Summary
Royal Caribbean Cruises Ltd. (RCL) filed an 8-K on May 11, 2020, detailing significant amendments to its credit facilities and outlining the ongoing impact of the COVID-19 pandemic. The company entered into material definitive agreements to amend its $1.55 billion Nordea Revolver, $1.925 billion BNS Revolver, and $1.0 billion Term Loan. These amendments waive key financial covenants (fixed charge coverage and net debt to capitalization) through Q1 2021, replacing them with a monthly liquidity covenant. Crucially, cash dividends and share repurchases are restricted during this period unless specific financial covenants are met. Further, subsidiary guarantees may be required for these credit facilities if certain debt refinancing or incurrence events occur before April 2022. In addition to the credit facility amendments, RCL also secured "debt holiday" amendments for its Hermes and BpiFAE-backed loan facilities, which will provide approximately $150 million in incremental liquidity through April 2021. These holidays allow for the deferral of principal payments on specific loans related to the Ovation of the Seas and Harmony of the Seas vessels, providing temporary relief from amortization obligations. The company also announced its reliance on SEC Order 34-88465 to delay its Q1 2020 Form 10-Q filing by up to 45 days, citing operational disruptions caused by COVID-19, but expects to file by May 31, 2020. The filing also reiterates the severe impact of the pandemic, including an extended suspension of global operations through at least June 11, 2020, significant cost impacts, and liquidity concerns, leading to a preliminary estimated impairment charge of $1.0-$1.3 billion for Q1 2020.
Key Highlights
- 1RCL amended its major revolving credit facilities (Nordea, BNS) and Term Loan, waiving fixed charge coverage and net debt to capitalization covenants through Q1 2021 and introducing a monthly liquidity covenant.
- 2During the covenant waiver period, cash dividends and share repurchases are prohibited unless specific financial performance metrics are met.
- 3The company obtained 12-month debt holiday amendments for its Hermes and BpiFAE-backed loans, deferring principal payments and providing approximately $150 million in incremental liquidity through April 2021.
- 4RCL is delaying its Q1 2020 Form 10-Q filing by up to 45 days due to COVID-19 related operational disruptions, with an expected filing date by May 31, 2020.
- 5The company acknowledged the material adverse impact of COVID-19, including an extended suspension of global operations through at least June 11, 2020.
- 6Preliminary estimated impairment charges of $1.0-$1.3 billion are expected for Q1 2020, primarily related to goodwill for Silversea Cruises and certain vessels.
- 7The filing emphasizes the company's liquidity concerns, recent borrowings, credit rating downgrades, and the ongoing uncertainty surrounding the pandemic's duration and impact.