Summary
Royal Caribbean Cruises Ltd. (RCL) announced on April 10, 2020, amendments to its export-credit backed loan facilities for the vessels "Anthem of the Seas" and "Spectrum of the Seas", secured by German export credit agency Euler Hermes Aktiengesellschaft (Hermes). These amendments incorporate a 12-month debt holiday, allowing RCL to defer principal amortization payments between April 1, 2020, and March 31, 2021. This initiative, facilitated by a new "Deferred Tranche" of the loans, will provide approximately $200 million in incremental liquidity across three specific vessel financings, with plans to extend this relief to other Hermes-backed facilities, potentially generating an additional $320 million. While this debt holiday offers crucial financial flexibility and covenant relief during the ongoing global health crisis, it comes with restrictions. RCL must prepay the deferred principal if it engages in certain actions such as paying dividends, repurchasing stock, or issuing new debt or equity for purposes other than liquidity (with customary exceptions for new ship financing). The company is actively seeking to extend this debt holiday to its remaining Hermes-backed facilities, highlighting a proactive approach to managing its liquidity and financial obligations amidst unprecedented industry challenges.
Key Highlights
- 1RCL amended loan facilities for "Anthem of the Seas" and "Spectrum of the Seas" to include a 12-month debt holiday initiative supported by German export credit agency Euler Hermes.
- 2The debt holiday allows RCL to defer principal amortization payments from April 1, 2020, to March 31, 2021.
- 3This initiative, across three vessel financings, is expected to generate $200 million in incremental liquidity.
- 4RCL is seeking to extend this debt holiday to its remaining Hermes-backed facilities, potentially unlocking an additional $320 million in liquidity.
- 5Amendments provide interim debt service and financial covenant relief during the current global health crisis.
- 6Restrictions are in place requiring prepayment of the deferred debt if RCL undertakes actions such as dividend payments or stock repurchases during the deferral period.
- 7The company is actively managing its financial obligations and seeking ways to enhance liquidity in response to the challenging industry environment.