Business Context and Reporting Period
Company: Norwegian Cruise Line Holdings Ltd. (NCLH)
Reporting Date: May 24, 2013
Event: Entry into a new $1.3 billion senior secured credit agreement and termination of prior credit facilities to refinance existing debt.
Key Financial Metrics and Debt Structure
| Facility Type | Amount | Maturity Date | Utilization (as of May 24, 2013) |
|---|---|---|---|
| Term Loan Facility | $675 million | May 24, 2018 | 100% (Borrowed for refinancing) |
| Revolving Credit Facility | $625 million | May 24, 2018 | 0% (None borrowed) |
| Total New Facilities | $1.3 billion | May 24, 2018 | Partial |
Interest Rates: LIBOR or Base Rate plus an applicable margin. Initial margins are 2.25% for Eurocurrency loans and 1.25% for base rate loans, subject to adjustment based on total leverage ratio.
Amortization: Quarterly installments on the Term Loan begin September 2013 at 1.25% of outstanding principal (increasing to 2.50% after May 2015).
Collateral: First-priority liens on six vessels (Norwegian Star, Spirit, Sun, Dawn, Pearl, Gem) and equity interests of guarantor subsidiaries.
Material Changes vs. Prior Period
- Termination of $750M Revolving Facility: The Company terminated a facility with a $750 million capacity. Outstanding principal was $41 million. The prior interest rate was LIBOR + 4.00%.
- Termination of Pearl/Gem Facility: The Company terminated a facility with a $514 million capacity. Outstanding principal was $514 million. This facility had tranches maturing in 2018 and 2019.
- Debt Refinancing: The new Term Loan proceeds were used to refinance the outstanding debt from the terminated facilities and other senior debt.
- Redemption of Senior Notes: The Company notified holders of its 9.50% Senior Notes due 2018 of a redemption of $227.5 million on June 28, 2013. No notes will remain outstanding after this date.
Outlook, Covenants, and Risks
Covenants: The new agreement imposes restrictions on additional indebtedness, liens, asset sales, dividends, and mergers. It requires maintenance of a maximum facility loan-to-value ratio, a maximum ratio of total net funded debt to total capitalization, and a minimum level of free liquidity.
Prepayment Requirements: The Company must prepay the Term Loan with 100% of net cash proceeds from asset sales or events of loss, subject to exceptions for reinvestment in permitted assets.
Risks: Events of default include nonpayment, covenant violations, bankruptcy, and change of control. The filing does not provide specific revenue, profit, or cash flow figures for the period.
Investor Verification Checklist
- Verify the exact amount of the "Applicable Premium" payable on the redemption of the 9.50% Senior Notes.
- Confirm the current total leverage ratio to determine if the interest rate margin will remain at the initial 2.25% or adjust.
- Review the specific definition of "free liquidity" required by the new covenants to assess immediate compliance.
- Check the status of the six mortgaged vessels to ensure no prior liens or encumbrances conflict with the new first-priority security interest.