Royal Caribbean Announces $250 Million Senior Notes Offering
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Royal Caribbean Announces $250 Million Senior Notes Offering
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Category: Worldwide
This is a press release selected by our editorial committee and published online for free on 2009-06-29
Royal Caribbean Cruises Ltd. (NYSE:RCL) today announced that it has commenced an offering of $250 million aggregate principal amount of 6-year Senior Notes. The offering of the Senior Notes is being made pursuant to a shelf registration statement filed with the Securities and Exchange Commission. The company plans to use the proceeds from the offering for general corporate purposes, including repayment of amounts outstanding under its unsecured revolving credit facility.
As part of its prospectus supplement for the offering, the company provided a business update and details of the effects of the H1N1 virus outbreak and rising fuel prices.
Overall, the company reported booking volumes and pricing levels have remained stable and consistent with prior guidance. With the exception of the Spanish market, the peak summer products are performing consistent with prior guidance. While it is still early, the trajectory of both rate and volume - especially as it relates to its newer ships - points to improving yields in 2010.
Since the company last provided guidance on April 23, 2009, the H1N1 virus outbreak and rising fuel prices have negatively impacted what otherwise would be considered a stabilizing operating environment. On April 23, the company provided guidance of 2009 earnings per share of approximately $1.35 plus or minus $0.10 per share for every 10% change in fuel prices. Since then, the price of oil has risen approximately 45%. On June 9, the company estimated the effects of the H1N1 virus on 2009 earnings per share to be approximately ($0.22) per share.
In the prospectus supplement, the company provided further guidance that:
1. Hedging and fuel cost management have mitigated the impact of increasing oil prices and that full year fuel expense would now be up only $0.12 per share at today's prices;
2. Other Income and Expense for the second quarter is expected to be worse than prior guidance due mainly to foreign currency adjustments to the balance sheet and for ineffectiveness related to hedging amounting to about $0.10 per share; and
3. Interest on the senior notes is expected to increase interest expense for the year by approximately $0.05 per share.
4. Fuel consumption is currently hedged at 48%, 50% and 45% for 2009, 2010 and 2011, respectively.
Commenting on the bond offering, Richard D. Fain, chairman and chief executive officer noted, "Although there are clear signs of stabilization in our business and we enjoy solid liquidity, we believe prudence dictates that we be proactive and opportunistic in these uncertain and volatile financial markets."
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