Royal Caribbean aims for mid-3x by year-end, gets upgrades after refi

By Devika Patel

Knoxville, Tenn., April 26 – Royal Caribbean Group intends to get its leverage ratio to just below mid-3x by the end of 2024 by paying down debt and possibly pursuing some refinancing opportunities.

The group strengthened its balance sheet and caught the attention of rating agencies during the last quarter when it increased its revolving credit facility by $80 million and refinanced its $1.25 billion of 11 5/8% unsecured notes due 2027 through the issuance of $1.25 billion new 6¼% unsecured notes due 2032.

“We continue to make significant progress in strengthening the balance sheet and reaching our trifecta goals of investment grade metrics,” chief financial officer Naftali Holtz said on the Miami-based cruise vacation company’s first quarter ended March 31 earnings conference call on Thursday.

“During the first quarter, we refinanced $1.25 billion of our most expensive bonds with a new unsecured note at six and a quarter that allowed us to save over 500 basis points, or $56 million, of annual interest expense, while also realizing some savings in 2024.

“We will continue to proactively pay down debt and pursue opportunistic refinancing and expect to further reduce leverage to just below mid 3x by the end of 2024,” he said.

During the first quarter, S&P upgraded the company’s rating to BB+ with a stable outlook and Moody’s upgraded the company’s credit rating to Ba2 with a positive outlook.

“Also in the first quarter, S&P upgraded our credit rating to BB+ with a stable outlook and Moody’s upgraded the company's credit rating to Ba2 with a positive outlook,” Holtz said.

“We are very pleased with the rating agencies’ acknowledgement of the strong trajectory of the business and our commitment to strengthening the balance sheet.

“Our priorities to address debt remain unchanged, managing debt maturities, reducing interest expense and removing remaining restrictions on capital allocation for a fully unsecured balance sheet,” he said.

In a Thursday earnings press release, the group noted that as of March 31, the scheduled debt maturities for the remainder of 2024, 2025, 2026 and 2027 were $1.4 billion, $2.6 billion, $3 billion and $2.5 billion, respectively.

Approximately 85% of the company’s debt accrues interest at fixed rates.

As of March 31, the group’s liquidity position was $3.7 billion.

Cash and cash equivalents were $437 million as of March 31, 2024, compared to $497 million as of Dec. 31, 2023.

Long-term debt was $18,876,000,000 as of March 31, 2024, compared to $19,732,000,000 as of Dec. 31, 2023.

Current portion of long-term debt was $1,643,000,000 as of March 31, 2024, compared to $1.72 billion as of Dec. 31, 2023.

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