Royal Caribbean predicts rapid turnaround, cash flow positive in 2022

By Devika Patel

Knoxville, Tenn., Oct. 29 – Royal Caribbean Group expects to be cash flow positive by spring and profitable for the full-year 2022, an executive said Friday.

“[Our] incredible and unique set of assets have helped us effectively manage through the pandemic and is now helping us accelerate out of it,” executive vice president and chief financial officer Jason T. Liberty said on the company’s third quarter ended Sept. 30 earnings conference call on Friday.

“While still too early to provide guidance for next year, we currently anticipate the group generating positive EBITDA starting in the spring of 2022 and positive earnings for the full year 2022,” Liberty said.

Management is pleased by such a rapid turnaround, but cautioned that many factors could affect this outcome, so it is not yet providing concrete guidance for next year.

“We are pleased to be looking at such a positive forward path,” chairman and chief executive officer Richard D. Fain said on the call.

“Our ability to predict a profitable 2022 is strong evidence of how quickly our future can get better.

“We are encouraged to see the return to profitability and strong cash flows as a rapid turnaround, rather than a slow, steady progression.

“Obviously, there are a large number of factors that could shift the us off this trajectory, including worsening spread of the disease, a new variant, inflation, et cetera, but on the current trajectory we are seeing, we believe we can prudently predict at least this level of profitability and cash flow,” Fain said.

In August, the company refinanced 40% of its 11½% secured notes due 2025 with $1 billion of 5½% unsecured notes due 2026.

“During the third quarter, we continued our efforts to manage and improve our balance sheet,” Liberty said.

“To that end, we successfully issued $1 billion in senior unsecured notes at 5½% due in 2026.

“These proceeds were used to replenish capital as a result of the redemption of 40% of the 11½% senior secured notes that were due in 2025.

“This redemption will result in a full-year interest savings of $51 million,” Liberty said.

As of Thursday, the company had no scheduled debt maturities for the remainder of 2021 and $2.2 billion in scheduled debt maturities for 2022, Royal Caribbean stated in a press release.

As of Sept. 30, the company's liquidity was approximately $4.1 billion, including $3.3 billion in cash and cash equivalents, $100 million of undrawn revolving credit facility capacity, and a $700 million commitment for a 364-day facility.

Cash and cash equivalents were $3,289,326,000 as of Sept. 30, 2021, compared to $3,684,474,000 as of Dec. 31, 2020.

Long-term debt was $19,882,760,000 as of Sept. 30, 2021, compared to $17,957,956,000 as of Dec. 31, 2020.

On Aug. 11, Royal Caribbean Cruises Ltd. announced that it plans to use new notes to redeem up to 40% of its 11½% senior notes due 2025 and refinance future debt maturities.

The company sold $2.32 billion of the 11½% notes in May of 2020. The bonds were to be redeemed with a make-whole premium of Treasuries plus 50 basis points and a first call date of June 1, 2022.

The new notes, $1 billion of five-year senior bullet notes (B2/B), priced at par on Aug. 11 to yield 5½% in a drive-by.

The yield printed in the middle of yield talk in the 5½% area. Initial guidance was in the mid-5% area.

Left bookrunner Morgan Stanley & Co. LLC billed and delivered. Joint bookrunners were BofA Securities Inc., Citigroup Global Markets Inc., BNP Paribas Securities Corp., Goldman Sachs & Co. LLC, HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, Mizuho Securities USA Inc., Santander Investment Securities Inc., SEB, SMBC Nikko Securities America Inc., SG Americas Securities LLC, DNB Markets Inc., Fifth Third Securities Inc., R. Seelaus & Co. Inc., Scotia Capital (USA) Inc. and Truist Securities Inc.

Royal Caribbean is a Miami-based cruise vacation company.

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