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Derivative Instruments
 12 Months Ended
Dec. 31, 2014
Derivative Instruments [Abstract]  
Derivative Instruments

 

Note 13 – Derivative Instruments

We are exposed to interest rate changes from our outstanding floating rate borrowings. We manage our fixed to floating rate debt mix to mitigate the impact of adverse changes in interest rates on earnings and cash flows and on the market value of our borrowings. From time to time, we may enter into interest rate hedging contracts, which effectively convert a portion of our variable rate debt to a fixed rate over the term of the interest rate swap.

For our Australian borrowings, we were required to swap no less than 75% of our drawdowns under our Australian Corporate Credit Facility into fixed interest rate obligations. Under the June 27, 2014 refinancing the 75% of the loan balance be swapped into fixed rate obligations was no longer required. In conjunction with the NAB Credit Facility, we entered into a five-year interest swap agreement, which swaps more than 100% of our variable rate term loan based on BBSY for a 5.50% fixed rate loan which steps down commensurate with the payments of the loan balance.  At the time of entering into this NAB swap, our existing BOSI swap was “in-the-money” by $160,000.  In lieu of a cash payment for the in-the-money BOSI swap, we negotiated a slightly lower fixed swap rate by 0.05% for our new NAB fixed rate swap.  

Although our Bank of America Revolver does not require a fixed interest swap agreement, effective December 31, 2013, we entered into an approximate three-year $28.0 million fixed interest rate swap that has a balance reduction schedule which matches the contraction amortization of the Bank of America Revolver.

Effective October 28, 2013, we entered into a three-year $27.9 million fixed interest rate swap for our Trust Preferred Securities.

As a result of these swap and loan agreements, we pay a total fixed interest rate of 7.90%  (5.50% swap contract rate plus a 2.40% margin under the loan) for our NAB Loan, a total fixed interest rate of 3.65%  (1.15% swap contract rate plus a 2.50% margin under the loan) for our BofA Loan, and a total fixed interest rate of 5.20%  (1.20% swap contract rate plus a 4.00% margin under the loan) for our Trust Preferred Securities instead of the obligatorily disclosed loan rates of 5.04%,  2.67%, and 4.23%, respectively, as indicated in Note 12 – Notes Payable.

Finally, as part of our new US Minetta and Orpheum Theatres Loan, we entered into a five-year LIBOR rate cap of 4.00% with a loan margin of 2.75% (see Note 12 – Notes Payable).

The following table sets forth the terms of our interest rate swap derivative instruments at December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type of Instrument

 

Notional Amount

 

Pay Fixed Rate

 

Receive Variable Rate

 

Maturity Date

Interest rate swap

 

$49,446,650

 

5.500%

 

2.688%

 

June 30, 2016

Interest rate swap

 

$28,000,000

 

1.150%

 

0.169%

 

October 31, 2017

Interest rate swap

 

$27,913,000

 

1.200%

 

0.233%

 

October 31, 2017

Interest rate cap

 

$7,500,000

 

4.000%

 

n/a

 

June 1, 2018

 

In accordance with FASB ASC 815-20 – Derivatives and Hedging, we marked our interest swap instruments to market on the consolidated balance sheet resulting in a $1.0 million decrease to interest expense during 2014, a $2.0 million decrease to interest expense during 2013, and a $1.1 million increase to interest expense during 2012. At December 31, 2014 2013 and 2012 we recorded the fair market value of our interest rate swaps of $2.3 million, $3.3 million and $5.9 million respectively, as other long-term liabilities. In accordance with FASB ASC 815-20, we have not designated any of our current interest rate swap positions as financial reporting hedges.