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RCL stretches liquidity runway to at least 12 months with $2bn senior/convertible notes offerings

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Royal Caribbean Cruises Ltd. priced its concurrent private offerings of $1bn of 9.125% senior guaranteed notes and $1bn of 4.25% convertible senior notes, both due 2023.

Extends liquidity runway to at least 12 months

With RCL's monthly cash burn estimated at $260m to $285m, including interest expense and necessary capital expenditures but excluding cash refunds of deposits and inflows from new and existing bookings, the additional capital raise adds approximately seven months to the company's liquidity runway in a zero-revenue environment, William Blair analyst Sharon Zackfia said. This effectively funds the company for at least another 12 months.

Guaranteed by seven ships with $7.7bn book value

The senior notes will mature on June 15, 2023. They will be fully guaranteed on a senior unsecured basis by a newly formed, direct wholly owned subsidiary of the company. This subsidiary will own all the equity interests in the RCL subsidiaries that own seven ships with a total book value of $7.7bn.

The convertible notes will mature on June 15, 2023, unless earlier converted, redeemed pursuant to a tax redemption or repurchased. The initial conversion rate per $1,000 principal amount of convertible notes is 13.8672 shares of common stock, which is equivalent to an initial conversion price of approximately $72.11 per share. This is subject to adjustment in certain circumstances.

25% premium to June 4 stock price

The initial conversion price represents an approximately 25% premium to the Thursday's closing price of $57.69 per share.

The notes will be convertible at the holder's option in certain circumstances. RCL may satisfy its conversion obligation by paying or delivering, at its election, cash, shares of common stock or a combination of cash and shares.

Option for up to $150m in additional convertible notes

RCL also granted certain of the initial purchasers a 13-day option to buy up to an additional $150m in convertible notes. These are expected to be issued on or around June 9.

Net proceeds from the offerings are expected to be used for general corporate purposes, which may include repaying debt.

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