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Royal Caribbean announces pricing for its $2.0 billion of bonds

05 Jun 2020

Royal Caribbean Cruises Ltd. announced on Friday that it has priced its concurrent private offerings of $1.0 billion aggregate principal amount of 9.125% Senior Guaranteed Notes due 2023, and $1.0 billion aggregate principal amount of 4.250% Convertible Senior Notes due 2023.

The Senior Notes will mature on June 15, 2023. The Senior Notes will be fully and unconditionally guaranteed on a senior unsecured basis by a newly formed, direct wholly owned subsidiary of the Company that will own all the equity interests in the Company's subsidiaries that own seven of the Company's vessels. 

The Convertible Notes will mature on June 15, 2023, unless earlier converted, redeemed pursuant to a tax redemption or repurchased. The initial conversion rate per $1,000 principal amount of Convertible Notes is 13.8672 shares of common stock of the Company, which is equivalent to an initial conversion price of approximately $72.11 per share, subject to adjustment in certain circumstances. The initial conversion price represents a conversion premium of approximately 25.00% to the last reported sale price of $57.69 per share of the Company's common stock on The New York Stock Exchange on June 4, 2020.

The Convertible Notes will be convertible at the holder's option in certain circumstances. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, at its election, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock. The Convertible Notes will not be guaranteed by any of the Company's subsidiaries.

In connection with the offering of the Convertible Notes, the Company granted certain of the initial purchasers of the Convertible Notes a 13-day option to purchase up to an additional $150.0 million aggregate principal amount of the Convertible Notes. The Notes are expected to be issued on or around June 9, 2020, subject to customary closing conditions. The closing of each of the Senior Notes offering and the Convertible Notes offering is not contingent upon the closing of the other offering.

The Company expects to use the combined net proceeds from the offerings of the Notes for general corporate purposes, which may include the repayment of indebtedness.

Royal Caribbean offers up to $2 billion in bonds and convertible bonds that mature in 2023

04 Jun 2020

Royal Caribbean announced on Thursday it is offering up to $2 billion in senior notes and convertible bonds that mature in 2023 in two separate offerings. 

The company said in a statement it will use the proceeds for "general corporate purposes", which may include repaying debt.

The Senior Notes will be fully and unconditionally guaranteed on a senior unsecured basis by a newly formed, direct wholly-owned subsidiary of the Company that will own all the equity interests in the Company’s subsidiaries that own seven of the Company’s vessels with an aggregate net book value of approximately $7.7 billion. The Convertible Notes will not be guaranteed by any of the Company’s subsidiaries.

Wall Street: Royal Caribbean's revenue will take years to recover

02 Jun 2020

You do not need to study business to know the impact of Royal Caribbean shutting down all of its cruise ships and halting all cruises for months will have a long term impact on the company's bottom line, but one analyst provided some context into what the future might hold.

Faizan Farooque is a contributing author for, and recently wrote about how much time Royal Caribbean Cruise Ltd (NYSE: RCL) will need to recover from its current financial 

Prior to the shutdown, cruise line revenues were steadily rising, and new bookings were at equally impressive. Then the voluntary global cruise shutdown occurred, and just in the first quarter of 2020, the cruise line took over $1 billion in losses.

Even once cruises resume, revenues are expected to take massive hits this year and the next.

Source: Chart by Faizan Farooque, data from S&P Global Market Intelligence

Wall Street expects RCL will finish 2020 with $3.83 billion in revenue, which is down 65% compared to 2019. Analysts believe things will improve in 2021, with an estimate of $8.73 billion in revenue. That estimate is still down from the $11 billion in revenue the company had in 2019.

While the RCL stock is down significantly compared to the start of 2020, it has seen a resurgence lately, rising over 30% in the last month.

Note: Matt Hochberg has no position in any of the stocks mentioned, nor does he own any cruise line stock.

Royal Caribbean stock on rebound since latest round of cancellations

27 May 2020

If you purchased Royal Caribbean stock in the early months of the economic downturn, the last week has likely been a welcome sight.

