Summary
Royal Caribbean Cruises Ltd. (RCL) announced significant amendments to its export credit facilities with Hermes and BpiFAE, secured on several of its vessels. These amendments are designed to provide substantial financial flexibility during the ongoing challenging environment for the cruise industry. The core of these agreements involves deferring approximately $570 million in principal amortization payments under Hermes-backed facilities and $265 million under BpiFAE-backed facilities, totaling over $835 million in deferred principal payments over the next one to two years. This deferral is a crucial step in managing near-term liquidity and preserving capital. Additionally, the company secured an extension on the covenant breach waivers, pushing them out through the end of 2022 for most facilities, providing a broader buffer against potential financial covenant defaults. These amendments also introduce a minimum liquidity covenant of $500 million, which can be reduced to $350 million if the company raises additional capital. This covenant is designed to ensure the company maintains a sufficient cash buffer. However, the deferrals are subject to mandatory prepayment triggers related to activities like dividend issuance, share repurchases, and certain debt issuances or asset sales, indicating that while flexibility is granted, it is conditional upon prudent capital management and operational recovery. Overall, these actions represent a proactive measure by RCL to bolster its financial position and navigate the protracted recovery period for the global cruise industry.
Key Highlights
- 1RCL secured substantial principal amortization deferrals totaling over $835 million across Hermes and BpiFAE backed loan facilities.
- 2Hermes facility amendments allow deferral of approximately $570 million in principal payments due between April 2021 and March 2022.
- 3BpiFAE facility amendments allow deferral of approximately $265 million in principal payments due between April 2021 and March 2022.
- 4Waivers on financial covenant breaches are extended through Q4 2022 for Hermes facilities and Q3 2022 for BpiFAE facilities, providing an extended buffer.
- 5A new minimum liquidity covenant of $500 million (reducible to $350 million under certain conditions) has been agreed upon.
- 6Deferred principal amounts are subject to mandatory prepayment under specific conditions, including dividend payments and share repurchases.
- 7These amendments provide significant near-term liquidity relief and financial flexibility amid industry challenges.