WSJ / "latest" on Royal Caribbean / Could Pay Down Debt After Share Sale .................................
March 1, 2021
Royal Caribbean CFO to Bolster Liquidity, Could Pay Down Debt After Share Sale
The cruise operator is offering 16.94 million shares at $91 apiece
By Nina Trentmann and Dave Sebastian
Royal Caribbean Group’s finance chief plans to use the proceeds from a $1.5 billion share sale to boost the cruise operator’s liquidity and, potentially, to reduce its debt, which ballooned during the pandemic.
The Miami-based company, which is nearing the first anniversary since it stopped sailings in North America, said Monday it has launched an equity offering of 16.94 million shares at $91 apiece. The sale is expected to close Wednesday and provide Royal Caribbean with additional funds, Chief Financial Officer Jason Liberty said.
“We are always evaluating and opportunistic about accessing the capital markets. We saw an opportunity here,” Mr. Liberty said.
The fresh capital could help the company pay down its debt, Mr. Liberty added, noting that “last year, we took on a lot of debt.”
Royal Caribbean’s net debt rose more than 42% to $16.45 billion in 2020 from the prior year, according to S&P Global Ratings, a data provider and ratings firm. The cruise operator, which ended 2020 with about $4.4 billion in cash, expects to burn through between $250 million and $290 million a month during the hiatus, Mr. Liberty said. Royal Caribbean last week reported a net loss of $5.8 billion for 2020, compared with net income of $1.9 billion in 2019.
Royal Caribbean has suspended sailings on most of its ships through at least April 30. Its peers Carnival Corp.’s Carnival Cruise Line and Norwegian Cruise Line Holdings Ltd. have scrapped U.S. sailings through the end of May. Mr. Liberty declined to comment on whether Royal Caribbean would extend its sailing suspension.
The timing for resuming U.S. voyages ultimately depends on obtaining a permit from the U.S. Centers for Disease Control and Prevention, which requires operators to conduct mock sailings and apply for permits at least 60 days before offering passenger cruises. Mr. Liberty said Royal Caribbean is in touch with the CDC, but declined to comment further.
A CDC spokesman last week said no cruise operator has held mock voyages or applied for a permit, as the CDC has yet to publish technical instructions for agreements between cruise operators and port and local health authorities.
Canada recently extended its cruise ban by a year to February 2022. Royal Caribbean is currently considering if and how it could offer travel to Alaska and New England despite the Canadian ban, Mr. Liberty said.
Mr. Liberty will see some more cash coming in when the company’s sale of its Azamara business closes. Royal Caribbean in January said it had agreed to sell the cruise line to private-equity firm Sycamore Partners for $201 million in cash. “Every dollar counts,” Mr. Liberty said about the transaction.
He declined to comment on how much Royal Caribbean would need to spend on health and safety measures once it resumes the majority of its operations. “The range is too extreme to provide an estimate for it,” Mr. Liberty said. Competitor Norwegian has said it has put aside about $300 million for health and safety efforts.
Royal Caribbean’s equity offering was received positively by S&P. The ratings firm said the stock sale would provide the cruise operator with “a liquidity cushion to support its ongoing cash burn while operations remain suspended and as they gradually resume.”
The proceeds also could help Royal Caribbean reduce its leverage levels, S&P said.
S&P last week downgraded its issuer-credit rating on Royal Caribbean further below investment-grade. Mr. Liberty said Royal Caribbean wants to return to an investment-grade rating, but didn’t provide a specific timeline for that.
Write to Nina Trentmann at Nina.Trentmann@wsj.com and Dave Sebastian at dave.sebastian@wsj.com
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