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Law360 (May 13, 2020, 2:16 PM EDT) -- Royal Caribbean Cruises Ltd. on Wednesday said it has launched a $3.3 billion private debt offering to help pay off existing debt as the cruise line operator works to navigate the coronavirus pandemic.
Royal Caribbean said it issued two series of senior notes secured by 28 of its vessels and intellectual property. The proceeds will go toward paying off a $2.35 billion loan from Morgan Stanley Senior Funding Inc., with the remaining funds to be used for general corporate purposes — which could include paying off other debt obligations, the announcement said.
The cruise operator, which is incorporated in Liberia but has its main executive offices in Florida, said it has been hard-hit by the travel restrictions and port closures stemming from the pandemic. Royal Caribbean controls the Royal Caribbean International brand as well as Celebrity Cruises, Azamara and Silversea Cruises brands, and holds a stake in German brand TUI Cruises and Spanish brand Pullmantur Cruceros, according to its website.
"The disruptions to our operations resulting from the COVID-19 pandemic have had, and continue to have, a material negative impact on our financial condition and results of operations," the company said Wednesday in a filing with the U.S. Securities and Exchange Commission.
Royal Caribbean suspended its global cruise operations from March 13 through at least June 11, and suspended its Alaska sailings until June 30, the filing said. Close to half its customers requested cash refunds for canceled cruises, while others opted for future cruise credits at a sweetened price, the disclosure said.
The company has cut staff, instituted a hiring freeze, slashed its marketing costs and halted discretionary capital expenditures, and still expects to burn through about $250 million to $275 million per month while its operations are suspended, the filing said.
Royal Caribbean also faces a steep pile of debt.
It recently increased the capacity of its revolving credit facilities by $600 million and fully drew on both facilities for a total of nearly $3.5 billion of outstanding debt, the filing said. It also entered a $2.35 billion, 364-day loan agreement with Morgan Stanley that it secured with 28 of its ships, and obtained various "holidays" from some of its financial obligations, the SEC disclosure said.
Not including the Morgan Stanley loan, Royal Caribbean said it expects $400 million in debt to mature this year and another $900 million to mature next year.
The proceeds from the senior secured note offerings will go to paying off the Morgan Stanley loan "in full" and could be used to chip away at some of the other debt, Royal Caribbean said. The private offering consists of two series of notes: one series that is due in 2023 and another due in 2025, according to Wednesday's announcement.
The company is also fighting several lawsuits related to the pandemic, including one filed by workers who accuse Royal Caribbean of an "alarming lack of caution" in failing to safeguard them from COVID-19, which they allege led to at least three crew members' deaths. The company's subsidiary Celebrity Cruises was also hit with a worker suit that says the company failed to take appropriate measures to protect thousands of workers on its ships.
Its competitors in the industry face a similar set of financial and legal woes. Norwegian Cruise Line raised $2.2 billion in early May through a raft of fundraising transactions, and Carnival Corp. said in April that it planned to raise about $6 billion in a series of stock and note offerings. Norwegian also faces a probe by the Florida attorney general and proposed securities class actions from investors over the cruise line's handling of the virus.
A representative for Royal Caribbean did not immediately respond to a request for comment Wednesday.
Counsel information was not immediately available Wednesday.
--Additional reporting by Jasmin Boyce, McCord Pagan, Nathan Hale and Carolina Bolado. Editing by Stephen Berg.
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