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Global Ship Lease Reports Results For The Second Quarter Of 2012

Stocks in this article: GSL

Interest income for the three and six months ended June 30, 2012 and 2011 was not material.

Change in Fair Value of Financial Instruments The Company hedges its interest rate exposure by entering into derivatives that swap floating rate debt for fixed rate debt to provide long-term stability and predictability to cash flows. As these hedges do not qualify for hedge accounting under US GAAP, the outstanding hedges are marked to market at each period end with any change in the fair value being booked to the income and expenditure account. The Company's derivative hedging instruments gave a realized loss of $4.6 million in the three months ended June 30, 2012 for settlements of swaps in the period, as current LIBOR rates are lower than the average fixed rates. Further, there was a $0.9 million unrealized gain for revaluation of the balance sheet position given current LIBOR and movements in the forward curve for interest rates. This compares to a realized loss of $4.9 million and an unrealized loss of $3.8 million in the three months ended June 30, 2011. 

For the six months ended June 30, 2012, the realized loss from hedges was $9.1 million and the unrealized gain was $3.6 million. This compares to a realized loss of $9.7 million and an unrealized gain of $1.2 million in the six months ended June 30, 2011.

At June 30, 2012, interest rate derivatives totaled $580.0 million against floating rate debt of $507.8 million, including the preferred shares. As a consequence, the Company is over hedged which arises from accelerated amortization of the credit facility debt and not incurring additional floating rate debt anticipated to be drawn in connection with the originally intended purchases of the two 4,250 TEU vessels at the end of 2011. $253.0 million of the interest rate derivatives at a fixed rate of 3.40% expire mid March 2013. The total mark-to-market unrealized loss recognized as a liability on the balance sheet at June 30, 2012 was $41.7 million.

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