BrightSpire Capital Inc
For the period ended Dec 31, 2023. Filed Feb 21, 2024.
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FY2023 · Filed Feb 21, 2024
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14. Derivatives
- Derivatives
The Company uses derivative instruments to manage the risk of changes in interest rates and foreign exchange rates, arising from both its business operations and economic conditions. Specifically, the Company enters into derivative instruments to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and cash payments, the values of which are driven by interest rates, principally relating to the Company’s investments. Additionally, the Company’s foreign operations expose the Company to fluctuations in foreign exchange rates. The Company enters into derivative instruments to protect the value or fix certain of these foreign-denominated amounts in terms of its functional currency, the U.S. dollar. Derivative instruments used in the Company’s risk management activities may be designated as qualifying hedge accounting relationships, designated hedges, or non-designated hedges.
As of December 31, 2023 and 2022, fair value of derivative assets and derivative liabilities were as follows (dollars in thousands):
| Non-Designated Hedges | ||
|---|---|---|
| December 31, 2023 | December 31, 2022 | |
| Derivative Assets | ||
| Foreign exchange contracts | $164 | $1,599 |
| Interest rate contracts | — | 2 |
| Included in other assets | $164 | $1,601 |
As of December 31, 2023, the Company’s counterparties donot hold any cash collateral.
The following table summarizes the Company’s FX forwards and interest rate contracts as of December 31, 2023 and 2022:
| Type of Derivatives | Notional Currency | Notional Amount (in thousands) | Range of Maturity Dates |
|---|---|---|---|
| Non-Designated | |||
| FX Forward | NOK | 8,229 | February 2024 - May 2024 |
| FX Forward | NOK | 99,733 | February 2023 - May 2024 |
| Interest Rate Swap | USD | $285 | July 2023 |
The table below represents the effect of the derivative financial instruments on the consolidated statements of operations foryears ended December 31, 2023, 2022 and 2021 (dollars in thousands):
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Other gain (loss), net | |||
| Non-designated foreign exchange contracts | $839 | $1,827 | $37,674 |
| Non-designated interest rate contracts | (2) | 12 | 28 |
| Total | $837 | $1,839 | $37,702 |
| Accumulated other comprehensive loss | |||
| Designated foreign exchange contracts | $— | $— | $(29,927) |
| Total | $— | $— | $(29,927) |
Offsetting Assets and Liabilities
The Company enters into agreements subject to enforceable netting arrangements with its derivative counterparties that allow the Company to offset the settlement of derivative assets and liabilities in the same currency by derivative instrument type or, in the event of default by the counterparty, to offset all derivative assets and liabilities with the same counterparty. The Company has elected not to net derivative asset and liability positions, notwithstanding the conditions for right of offset may have been met. The Company presents derivative assets and liabilities with the same counterparty on a gross basis on the consolidated balance sheets.
The following table sets forth derivative positions where the Company has a right of offset under netting arrangements with the same counterparty as of December 31, 2023 and 2022 (dollars in thousands):
| Gross Amounts of Assets (Liabilities) Included on Consolidated Balance Sheets | Net Amounts of Assets (Liabilities) | |
|---|---|---|
| Derivative Assets | ||
| Foreign exchange contracts | $164 | $164 |
| Total | $164 | $164 |
| Derivative Assets | ||
| Foreign exchange contracts | $1,599 | $1,599 |
| Interest rate contracts | 2 | 2 |
| Total | $1,601 | $1,601 |
The Company did not offset any of its derivatives positions as of December 31, 2023 and 2022.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.