Royal Caribbean's stock price (NYSE: RCL) has been shooting up over the last week, with the entire travel industry seeing big gains as investors see a near-term economic recovery. This hope has many believing a return to pre-shutdown prices could be on the horizon.

Royal Caribbean's stock price closed at $54.29 at the end of trading on Wednesday, marking a 9.54% gain on the day. After trading on Tuesday, the stock was up 14%, that followed a bounce back at the end of last week.

The cruise line's stock has been shooting upwards for the last week, beginning on the day when the cruise line announced over $1 billion in losses and another round of cancelled cruises through August.

The recent trend is great news for the cruise line, who has seen giant losses in its stock price following a wave of bad press related to cruise ships, and trepidation in the market regarding the future of travel.

Royal Caribbean's current plan is to resume sailings on August 1, with China sailings perhaps starting up in July.

Note: Matt Hochberg has no position in any of the stocks mentioned, nor does he own any cruise line stock.

Demand for cruises by repeat cruisers surprises Royal Caribbean

20 May 2020

Royal Caribbean held a call with investors this morning to discuss its first quarter 2020 results, and touched upon a variety of topics related to the current business climate, as well as what the future may look like.

During the hour-long call, Royal Caribbean Cruises Ltd. executives answered questions related to return to service, refunds, future demand and more.

Surprisingly high demand by cruise fans

Despite all the upheaval in the cruise and travel industries, Royal Caribbean reports its brand loyalty members are showing surprising dedication to the cruise line.

Royal Caribbean Cruises Ltd. Chief Financial Officer Jason Liberty touched on the subject, "Our loyalty guests have really just been absolutely incredible in their support, and you can really see their love of cruising as they begin to want to focus further out."

Royal Caribbean International President & CEO Michael Bayley also spoke about the loyalty of cruise fans, "I think we've really seen surprising demand from our loyalty members, and remember we've got close to 20 million loyalty members. Their response to various promotions that we've put into the market, just to understand what the demand looks like is been surprisingly positive. So, as we move into Q4 and into '21, we've been honestly surprised in terms of the demand that we've seen coming in, particularly from loyalty guests."

Outlook on cruising resuming

Of course, the question everyone wanted to know is about Royal Caribbean starting cruises again. While Royal Caribbean provided no firm dates on when they plan to cruise again, executives did touch upon its approach to resuming sailings.

Royal Caribbean Cruises Ltd. Chairman and CEO Richard Fain started off the call touching on the matter, "While it's very difficult to have any certainty around the timing or shape of a recovery we do intend to make sure that we are prepared for it and for the changes it will entail. To this end, we are focused on all aspects of our safe return just to serve as strategy with special emphasis on safety security and health. We know that the public expects that we will elevate our health and safety protocols to a new level. We are prepared to make sure that we meet and exceed those expectations."

"We have been and are working on ways to up our game in this field to ensure that we use our ingenuity, our passion, and our innovation, raise the bar to new heights. We are calling our aspirational program the healthy return to service program. The program will have four main focuses: upgraded screening prior to boarding, enhanced processes and procedures onboard, special focus on addressing the destinations we visit, and procedures for dealing with any reports of exceptions."

"It is tempting to start talking now about all the individual components of how things will change. However, we still defining all those enhancements, and we're still taking guidance from our expert advisors. And this process will continue in keeping with our mantra of continuous improvement."

"The one thing that won't change is our determination that we will not start operations until we are fully ready to do so with all the hygiene and other health protocols solidly in place."

Not all ships will start up at once

Continuing comments made over the last few weeks, Mr. Fain reiterated that when Royal Caribbean starts sailing again, the entire fleet will not resume at once.

"We don't expect that... someday somebody blows a horn, and all the ships start operating right away. We think that it will be a gradual start, a little bit like society is opening up gradually."

"So we would imagine that we would start with fewer ships, and more likely to be more drive markets in the beginning, and then it would then evolve and grow from there."

