Norwegian expects profound drop in leverage as it keeps repaying debt

By Devika Patel

Knoxville, Tenn., Nov. 2 – Norwegian Cruise Line Holdings Ltd. expects its trailing 12-month net leverage will decline significantly from current elevated levels as management keeps repaying debt, having paid down $1.5 billion of debt so far this year and planning to repay another $330 million before the year ends.

“We continue to expect significant improvement [in leverage] driven by our organic cash generation and scheduled payment of debt installments,” executive vice president and chief financial officer Mark A. Kempa said on the company’s third quarter ended Sept. 30 earnings conference call on Wednesday.

“Excluding debt associated with our ships on order for future delivery, trailing 12-month net leverage is expected to be meaningfully reduced versus current elevated levels.

“This does not adjust for ships that are delivered in 2023, which would have the full debt load in the numerator without a full year of contribution included in adjusted EBITDA,” he said.

Norwegian is “committed to prioritizing efforts to optimize its balance sheet and reduce leverage,” it stated in a Wednesday press release.

The company has repaid about $1.5 billion of debt thus far this year and expects to repay another $330 million of debt through the remainder of this year.

“We’ve repaid $130 million debt in the quarter and approximately $1.5 billion of debt over the first nine months of the year,” Kempa said.

“For the remainder of the year, we have approximately $330 million of scheduled debt payments,” he said.

Norwegian boosted its liquidity by refinancing its operating credit facility, lifting the size to $1.2 billion and extending the term to 2026.

“In October, we successfully completed the refinancing of our operating credit facility, extending our debt maturity profile and providing incremental liquidity,” Kempa said.

“Our revolving credit facility was upsized to $1.2 billion from $875 million with a three-year term maturing in October 2026,” he said.

The company sold a $790 million issue of 5.25-year senior secured notes (B1/BB-) at par to yield 8 1/8% in an Oct. 11 drive-by, using proceeds to repay a term loan under the senior secured credit facility.

“The net proceeds, together with the cash on hand were used to fully repay the approximately $800 million on our term loan A, which was to mature in January of 2025,” Kempa said.

“We were particularly pleased with the demand we saw for the new notes issuance.

“In addition to being significantly oversubscribed, we also saw substantial interest from new investors, reflecting increased confidence from the markets in our financial position and outlook,” Kempa said.

At quarter-end, liquidity was $2.2 billion, or approximately $2.5 billion adjusting for the October refinancing.

“Our liquidity position remains strong and would have been approximately $2.5 billion at quarter end, if adjusted for the upsizing of our revolver in October,” Kempa said.

“We continue to believe that our strong liquidity position, coupled with our ongoing cash generation and attractive growth profile, provide a path to meet our near-term liquidity needs, including scheduled debt amortization payments and capital expenditures,” he said.

Cash and cash equivalents were $681,558,000 as of Sept. 30, 2023, compared to $946,987,000 as of Dec. 31, 2022.

Long-term debt was $12,634,609,000 as of Sept. 30, 2023, compared to $12,630,402,000 as of Dec. 31, 2022.

Current portion of long-term debt was $1,240,088,000 as of Sept. 30, 2023, compared to $991,128,000 as of Dec. 31, 2022.

Norwegian is a Miami-based cruise company.

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