NCLH transactions reduce annual interest expense by $86m, among other benefits

A key benefit of these related transactions is that assuming the newly issued 1.125% exchangeable senior notes due 2027 are settled entirely in cash, at the company’s election, NCLH will benefit from a net reduction in its diluted shares outstanding of approximately 5.2m shares.

First step in post-crisis recovery plan

'The completion of these balance sheet and cash flow optimization transactions represents an important milestone for our company as we have now taken the first significant step forward in executing on our post-crisis financial recovery plan,' EVP/CFO Mark Kempa said.

The expected net effect of the transactions includes savings of approximately $86m in annual interest expense, the reduction of approximately 52m diluted shares outstanding, $65m in principal debt reduction and $259m in additional liquidity, after expenses and fees.

$1.15bn of 2027 exchangeable notes

Key elements of last week's transactions include issuance of $1.15bn of 2027 exchangeable notes, which includes the full exercise of the greenshoe option. The initial exchange rate per $1,000 principal amount of these notes is 29.685 ordinary shares, which is equivalent to an initial exchange price of approximately $33.69 per share, subject to adjustment in certain circumstances.

The company also repurchased $715.9m of its 6% exchangeable senior notes due 2024 for approximately $1.4bn.

46.9m shares issued to certain existing holders

And NCLH issued 46,858,854 shares to certain existing holders of the 2024 exchangeable notes at a price of $23.64 per share, resulting in net proceeds of approximately $1.1bn.

A portion of the net proceeds from these ordinary shares will be used to redeem $236.25m of the company's 12.25% senior secured notes due 2024 and $262.5m of its 10.25% senior secured notes due 2026. 

By repurchasing the majority of the 2024 exchangeable notes, which are required to be settled entirely in ordinary shares, NCLH was able to remove approximately 52.1m shares from its diluted share count, which was partially offset by the issuance of the 46.9m shares in the equity offering.

Flexibility

The 2027 exchangeable notes may be settled at the company’s election, in cash, ordinary shares or a combination of cash and ordinary shares, preserving flexibility to manage shareholder dilution in the future.

Assuming NCLH elects to settle the 2027 exchangeable notes entirely in cash, the net result from the optimization transactions would be the reduction of 5.2m in outstanding diluted shares.