| Financial Instruments and Fair Value Disclosures | 13. Financial Instruments and Fair Value Disclosures Our principal financial assets consist of cash and cash equivalents, amounts due from related parties, investment securities, long-term investments and trade accounts receivable. Our principal financial liabilities consist of long-term debt, accounts payable, amounts due to related parties, accrued liabilities, and derivative instruments. (a) Concentration of credit risk: Financial instruments, which may subject us to significant concentrations of credit risk, consist principally of amounts due from our charterers, including the receivables from Helios Pool, and cash and cash equivalents. We limit our credit risk with amounts due from our charterers, including those through the Helios Pool, by performing ongoing credit evaluations of our charterers’ financial condition and generally do not require collateral from our charterers. We limit our credit risk with our cash and cash equivalents and restricted cash by placing it with highly-rated financial institutions. (b) I nterest rate risk: Our long-term bank loans are primarily based on SOFR and hence we are exposed to movements thereto. We entered into interest rate swap agreements in order to hedge a majority of our variable interest rate exposure related to our 2022 Debt Facility. On August 8, 2022, our interest rate swap with Citibank N.A. was novated to CACIB and BNP with the original amount equally apportioned to each counterparty, an adjustment in the fixed rate from 1.0908% to 0.9208% and a change in the indexed rate from LIBOR to SOFR. On August 25, 2022, our interest rate with ING was amended with an adjustment in the fixed rate from 1.145% to 0.915% and the indexed rate changed from LIBOR to SOFR. Additionally, we have exposure to floating rate movements on two of our Japanese Financings. The Cougar Japanese Financing is subject to SOFR and the Cresques Japanese Financing is the only debt agreement which is subject to LIBOR. (c) Fair value measurements: Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on market ‑ based SOFR swap yield rates. SOFR swap rates are observable at commonly quoted intervals for the full terms of the swaps and, therefore, are considered Level 2 items in accordance with the fair value hierarchy. The fair value of the interest rate swap agreements approximates the amount that we would have to pay or receive for the early termination of the agreements. The following table summarizes the location on the balance sheet of the financial assets and liabilities that are carried at fair value on a recurring basis, which comprise our financial derivatives, all of which are considered Level 2 items in accordance with the fair value hierarchy: December 31, 2022 March 31, 2022 Other non-current assets Long-term liabilities Other non-current assets Long-term liabilities Derivatives not designated as hedging instruments Derivative instruments Derivative instruments Derivative instruments Derivative instruments Interest rate swap agreements $ 11,359,543 $ — $ 6,512,479 $ — The effect of derivative instruments within the unaudited interim condensed consolidated statements of operations for the periods presented is as follows: Three months ended Derivatives not designated as hedging instruments Location of gain/(loss) recognized December 31, 2022 December 31, 2021 Interest rate swaps—change in fair value Unrealized gain/(loss) on derivatives (700,015) 3,056,741 Interest rate swaps—realized gain/(loss) Realized gain/(loss) on derivatives 1,404,004 (895,782) Gain/(loss) on derivatives, net $ 703,989 $ 2,160,959 Nine months ended Derivatives not designated as hedging instruments Location of gain/(loss) recognized December 31, 2022 December 31, 2021 Interest rate swaps—change in fair value Unrealized gain on derivatives 4,847,064 4,205,465 Interest rate swaps—realized gain/(loss) Realized gain/(loss) on derivatives 1,997,815 (2,714,337) Gain/(loss) on derivatives, net $ 6,844,879 $ 1,491,128 As of December 31, 2022 and March 31, 2022, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the consolidated balance sheets with the exception of cash and cash equivalents, restricted cash, and investment securities. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three and nine months ended December 31, 2022 and 2021. (d) Book values and fair values of financial instruments: In addition to the derivatives that we are required to record at fair value on our balance sheet (see (c) above) and investment securities that are included in other current assets in our balance sheet that we record at fair value, we have other financial instruments that are carried at historical cost. These financial instruments include trade accounts receivable, amounts due from related parties, cash and cash equivalents, restricted cash, accounts payable, amounts due to related parties and accrued liabilities for which the historical carrying value approximates the fair value due to the short-term nature of these financial instruments. Cash and cash equivalents, restricted cash and investment securities are considered Level 1 items. The summary of gains and losses on our investment securities included in other gain/(loss), net on our consolidated statements of operations for the periods presented is as follows: Three months ended December 31, 2022 December 31, 2021 Unrealized gain/(loss) on investment securities $ 206,691 $ (1,179,297) Realized loss on investment securities — (305) Net gain/(loss) on investment securities $ 206,691 $ (1,179,602) Nine months ended December 31, 2022 December 31, 2021 Unrealized gain/(loss) on investment securities $ 1,013,794 $ (1,710,348) Realized gain on investment securities 776,770 447,255 Net gain/(loss) on investment securities $ 1,790,564 $ (1,263,093) We have long-term bank debt related to the 2022 Debt Facility, the Cougar Japanese Financing, and the Cresques Japanese Financing for which we believe the carrying values approximate their fair values as the loans bear interest at variable interest rates, being SOFR and LIBOR, which are observable at commonly quoted intervals for the full terms of the loans, and hence are considered as Level 2 items in accordance with the fair value hierarchy. We also have long-term debt related to the Corsair Japanese Financing, Cratis Japanese Financing, Copernicus Japanese Financing, Chaparral Japanese Financing, and Caravelle Japanese Financing (collectively the “Japanese Financings”) that incur interest at a fixed-rate. We have long-term debt related to the BALCAP Facility that incurs interest at a fixed-rate. The fixed-rate Japanese Financings and the BALCAP Facility are considered Level 2 items in accordance with the fair value hierarchy and the fair value of each is based on a discounted cash flow analysis using current observable SOFR interest rates. The following table summarizes the carrying value and estimated fair value of our fixed debt obligations as of: December 31, 2022 March 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Corsair Japanese Financing $ 35,208,334 $ 33,730,112 $ 37,645,833 $ 36,904,683 Concorde Japanese Financing — — 42,269,231 41,352,417 Corvette Japanese Financing — — 42,807,692 41,862,894 Cratis Japanese Financing 46,600,000 42,940,476 49,660,000 46,716,277 Copernicus Japanese Financing 46,600,000 42,940,476 49,660,000 46,716,277 Chaparral Japanese Financing 62,934,348 61,084,562 64,662,242 64,321,963 Caravelle Japanese Financing 47,000,000 43,312,327 49,700,000 46,792,400 BALCAP Facility $ 75,992,178 70,577,748 $ 81,574,172 $ 77,063,912 |
