Royal Caribbean puts up 28 ships as collateral for $3.2bn bond

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Royal Caribbean Cruises has launched a $3.2 billion bond offering while pledging 28 of its ships and “material intellectual property” as collateral.

The move followed the world’s second-largest cruise group forecasting heavy losses for the first quarter of the year as Covid-19 brought global sailings to a standstill.

The company expects to report a preliminary first-quarter net loss of $1.44 billion compared to a profit of $249.7 million a year earlier.

Royal Caribbean, which was forced to suspend its cruises globally and cut about 23% of its US workforce, said the health crisis has dented its quarterly net income by about $453 million.

Preliminary total revenue for the three months ended March 31 fell 16.7% to $2 billion against the same period last year.

Royal Caribbean declined to specify which ships it had pledged for its debt offering. It had vessels with a net book value of about $22.7 billion as of December 31, including Symphony of the Seas, the world’s largest cruise ship.

The net proceeds from the offering of the $3.3 billion notes will be used to repay a $2.35 billion 364-day loan.

The remainder will be used for “general corporate purposes, which may include repayment of additional indebtedness”.

The parent company of Royal Caribbean International, Celebrity Cruises, Azamara and Silversea, estimates its cash burn to be about $250 million to $275 million a month during a prolonged suspension of operations.

Royal Caribbean Announces Proposed Offering Of $3.3 Billion Senior Secured Notes

Independence of the Seas

Royal Caribbean Cruises today announced that it has commenced a private offering of senior secured notes to be issued by the company in separate series of notes due 2023 and 2025, for an aggregate principal amount of $3.3 billion.

The Notes and the related guarantees will be secured by 28 of the company’s vessels and material intellectual property of the company. The obligations under the Notes and the related guarantees will be secured by the collateral in an amount not to exceed permitted capacity under the company’s existing indebtedness.

The company expects to use the net proceeds from the offering of the Notes to repay its $2.35 billion 364-day senior secured term loan agreement with Morgan Stanley Senior Funding, Inc., as the administrative agent and collateral agent and the other lenders’ party thereto entered into on March 23, 2020. The company expects to use the remaining net proceeds for general corporate purposes, which may include repayment of additional indebtedness.