Royal Caribbean draws $150 million on term loan as liquidity woes mount

By Rebecca Melvin

New York, May 8 – Royal Caribbean Cruises Ltd. increased its 364-day senior secured credit facility and drew $150 million on May 4 as it continues to cut costs, reduce capital expenditures and implement other cash conservation measures to mitigate the financial and operational impacts of the Covid-19 pandemic, according to a company release on Friday.

Additional financing sources are being considering as the company continues to evaluate all options, executive vice president and chief financial officer Jason T. Liberty stated in the release.

Travel restrictions and uncertainty regarding port closures and availability globally caused the cruise operator to suspend operations from March 13 through at least June 11.

As of April 30, the company had liquidity of about $2.3 billion in the form of cash and cash equivalents.

Since its last earnings call, the company has increased the capacity under its revolving credit facilities by $0.6 billion and fully drew on both facilities; entered into a $2.35 billion 364-day senior secured credit facility with an option to extend (secured by 28 ships with a net book value of about $12 billion as of March 31); obtained a $0.8 billion, 12-month debt amortization and financial covenant holiday from certain export-credit backed facilities; amended its non-export-credit backed bank facilities to incorporate a 12-month financial covenant holiday; and agreed with lenders that it will not pay dividends or buy back stock.

Expected debt maturities for the remainder of 2020 and 2021 are $0.4 billion and $0.9 billion, respectively.

The company said it has also cut ship operating expenses, including crew payroll, food, fuel, insurance and port charges, and ships are transitioning into various levels of layup. It has also cut its U.S.-based shoreside workforce by about 26% and has a hiring freeze across the organization.

Operating expenses and administrative expenses are estimated at about $150 million to $170 million per month, and under a prolonged non-revenue scenario the company may seek to further reduce the average monthly requirement.

In addition, it had deferred about $3.0 billion and $1.4 billion of capital expenditure reductions or deferrals in 2020 and 2021, respectively.

Royal Caribbean is a Miami-based cruise vacation company.

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