RCL to offer 700,000,000

[BermudaBound2014]

Royal Caribbean Group (NYSE: RCL) (the "Company") today announced that it has commenced a private offering of $700,000,000 aggregate principal amount of senior unsecured notes due 2027 to be issued by the Company 

 

https://www.prnewswire.com/news-releases/royal-caribbean-group-announces-proposed-offering-of-senior-unsecured-notes-301453604.html

 

[JT1962]

Gives them some breathing room on debt payments due this year.

[RoyalC]

Total debt almost exceeds market cap at this point. 

[VTSKIandCRUISEGUY]

58 minutes ago, RoyalC said:

Total debt almost exceeds market cap at this point. 

They're using the proceeds to pay off existing debt.

[yogimax]

Just now, VTSKIandCRUISEGUY said:

They're using the proceeds to pay off existing debt.

Yes, creating more debt to pay off existing debt.  Let's hope the pyramid doesn't collapse from its own weight.

[twangster]

Welcome to the Liberty era.

[2chiefs]

1 hour ago, VTSKIandCRUISEGUY said:

They're using the proceeds to pay off existing debt.

Kinda like a government I know...

[orville99]

2 hours ago, RoyalC said:

Total debt almost exceeds market cap at this point. 

Which is an artificial measure of value that only represents how much investors are willing to pay to acquire fractional ownership in a company. Debt to Equity or Debt to Assets are the important metrics relative to incremental debt offerings as they are based on real audited GAAP numbers.

[VTSKIandCRUISEGUY]

9 hours ago, yogimax said:

Yes, creating more debt to pay off existing debt.  Let's hope the pyramid doesn't collapse from its own weight.

No, it's like refinancing your mortgage. Borrowing money to pay off existing debt does not increase the debt load. And if they're able to get a lower interest rate, then all the better.

[VTSKIandCRUISEGUY]

8 hours ago, 2chiefs said:

Kinda like a government I know...

No, it's like refinancing your mortgage. Borrowing money to pay off existing debt does not increase the debt load. And if they're able to get a lower interest rate, then all the better

[2chiefs]

8 hours ago, VTSKIandCRUISEGUY said:

No, it's like refinancing your mortgage. Borrowing money to pay off existing debt does not increase the debt load. And if they're able to get a lower interest rate, then all the better

Unfortunately most refinance so they can add debt load. (been there, done it when I was young but I've since wised up). I should have been a little more clear.

[Presbycruiser67]

Darn, I thought they were offering free money to loyal.passengers.

[Interestedcruisefan]

I thought Rosie had just won her compensation claim from Harmony of the Seas!

 

 

[ONECRUISER]

23 hours ago, JT1962 said:

Gives them some breathing room on debt payments due this year.

Agree, not a Big Deal. 

[orville99]

12 hours ago, VTSKIandCRUISEGUY said:

And if they're able to get a lower interest rate, then all the better

Given the timing, it is highly likely that this is an exchange (refinance) of high interest callable debt for extremely low interest debt. If the original debt has reached the midpoint of its term and is in fact callable, then RCL could actually receive some amount of net proceeds from paying off the balance on the original bonds with the receipts from the new issuance. 

[Interestedcruisefan]

1 minute ago, orville99 said:

Given the timing, it is highly likely that this is an exchange (refinance) of high interest callable debt for extremely low interest debt. If the original debt has reached the midpoint of its term and is in fact callable, then RCL could actually receive some amount of net proceeds from paying off the balance on the original bonds with the receipts from the new issuance. 

Out of interest why would debt be cheaper now?

 

And what made them take on high interest debt to start with? 

[topnole]

20 hours ago, orville99 said:

Which is an artificial measure of value that only represents how much investors are willing to pay to acquire fractional ownership in a company. Debt to Equity or Debt to Assets are the important metrics relative to incremental debt offerings as they are based on real audited GAAP numbers.

What do you think is used to measure debt to equity?

[topnole]

Just now, Interestedcruisefan said:

Out of interest why would debt be cheaper now?

 

And what made them take on high interest debt to start with? 

Apparently they negotiated a better rate with BOA for the new debt.  Things certainly look more stable now than they did in mid 2000.  I think they were paying over 11% on some of the debt they secured at the beginning of the pandemic when no one knew if they could ever return.   
 

 

[Tolkmit]

8 minutes ago, Interestedcruisefan said:

Out of interest why would debt be cheaper now?

 

And what made them take on high interest debt to start with? 

 

People were worried about cruise lines going bankrupt at the time, so stock prices crashed and banks viewed the loans as high risk, so higher interest rate was all that was available. That's no longer a huge concern, which is why stock prices are back up and loans are available for more reasonable rates.

Edited January 5, 2022 by Tolkmit

[Interestedcruisefan]

4 minutes ago, topnole said:

Apparently they negotiated a better rate with BOA for the new debt.  Things certainly look more stable now than they did in mid 2000.  I think they were paying over 11% on some of the debt they secured at the beginning of the pandemic when no one knew if they could ever return.   
 

 

Do you mean mid 2020?

 

Or was 2000 a bad year as well for cruising?

[Interestedcruisefan]

So the expensive debt was 2020? 

[topnole]

4 minutes ago, Interestedcruisefan said:

Out of interest why would debt be cheaper now?

 

And what made them take on high interest debt to start with? 

For the second question.  They had no choice.  No revenue for a year will do that when expenses remain.  Capital intensive companies will bleed heavily when they can’t generate revenue (see the airlines for the several days post 9-11 - they all lost a fortune from just several days of being grounded ).   RCL needed additional capital to ride out the storm and hope to survive.   Why high interest?  See my prior reply.  

[topnole]

1 minute ago, Interestedcruisefan said:

So the expensive debt was 2020? 

Yeah. 2020.  Typo.  
 

Just going off of what I read yesterday.   And apparently they upped the note from 700M to 1B.  

[Interestedcruisefan]

I guess 2020 we didn't know we would get vaccines and even wondered if we would ever cruise again 

 

I was thinking it must be older debt to be refinancing now

 

But all that makes sense

 

World's not normal yet but light at the end of the tunnel at some stage

[topnole]

4 minutes ago, Tolkmit said:

 

People were worried about cruise lines going bankrupt at the time, so stock prices crashed and banks viewed the loans as high risk, so higher interest rate was all that was available. That's no longer a huge concern, which is why stock prices are back up and loans are available for more reasonable rates.

Yeah.  At 20 per share stock price the debt to equity ratio skyrocketed just based on equity value dropping so much.   I think they were at junk status at that point with no end in sight as to if/when they could operate their billions in ships to earn revenue.  Not a loan for the faint of heart.  So of course they had to absorb higher cost of capital.