8-KMaterial AgreementsFinancial EventsOther Events+1

ROYAL CARIBBEAN CRUISES LTD 8-K Report, Material Agreement (Aug 12, 2024)

Filed August 12, 2024For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) has completed a private offering of $2.0 billion in aggregate principal amount of 6.000% Senior Notes due 2033. The net proceeds of approximately $1.98 billion will be used, along with existing credit facilities, to redeem in full two of its existing debt issuances: $1.0 billion of 9.250% Senior Notes due 2029 and $1.0 billion of 8.250% Senior Secured Notes due 2029. This strategic move aims to lower the company's overall interest expense and extend its debt maturity profile. The new notes carry a significantly lower interest rate compared to the notes being redeemed, representing a substantial cost savings for RCL. The redemption of the older, higher-coupon debt is scheduled for August 13, 2024. The new 2033 notes are subject to certain covenants limiting liens, sale and leaseback transactions, and asset transfers, and also include a change of control provision requiring a repurchase offer.

Key Highlights

  • 1Completed a $2.0 billion private offering of 6.000% Senior Notes due 2033.
  • 2Proceeds will be used to redeem $1.0 billion of 9.250% Senior Notes due 2029 and $1.0 billion of 8.250% Senior Secured Notes due 2029.
  • 3The redemption of existing notes is scheduled for August 13, 2024.
  • 4Achieves a significant reduction in interest expense by replacing higher-coupon debt with lower-coupon debt.
  • 5Extends the company's debt maturity profile to 2033.
  • 6The new notes are issued under an indenture with covenants regarding liens, sale and leaseback transactions, and asset transfers.
  • 7Includes a change of control provision requiring a repurchase offer at 101% of principal.

Frequently Asked Questions

The primary purpose is to refinance existing, higher-interest debt with new, lower-interest debt, thereby reducing interest expense and extending the maturity profile of Royal Caribbean's debt. The company is replacing 9.250% and 8.250% notes with new 6.000% notes.

The company will save approximately 3.25% on $1.0 billion of notes (9.250% vs. 6.000%) and 2.25% on another $1.0 billion of notes (8.250% vs. 6.000%) annually, not including fees and expenses associated with the redemption. This translates to potential annual interest savings of roughly $22.5 million to $32.5 million, depending on the exact allocation and timing of funds.

Yes, the new notes are subject to covenants that limit the company's ability and its restricted subsidiaries' ability to create liens, enter into sale and leaseback transactions, or consolidate, merge, or transfer substantially all assets. Additionally, a change of control event would trigger an offer to repurchase the notes at 101% of the principal amount.

The redemption of the outstanding 9.250% Senior Notes due 2029 and 8.250% Senior Secured Notes due 2029 is scheduled to occur on August 13, 2024.