Royal Caribbean Group announces upsizing and pricing of $1.25 billion offering of senior unsecured notes to refinance its senior notes due 2027

Rhea-AI Summary

Royal Caribbean Cruises Ltd. announces pricing of $1.25 billion senior unsecured notes due 2032, with plans to redeem outstanding notes. The offering targets qualified institutional buyers and non-U.S. investors, aiming to strengthen the company's financial position.

Financial Analyst

The private offering of $1.25 billion in senior unsecured notes by Royal Caribbean Cruises Ltd. represents a significant financial maneuver within the cruise industry, aimed at restructuring the company's debt profile. The decision to issue notes at a 6.25% interest rate, which is notably lower than the existing 11.625% Senior Notes due 2027, indicates a strategic move to capitalize on current market conditions to reduce long-term interest expenses.

From a financial perspective, this is a prudent approach to manage and improve the balance sheet, especially considering the capital-intensive nature of the cruise industry. The move to redeem higher-interest debt ahead of maturity can lead to substantial interest savings, improving the company's cash flow and potentially enhancing its credit rating. This action could be seen as a reflection of management's confidence in the company's operational stability and future cash generation capabilities.

Investors and stakeholders should note the increase in the aggregate principal amount of Notes to be issued, which suggests a strong demand from qualified institutional buyers. However, the fact that these notes are not registered under the Securities Act implies that they are subject to certain trading restrictions, which may limit liquidity for investors. The reliance on Rule 144A and Regulation S for the offering also indicates a targeted approach to investors who are familiar with such financial instruments and the associated risks.

Legal Expert

The legal implications of the offering, particularly its structuring as a private placement under Rule 144A and Regulation S, are noteworthy. These provisions allow the company to bypass the extensive disclosures and regulatory hurdles associated with public offerings. While this expedites the capital-raising process and minimizes disclosure obligations, it also restricts the potential investor base to those who qualify as institutional buyers or non-U.S. investors.

It is essential for investors to understand the legal nuances of such securities, which are not registered under the Securities Act and therefore not subject to the same level of public scrutiny. The lack of registration means that investors must rely more heavily on their due diligence and the limited information provided by the issuer. The unregistered nature of the Notes also necessitates a deeper understanding of the exemption mechanisms and the resale limitations imposed on the securities.

Market Research Analyst

The cruise industry has faced significant challenges due to global events such as the COVID-19 pandemic, which disrupted travel and leisure sectors. Royal Caribbean's issuance of new debt suggests a recovery phase, as the company is likely aiming to optimize its capital structure in anticipation of increased demand for travel as markets normalize. The industry's recovery trajectory will be critical in determining the success of this financial strategy.

Market conditions, including interest rates and investor sentiment towards the travel and leisure sector, play a crucial role in the timing and success of such offerings. By locking in a lower interest rate for the long term, Royal Caribbean is strategically positioning itself to benefit from a potential uptick in the industry. However, the long-term nature of the notes and the inherent risks of the cruise industry require careful consideration of the macroeconomic factors that could affect the company's ability to meet its debt obligations over time.

MIAMI, Feb. 22, 2024 /PRNewswire/ -- Royal Caribbean Cruises Ltd. (NYSE: RCL) (the "Company") today announced that it has priced its private offering of $1.25 billion aggregate principal amount of 6.25% senior unsecured notes due 2032 (the "Notes"). The aggregate principal amount of Notes to be issued was increased to $1.25 billion. The Notes will mature on March 15, 2032. The Notes are expected to be issued on or around March 7, 2024, subject to customary closing conditions.

The Company intends to use the proceeds from the sale of the Notes, together with cash on hand and/or borrowings under the Company's revolving credit facilities, to redeem all of the outstanding 11.625% Senior Notes due 2027 (including 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. investors pursuant to 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 the 11.625% Senior Notes due 2027. 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 and the intended use of proceeds. Words such as "anticipate," "believe," "could," "driving," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," "would," "considering," and similar expressions are intended to help identify forward-looking statements. Forward-looking statements reflect management's current expectations, are based on judgments, are inherently uncertain and are subject to risks, uncertainties and other factors, which 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 contagious illnesses on economic conditions and the travel industry in general and the financial position and operating results of the Company in particular, such as governmental and self-imposed travel restrictions and guest cancellations; the Company's ability to obtain sufficient financing, capital or revenues to satisfy liquidity needs, capital expenditures, debt repayments and other financing needs; 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; incidents or adverse publicity concerning the Company's ships, port facilities, land destinations and/or passengers or the cruise vacation industry in general; concerns over safety, health and security of guests and crew; further impairments of the Company's goodwill, long-lived assets, equity investments and notes receivable; an inability to source crew or provisions and supplies from certain places; 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 reduces demand; unavailability of ports of call; growing anti-tourism sentiments and environmental concerns; changes in U.S. foreign travel policy; the uncertainties of conducting business internationally and expanding into new markets and new ventures; the Company's ability to recruit, develop and retain high quality personnel; changes in operating and financing costs; the Company's indebtedness, any additional indebtedness the Company may incur and restrictions in the agreements governing the Company's indebtedness that limit its flexibility in operating its business; the impact of foreign currency exchange rates, the impact of higher interest rate and food and fuel prices; vacation industry competition and changes in industry capacity and overcapacity; the risks and costs related to cyber security attacks, data breaches, protecting the Company's systems and maintaining integrity and security of its business information, as well as personal data of the Company's guests, employees and others; the impact of new or changing legislation and regulations (including environmental regulations) or governmental orders on the Company's business; pending or threatened litigation, investigations and enforcement actions; 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; the unavailability or cost of air service; and uncertainties of a foreign legal system as the Company is not incorporated in the United States.

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 one of the leading cruise companies in the world with a global fleet of 65 ships traveling to approximately 1,000 destinations around the world. Royal Caribbean Group is the owner and operator of three award winning cruise brands: Royal Caribbean International, Celebrity Cruises, and Silversea Cruises and it is also a 50% owner of a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises. Together, the brands have an additional 8 ships on order as of December 31, 2023.

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SOURCE Royal Caribbean Group

What is the total amount of the senior unsecured notes offered by Royal Caribbean Cruises Ltd.?

Royal Caribbean Cruises Ltd. priced a private offering of $1.25 billion aggregate principal amount of 6.25% senior unsecured notes due 2032.

When will the notes mature?

The senior unsecured notes are set to mature on March 15, 2032.

Who are the intended recipients of the notes offering?

The notes are being offered to qualified institutional buyers under Rule 144A and certain non-U.S. investors pursuant to Regulation S.

What is the purpose of issuing these notes?

Royal Caribbean Cruises Ltd. intends to use the proceeds from the sale of the notes to redeem all outstanding 11.625% Senior Notes due 2027.

Are the notes registered under the Securities Act?

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 without registration or an applicable exemption.