Millennials vs. Baby Boomers

An intriguing stat shared during the call was Mr. Liberty's breakdown of who is taking refunds versus future cruise credits based on age.

Younger cruisers, specifically millennials, typically opt for a cash refund, whereas families and baby boomers are more likely to take a future cruise credit.

Big ships vs small ships

One of the questions asked was if bigger or smaller ships made more sense to start cruising first, and Mr. Liberty talked about how bigger ships are better situated to handle the demands, both financially and socially.

"Load factors can be lower because they have great economies of scale, they're extremely fuel efficient, and the cabin cabin category makes it very rich. Really more broadly within the fleet, public space per berth is very good. But certainly the newer ships have more public space per passenger. And would be heavily in consideration for the return to service, as well as other ships that we've modernized and having more venues on to."

Royal Caribbean reports over $1 billion first quarter loss

20 May 2020

Royal Caribbean Cruises Ltd. released its first quarter 2020 results to investors on Wednesday morning, outlining the impact of Coronavirus on its business in the first few months of the pandemic.

As expected, the global pandemic had a major impact on the business, with the cancellation of 130 sailings during the first quarter.

The Company reported US GAAP Net Loss for the first quarter of 2020 of $(1.4) billion or $(6.91) per share compared to US GAAP Net Income of $249.7 million or $1.19 per share in the prior year.  The 2020 results include a non-cash asset impairment loss of $1.1 billion.  The Company reported Adjusted Net Loss of $(310.4) million or $(1.48) per share compared to Adjusted Net Income of $275.8 million or $1.31 per share in the prior year.  The Net Loss for the quarter is a result of the COVID-19 pandemic on the business.

"Responding to the dramatic change in business conditions caused by COVID-19 has required focus, dedication, ingenuity and improvisation from all our people, and their efforts have been nonstop," said Richard D. Fain, Chairman and CEO.  "We understand that when our ships return to service, they will be sailing in a changed world.  How well we anticipate and solve for this new environment will play a critical role in keeping our guests and crew safe and healthy, as well as position our business and that of our travel agent partners to return to growth."

Bookings update

Prior to the COVID-19 pandemic, bookings were strong and at higher prices on a prior year comparable basis.

Since then, the impact of the virus has seen booking volumes for the remainder of 2020 at meaningfully lower levels compared to last year, with prices down low-single digits.

Although still early in the booking cycle, the booked position for 2021 is within historical ranges when compared to same time last year with 2021 prices up mid-single digits compared to 2020.

As of April 30, 2020, approximately 45% of the guests booked on cancelled sailings have requested cash refunds. Additionally, as of March 31, 2020, the Company had $2.4 billion in customer deposits.  The Company also continues to take future bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings.

Cost-cutting measures

RCCL is actively working on cutting costs to improve its cash situation, as well as secure additional financing. Steps taken include:

  • Reducing operating expenses
  • Reducing or deferring capital spend
  • Increasing its available cash position through various financing sources

Among these efforts, the Company highlighted an approximate $4.0 billion increase in additional financing through a secured bond issuance and increased revolver capacity; a $3.0 billion reduction in its 2020 capital expenditures, a $0.8 billion 12-month debt amortization holiday from certain export-credit backed facilities, and a substantial reduction in its operating expenses due to the fleet layup and significant actions to meaningfully decrease the Company's sales, marketing and administrative expenses.

RCCL's cash burn is, on average, approximately $250 million to $275 million per month during a prolonged suspension of operations.

The Company is considering ways to further reduce the average monthly requirement under a further prolonged out-of-service scenario and during start-up of operations.

Once again, Royal Caribbean stated it believes COVID-19 has impacted shipyard operations and will result in delivery delays of ships previously planned for delivery in 2020 and 2021.

The future

Compounding the issue for Royal Caribbean is the fact its cruise ships are remain shut down as part of the global containment effort.

While it works to finish repatriating crew members to their home countries, the Company's future focus now turns to four key principles:

  • Ensuring the safety of guests and crew
  • Proactively enhancing liquidity
  • Protecting the Company's brands, and
  • Defining and preparing for a "new normal."

