Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments and Hedging Strategies

v3.19.1
Derivative Instruments and Hedging Strategies
3 Months Ended
Mar. 31, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Strategies

7.

DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

Derivative instruments are classified as either assets or liabilities based on their individual fair values. The fair values of the Company’s derivative instruments were as follows (in thousands):

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

 

 

 

Derivative

Asset

 

 

Derivative

Liability

 

 

Derivative

Asset

 

 

Derivative

Liability

 

 

 

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements (cash flow hedges)

 

$

 

 

$

2,295

 

 

$

 

 

$

1,659

 

 

(1

)

 

 

 

 

 

 

2,295

 

 

 

 

 

 

1,659

 

 

 

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion option liability on Convertible Senior Notes

 

 

 

 

 

6,201

 

 

 

 

 

 

5,276

 

 

 

 

 

 

$

 

 

$

8,496

 

 

$

 

 

$

6,935

 

 

 

 

 

(1)Included in other current liabilities in the accompanying condensed consolidated balance sheets.

Cash Flow Hedges. The Company and certain of its 50% or less owned companies have interest rate swap agreements designated as cash flow hedges. By entering into these interest rate swap agreements, the Company and its 50% or less owned companies have converted the variable LIBOR or EURIBOR component of certain of their outstanding borrowings to a fixed interest rate. The Company recognized immaterial losses on derivative instruments designated as cash flow hedges during the three months ended March 31, 2019. As of March 31, 2019, the interest rate swaps held by the Company and its 50% or less owned companies were as follows:

 

Windcat Workboats Holdings Ltd. (“Windcat Workboats”) had two interest rate swap agreements maturing in 2021 that call for the Company to pay a fixed rate of interest of (0.03%) per annum on the aggregate notional value of €15.0 million (approximately $16.9 million) and receive a variable interest rate based on EURIBOR on the aggregate notional value;

 

SEACOR Marine Foreign Holdings Inc. (“SMFH”) had an interest rate swap agreement maturing in 2023 that calls for SMFH to pay a fixed rate of interest of 3.32% per annum on the amortized notional value of $9.5 million and receive a variable interest rate based on LIBOR on the amortized notional value;

 

SMFH had an interest rate swap agreement maturing in 2023 that calls for SMFH to pay a fixed rate of interest of 3.195% per annum on the amortized notional value of $52.7 million and receive a variable interest rate based on LIBOR on the amortized notional value;

 

SEACOR 88 LLC and SEACOR 888 LLC (collectively, “SEACOR 88/888”) have an interest rate swap agreement maturing in 2023 that calls for SEACOR 88/888 to pay a fixed rate of interest of 3.2% per annum on the amortized notional value of $5.5 million and receive a variable interest rate based on LIBOR on the amortized notional value; and

 

MexMar had five interest rate swap agreements with maturities in 2023 that call for MexMar to pay a fixed rate of interest ranging from 1.71% to 2.10% per annum on the aggregate amortized notional value of $94.4 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.

Other Derivative Instruments. The Company recognized (losses) gains on derivative instruments not designated as hedging instruments for the three months ended March 31 as follows (in thousands):

 

 

 

2019

 

 

2018

 

Conversion option liability on Convertible Senior Notes

 

$

(925

)

 

$

(12,159

)

Interest rate swap agreements

 

 

 

 

 

643

 

 

 

$

(925

)

 

$

(11,516

)

 

The conversion option liability relates to the bifurcated embedded conversion option in the Convertible Senior Notes issued to investment funds managed and controlled by the Carlyle Group (See Note 8, Fair Value Measures).

The Company and certain of its 50% or less owned companies have entered into interest rate swap agreements that did not qualify as cash flow hedges for the general purpose of providing protection against increases in interest rates, which might lead to higher interest costs. As of March 31, 2019, these interest rate swaps held by the Company or its 50% or less owned companies were as follows:

 

SEACOR OSV Partners I LP (“OSV Partners”) had two interest rate swap agreements with maturities in 2020 that call for OSV Partners to pay a fixed rate of interest ranging from 1.89% to 2.27% per annum on the aggregate amortized notional value of $26.6 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.