8-KMaterial AgreementsExhibits & Filings

ROYAL CARIBBEAN CRUISES LTD 8-K Report, Material Agreement (Feb 23, 2021)

Filed February 23, 2021For Securities:RCL

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.

Frequently Asked Questions

Royal Caribbean Cruises Ltd. will defer approximately $570 million in principal amortization payments under Hermes-backed facilities and $265 million under BpiFAE-backed facilities. This brings the total deferred principal payments to over $835 million.

The deferred principal payments under the Hermes facilities are generally due between April 2021 and March 2022, with repayment starting in semi-annual installments between April 2022 and March 2027. For the BpiFAE facilities, the deferral period is also primarily between April 2021 and March 2022, with repayment schedules varying slightly by facility but generally starting in 2022.

RCL has agreed to a minimum liquidity covenant of $500 million. This amount can be reduced to $350 million if the company successfully raises at least $500 million of additional capital. This covenant ensures the company maintains a certain level of cash reserves.

Yes, the deferred amounts are subject to mandatory prepayment under certain conditions. These include, but are not limited to, the issuance of dividends, completion of share repurchases, certain debt issuances beyond crisis/recovery purposes, making loans, and selling assets outside of arm's length transactions. These conditions aim to prevent the company from distributing capital or undertaking certain actions while benefiting from the deferrals.