Norwegian bookings remain strong; company to refinance facility early

By Devika Patel

Knoxville, Tenn., Aug. 10 – Norwegian Cruise Line Holdings Ltd. has a manageable debt maturity ladder, despite 2024 looking bleak, since $2.4 billion of the debt maturing in 2024 is under the company’s credit facility, which it plans to refinance long before it comes due.

The company is keeping liquidity high in this uncertain environment, but bookings are still strong, reflecting continuing demand for travel.

“For the remainder of 2022 and for full year 2023, we have approximately $500 million and $900 million of debt payments coming due, respectively,” executive vice president and chief financial officer Mark A. Kempa said on the company’s second quarter ended June 30 earnings conference call on Tuesday.

“While on the surface, 2024 maturities appear high, approximately $2.4 billion is related to our operating credit facility, consisting of our revolver and term loan A, both of which we expect to refinance well prior to maturity,” Kempa said.

Most of the company’s debt is fixed-rate in a rising rate environment.

“Our debt portfolio is approximately 75% fixed-rate today,” Kempa said.

“This fixed-rate ratio is expected to increase to approximately 80% by year-end 2023, positioning us well in a rising rate environment.

“The weighted average cost of debt for the portfolio is approximately 5%,” Kempa said.

In July, the company amended its undrawn $1 billion commitment and extended it through March 31, 2023.

The company has not drawn, and currently does not intend to draw, under this commitment, since it is able to fund its liquidity needs organically.

However, management believes extending the facility was prudent given the current volatile macroeconomic and strained capital markets environment, the company stated in a Tuesday press release.

“We have been clear that we view this facility as a backstop, and we currently do not intend to draw on it,” Kempa said.

“However, given the volatility in the capital markets in recent months, we felt extending the facility was the prudent choice to enhance our financial flexibility.

“Based on our current projections and trajectory, we continue to believe we will be able to meet our liquidity needs organically,” Kempa said.

The company continues to prioritize enhancing liquidity and financial flexibility in the current environment while seeking opportunities to optimize its balance sheet and reduce leverage, Norwegian stated in Tuesday’s press release.

“Our entire team is united around our key priorities which include accelerating our ongoing operational and financial recovery, delivering outsized top and bottom-line growth from our disciplined and cash-accretive newbuild pipeline and preserving liquidity and financial flexibility against a rapidly evolving macroeconomic backdrop,” Kempa stated in Tuesday’s release.

As of June 30, the company’s total debt position was $13.2 billion and liquidity was approximately $2.9 billion, consisting of cash and cash equivalents of $1.9 billion and a $1 billion undrawn commitment.

Bookings remain solid despite the economic environment.

“Despite recession and economic slowdown fears abounding in the broad marketplace, we continue to see a strong upmarket consumer, with booking trends continuing to show steady improvement week-over-week,” president and chief executive officer Frank J. Del Rio said on the call.

“While the broader economy has experienced a pullback in consumer spending for physical goods, we continue to see strong propensity for spending on travel and experiences, particularly from the affluent consumer.

“Consumers want a vacation even during economic downturns,” Del Rio said.

On July 29, subsidiary NCL Corp. Ltd. reported that it entered into a $1 billion amended and restated commitment letter with several funds care of Apollo Capital Management, LP that amended and restated the commitment letter dated Nov. 1, 2021.

Under the restated letter, the commitment parties agreed to purchase $1 billion of notes.

NCL has the option to make up to two draws under the commitment facility, in which case it will issue to the parties a total of $450 million principal amount of 8% senior secured notes due 2025 and $550 million principal amount of 8% senior notes due three years after the issue date.

The secured notes must be issued prior to the unsecured notes, and the principal amount of secured notes issuable will be increased to the extent that NCL obtains an increase in obligations that may be secured by liens on collateral under the terms and conditions of NCL’s debt agreements, with the principal amount of unsecured notes decreased commensurately

If drawn, the secured notes will be subject to a quarterly duration fee of 1.5% and the unsecured notes will have a semiannual duration fee of 3%. There will be draw fees of 3% for the secured notes and 5% for the unsecured notes.

The expiration of the commitment facility was extended through March 31, 2023. NCL has not drawn on the facility.

Norwegian Cruise Lines is a Miami-based cruise company.

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