | Other Long-Term Liabilities
| $ |  | $ |  | $ |  | $ |  | $
As at December 31, 2019 |  |  |  |  |  |  |  |  |
Derivatives designated as a cash flow hedge: |  |  |  |  |  |  |  |  |
Interest rate swap agreements | — |  |  | — |  |  | (13 | ) |  | (836 | ) |  | (3,475 | )
Derivatives not designated as a cash flow hedge: |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | — |  |  | — |  |  | — |  |  | (202 | ) |  | — |
Interest rate swap agreements | 932 |  |  | 1,916 |  |  | (2,948 | ) |  | (15,478 | ) |  | (29,452 | )
Cross currency swap agreements | — |  |  | — |  |  | (456 | ) |  | (22,661 | ) |  | (18,987 | )
Forward freight agreements | — |  |  | — |  |  | — |  |  | (86 | ) |  | — |
| 932 |  |  | 1,916 |  |  | (3,417 | ) |  | (39,263 | ) |  | (51,914 | )
(1) | Represents accrued interest related to derivative instruments presented in accrued liabilities and other on the consolidated balance sheets (see Note 8).
(2) | Represents the current portion of derivative liabilities presented in accrued liabilities and other on the consolidated balance sheets (see Note 8).
As at June 30, 2020, the Company had multiple interest rate swaps and cross currency swaps with the same counterparty that are subject to the same master agreements. Each of these master agreements provides for the net settlement of all derivatives subject to that master agreement through a single payment in the event of default or termination of any one derivative. The fair value of these derivatives is presented on a gross basis in the Company’s unaudited consolidated balance sheets. As at June 30, 2020, these derivatives had an aggregate fair value asset amount of $0.1 million and an aggregate fair value liability amount of $104.8 million. As at June 30, 2020, the Company had $23.3 million on deposit with the relevant counterparties as security for swap liabilities under certain master agreements. The deposit is presented in restricted cash – current and long-term on the consolidated balance sheets. For the periods indicated, the following tables present the gains (losses) on interest rate swap agreements designated and qualifying as cash flow hedges (excluding such agreements in equity-accounted investments):
Three Months Ended June 30, 2020 |  | Three Months Ended June 30, 2019
Amount of Loss Recognized in OCI |  | Amount of Loss Reclassified from Accumulated OCI to Interest Expense |  | Amount of Loss Recognized in OCI |  | Amount of Gain Reclassified from Accumulated OCI to Interest Expense |
(1,055) |  | (482) |  | (4,570) |  | 157 |
Six Months Ended June 30, 2020 |  | Six Months Ended June 30, 2019
Amount of Loss Recognized in OCI |  | Amount of Loss Reclassified from Accumulated OCI to Interest Expense |  | Amount of Loss Recognized in OCI |  | Amount of Gain Reclassified from Accumulated OCI to Interest Expense |
(10,226) |  | (634) |  | (7,402) |  | 408 |
Realized and unrealized (losses) gains from derivative instruments that are not designated for accounting purposes as cash flow hedges are recognized in earnings and reported in realized and unrealized (losses) gains on non-designated derivatives in the unaudited consolidated statements of income (loss) as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
| $ |  | $ |  | $ |  | $
Realized losses relating to: |  |  |  |  |  |  |
Interest rate swap agreements | (3,879 | ) |  | (1,785 | ) |  | (6,556 | ) |  | (3,473 | )
Foreign currency forward contracts | — |  |  | — |  |  | (241 | ) |  | — |
Stock purchase warrants | — |  |  | (25,559 | ) |  | — |  |  | (25,559 | )
Forward freight agreements | (201 | ) |  | (29 | ) |  | (250 | ) |  | (42 | )
| (4,080 | ) |  | (27,373 | ) |  | (7,047 | ) |  | (29,074 | )
Unrealized (losses) gains relating to: |  |  |  |  |  |  |
Interest rate swap agreements | (5,251 | ) |  | (8,195 | ) |  | (24,063 | ) |  | (14,216 | )
Foreign currency forward contracts | 53 |  |  | (101 | ) |  | 255 |  |  | (101 | )
Stock purchase warrants | — |  |  | 24,584 |  |  | — |  |  | 26,900 |
Forward freight agreements | 8 |  |  | 121 |  |  | (78 | ) |  | 104 |
| (5,190 | ) |  | 16,409 |  |  | (23,886 | ) |  | 12,687 |
Total realized and unrealized losses on derivative instruments | (9,270 | ) |  | (10,964 | ) |  | (30,933 | ) |  | (16,387 | )
Realized and unrealized (losses) gains from cross currency swaps are recognized in earnings and reported in foreign exchange loss in the unaudited consolidated statements of income (loss) as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
| $ |  | $ |  | $ |  | $
Realized losses on maturity and termination of cross currency swaps | (33,844 | ) |  | — |  |  | (33,844 | ) |  | — |
Realized losses | (1,430 | ) |  | (1,087 | ) |  | (3,247 | ) |  | (2,521 | )
Unrealized gains (losses) | 45,882 |  |  | (140 | ) |  | (3,658 | ) |  | (2,060 | )
Total realized and unrealized gains (losses) on cross currency swaps | 10,608 |  |  | (1,227 | ) |  | (40,749 | ) |  | (4,581 | )
The Company is exposed to credit loss to the extent the fair value represents an asset in the event of non-performance by the counterparties to the cross currency and interest rate swap agreements; however, the Company does not anticipate non-performance by any of the counterparties. In order to minimize counterparty risk, the Company only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transaction. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration