Royal Caribbean Group announces upsizing and pricing of $2.0 billion offering of senior unsecured notes to refinance certain series of its senior notes due 2029

Rhea-AI Summary

Royal Caribbean Group (NYSE: RCL) has upsized and priced a $2.0 billion offering of senior unsecured notes due 2033, increased from the previously announced $1.5 billion. The notes, with a 6.000% interest rate, are expected to be issued around August 12, 2024. Proceeds will be used to redeem all outstanding 9.250% Senior Notes due 2029 and 8.250% Senior Secured Notes due 2029, comprising the company's remaining secured indebtedness. This refinancing move aims to optimize Royal Caribbean's debt structure. The offering is to qualified institutional buyers and certain non-U.S. persons, with the notes not being registered under the Securities Act.

Positive

• Upsizing of the offering from $1.5 billion to $2.0 billion indicates strong investor demand
• Lower interest rate of 6.000% compared to the notes being redeemed (9.250% and 8.250%)
• Refinancing eliminates all remaining secured indebtedness, potentially improving financial flexibility

Negative

• Increase in total debt by $2.0 billion
• Reliance on additional borrowings from revolving credit facilities to complete the redemption

Insights

Financial Analyst

Royal Caribbean's $2.0 billion senior unsecured notes offering marks a significant shift in the company's debt structure and financial strategy. This move to refinance existing high-interest debt with lower-cost capital is a shrewd financial maneuver that could yield substantial benefits:

• Interest Savings: The new notes, priced at 6.000%, represent a considerable reduction from the 9.250% and 8.250% rates on the notes being redeemed. This could potentially save the company $60 million to $80 million in annual interest expenses.
• Debt Profile Improvement: By replacing secured debt with unsecured notes, Royal Caribbean is freeing up assets and enhancing its financial flexibility. This could improve its credit profile and potentially lead to future rating upgrades.
• Extended Maturity: The new 2033 maturity pushes out the company's debt obligations, providing more breathing room and reducing near-term refinancing pressures.

However, investors should note that while this refinancing is positive, it doesn't reduce the company's overall debt load. The cruise industry's recovery trajectory and Royal Caribbean's ability to generate strong cash flows will remain important factors in its long-term financial health.

Market Research Analyst

This refinancing move by Royal Caribbean signals several important market trends:

• Improved Credit Markets: The upsizing of the offering from $1.5 billion to $2.0 billion suggests strong investor demand for cruise line debt, indicating growing confidence in the sector's recovery.
• Industry Normalization: The ability to issue unsecured debt at more favorable rates points to a normalization of the cruise industry's risk profile in the eyes of investors, a marked improvement from the pandemic era.
• Strategic Timing: Royal Caribbean is capitalizing on the current interest rate environment before potential future rate hikes, locking in lower costs for an extended period.

This transaction may set a precedent for other cruise lines and travel-related companies to refinance their high-cost debt incurred during the pandemic. It could trigger a wave of similar offerings in the sector, potentially leading to improved financial health across the industry. Investors should watch for comparable moves from competitors, as this could reshape the competitive landscape in terms of financial flexibility and operational capabilities.

MIAMI, July 29, 2024 /PRNewswire/ -- Royal Caribbean Cruises Ltd. (NYSE: RCL) (the "Company") today announced that it has priced its private offering of $2.0 billion aggregate principal amount of 6.000% senior unsecured notes due 2033 (the "Notes"). The aggregate principal amount of Notes to be issued was increased from the previously announced offering size of $1.5 billion. The Notes will mature on February 1, 2033. The Notes are expected to be issued on or around August 12, 2024, subject to customary closing conditions.

The Company intends to use the proceeds from the sale of the Notes, together with borrowings under the Company's revolving credit facilities, to redeem (i) all of its outstanding 9.250% Senior Notes due 2029 and (ii) all of its outstanding 8.250% Senior Secured Notes due 2029, which comprise its remaining secured indebtedness (including, in each case, to pay fees and expenses in connection with such redemption).

