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.
With MSC Cruises entering the luxury market with dedicated 1,000-guest ships, the family-owned company will be the third biggest luxury operator by 2027, according to Cruise Industry News estimates.
Viking Ocean will control most of the market pie, with 18 ships and an estimated market share of 35.7 per cent based on passenger capacity.
Silversea, with an aggressive newbuilding program and a new owner in Royal Caribbean Cruises, will be the second largest luxury line, with 12 ships and 13 per cent of the market come 2027, based on the existing cruise ship orderbook.
MSC Cruises is next, as the Italian brand will have four 64,000-ton luxury ships, 4,000 berths and just under 10 per cent of the luxury market, not including the company’s Yacht Club berths on its quickly-expanding fleet of megaships.
Crystal and Seabourn round out the top five, as both are expanding into the expedition market with new ships and Crystal has also committed to a new class of larger ocean-going vessels.
Cunard has announced plans to add a fourth ship to its fleet – its first new ship in 12 years.
The new 3,000 passenger ship, which will be built at the Fincantieri shipyard, was announced as Cunard marks the 50th anniversary of the launch of the legendary QE2.
The new ship will join the fleet in 2022, joining Queen Mary 2, Queen Victoria and Queen Elizabeth.
It will be the first time since 1998 that the brand has had four ships in service at the same time. The new build will be the 249th ship to fly the Cunard flag, according to the line.
Simon Palethorpe, senior vice president of Cunard, said: “We have only recently marked the 50th anniversary of one of Cunard’s much-loved ocean liners, the legendary QE2.
“What better way to celebrate her important role in Cunard’s past than by announcing our commitment to Cunard’s future with the commissioning of a new ship. Cunard offers unrivalled luxury ocean experiences and the new ship firmly underpins our plans to continue our growth across international markets.”
The news of Cunard’s expansion comes just a week after Silversea announced a new ship order.
Silversea said the move signalled buoyancy in the market. These two announcements are the latest sign of the strength of the luxury cruise sector, with Ritz-Carlton recently announcing its plans to enter the cruise sector with three yachts. Meanwhile, Celebrity Cruises has three ships on order, Ponant has four, and Crystal Cruises, Scenic, Seabourn and Star Clippers also have new vessels set to launch.