RCCL has engaged the services of distinguished external experts in relevant fields, including public health, epidemiology, design and sanitation, to bring additional expertise to its internal teams that are envisioning the Company's new standards and procedures for its return to service strategy.

Royal Caribbean Group schedules conference call for business update & first quarter

18 May 2020

Royal Caribbean Cruises Ltd. announced it has scheduled a conference call with investors to discuss its first quarter results and provide a business update.

The call is scheduled for 10am Eastern Daylight Time on Wednesday, May 20, 2020.

The call will be available on-line at the company's investor relations website,

To listen to the call by phone, please dial (877) 663-9606 in the US and Canada.  International phone calls should be made to (706) 758-4628. 

Wall Street: How long Royal Caribbean can go without cruises?

15 May 2020

With there being no Royal Caribbean cruises sailing, it is no secret there is little to no revenue coming in and the company is losing money every month.

Royal Caribbean Cruises Ltd stated that its average ongoing ship operating expenses and administrative expenses is approximately $250 million to $275 million per month during the suspension of operations.  

This range of monthly expenditures  includes ongoing ship operating expenses, administrative expenses, and debt service expense, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuilds) and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings. 

So the natural question is how long can Royal Caribbean last without any meaningful revenue?

Bank of America analysts Andrew Didora and Geoffrey d’Halluin ran an analysis of the major cruise lines to determine an answer to that question.

Mr. Didora estimated that Royal Caribbean has roughly $3.45 billion in liquidity, but he estimates it is costing the cruise line around $330 million in cash per month to operate without revenue.

Thus, Mr. Didora thinks Royal Caribbean can operate through the first quarter of 2021 with no cruises sailing.

"For RCL to extend its liquidity into late 2021 to further de-risk its liquidity profile, we estimate it would need to raise an incremental $1.5-2.0B in capital"

While I am no Wall Street analyst by any means, it is worth noting Mr. Didora's cash burn per month differs from the value Royal Caribbean Cruises Ltd announced last week.

In addition, Royal Caribbean indicated it may seek to further reduce its average monthly requirement, "under a prolonged non-revenue scenario."

In order to cut costs, the cruise giant  identified approximately $3.0 billion and $1.4 billion of capital expenditure reductions or deferrals in 2020 and 2021, respectively.

If it deems it necessary, Royal Caribbean has outlined it could opt for further reductions in capital expenditures, operating expenses and administrative costs and additional financing.

Royal Caribbean launches $3.3 billion debt offering

13 May 2020

Royal Caribbean announced on Wednesday it will launch a private offering of $3.3 billion in senior secured notes due 2023 and 2025. 

Senior secured debt holders are invested in debt that is tethered and secured to something solid as collateral, which in this case is the cruise line's ships. And because it is considered "senior" debt, it has seniority over all other debts, which means it is first to be reimbursed.

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.

Royal Caribbean expects to use the proceeds from the offering to repay its $2.35 billion, 364-day term loan agreement, that was disclosed on March 23. The remainder of the proceeds is expected to be used for general corporate purposes, which could include repayment of other debt. 

Royal Caribbean reportedly working with Morgan Stanley to raise new financing

23 Apr 2020

Royal Caribbean Cruises Ltd is reportedly in talks with Morgan Stanley to raise new financing to help buoy the company's financial situation during the current cruise shutdown.

Bloomberg cited "people with knowledge of the matter" and said possible options include as much as $600 million of bonds in a possible offering.

Royal Caribbean also has considered selling convertible bonds and equity, but nothing has been decided on yet

Representatives for Royal Caribbean and Morgan Stanley declined to comment to Bloomberg about any deal.

Royal Caribbean has taken advantage of $3.48 billion in backup financing between two revolving lines of credit.

Royal Caribbean has not offered cruises since mid-March, and is in the midst of a global suspension of cruises that extends through June 11 at the moment. The cruise line also cut 26% of its employees last week.

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