The Notes are being offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States only to certain non-U.S. persons in reliance on Regulation S. The Notes will not be registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

This press release  shall not constitute an offer to sell or a solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful. This press release shall not constitute a notice of redemption with respect to either of the Company's 9.250% Senior Notes due 2029 or the 8.250% Senior Secured Notes due 2029. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

Special Note Regarding Forward-Looking Statements

Certain statements in this press release relating to, among other things, the offering and sale of the Notes constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited, to: statements regarding the expected timing for the closing of the offering of the Notes and the intended use of proceeds. Words such as "anticipate," "believe," "considering," "could," "driving," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," "would" and similar expressions are intended to help identify forward-looking statements. Forward-looking statements reflect management's current expectations, but they are based on judgments and are inherently uncertain. Furthermore, they are subject to risks, uncertainties and other factors that could cause the Company's actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to, the following: the impact of the economic and geopolitical environment on key aspects of the Company's business, such as the demand for cruises, passenger spending, and operating costs; changes in operating and financing costs; the unavailability or cost of air service; adverse events such as terrorist attacks, war and other similar events; disease outbreaks and an increase in concern about the risk of illness on the Company's ships or when traveling to or from the Company's ships, all of which could reduce demand; incidents or adverse publicity concerning the Company's ships, port facilities, land destinations and/or passengers or the cruise vacation industry in general; the effects of weather, natural disasters and seasonality on the Company's business; the impact of issues at shipyards, including ship delivery delays, ship cancellations or ship construction cost increases; shipyard unavailability; vacation industry competition and changes in industry capacity and overcapacity; unavailability of ports of call; an inability to source the Company's crew or the Company's provisions and supplies from certain places; the uncertainties of conducting business internationally and expanding into new markets and new ventures; the Company's ability to obtain sufficient financing, capital or revenues to satisfy liquidity needs, capital expenditures, debt repayments and other financing needs; the Company's indebtedness, any additional indebtedness the Company may incur and restrictions in the agreements governing the Company's indebtedness that limit the Company's flexibility in operating its business; changes in foreign travel policy of the United States or other countries; growing anti-tourism sentiments and environmental concerns; concerns over safety, health and security of guests and crew; the impact of new or changing legislation and regulations (including environmental regulations) or governmental orders on the Company's business; uncertainties of a foreign legal system as the Company is not incorporated in the United States; the impact of foreign currency exchange rates, the impact of higher interest rate and food and fuel prices; further impairments of the Company's goodwill, long-lived assets, equity investments and notes receivable; the Company's ability to recruit, develop and retain high quality personnel; the risks and costs related to cyber security attacks, data breaches, protecting the Company's systems and maintaining integrity and security of the Company's business information, as well as personal data of its guests, employees and others; and pending or threatened litigation, investigations and enforcement actions.

Forward-looking statements should not be relied upon as predictions of actual results. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the Company on the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Royal Caribbean Group

Royal Caribbean Group (NYSE: RCL) is a vacation industry leader with a global fleet of 68 ships across its five brands traveling to approximately 1,000 destinations. With a mission to deliver the best vacations responsibly, Royal Caribbean Group serves millions of guests each year through its portfolio of best-in-class brands, including Royal Caribbean International, Celebrity Cruises, and Silversea; and expanding portfolio of land-based vacation experiences through Perfect Day at CocoCay and Royal Beach Club collection. The company also owns 50% of a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises.

Investor Relations contact: Blake Vanier
Email: bvanier@rccl.com
Media contact: Melissa Castro
Email: corporatecommunications@rccl.com

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SOURCE Royal Caribbean Group

FAQ

What is the size and interest rate of Royal Caribbean's (RCL) new senior unsecured notes offering?

Royal Caribbean (RCL) has priced a $2.0 billion offering of senior unsecured notes due 2033 with a 6.000% interest rate.

When are Royal Caribbean's (RCL) new senior unsecured notes expected to be issued?

The new senior unsecured notes are expected to be issued on or around August 12, 2024, subject to customary closing conditions.

What will Royal Caribbean (RCL) use the proceeds from the new notes offering for?

Royal Caribbean (RCL) intends to use the proceeds to redeem all outstanding 9.250% Senior Notes due 2029 and 8.250% Senior Secured Notes due 2029, along with paying related fees and expenses.

Who is eligible to purchase Royal Caribbean's (RCL) new senior unsecured notes?

The notes are being offered only to qualified institutional buyers in reliance on Rule 144A and certain non-U.S. persons in reliance on Regulation S.