Business Context and Reporting Period
This Form 8-K Current Report was filed by Norwegian Cruise Line Holdings Ltd. (NCLH) on January 10, 2019, reporting events occurring on January 10 and January 15, 2019. The filing details the announcement of a new ship order and the execution of two material definitive financing agreements to support fleet expansion and general corporate purposes.
Key Financial Metrics and Agreements
New Ship Order (Regent Vessel)
- Contract Price: €473,500,000.
- Builder: Fincantieri S.p.A. of Italy.
- Expected Delivery: 2023.
Regent Vessel Financing (Credit Facility)
- Maximum Principal: $565,154,668.05.
- Availability: Funds 80% of the final contract price and 100% of the SACE premium.
- Interest Rate: Fixed at 3.64% or floating at six-month LIBOR + 1.45% (zero floor).
- Maturity: 12 years from delivery or disbursement.
- Repayment: 24 equal semi-annual installments starting 6 months after delivery/disbursement.
- Security: Guaranteed by NCLC; secured by first lien ship mortgage and equity interest. 100% insured by SACE (Italian export credit agency).
- Outstanding Balance: $0 as of January 15, 2019.
Pride of America Credit Agreement
- Maximum Principal: $230,000,000.
- Purpose: General corporate purposes, including pre-delivery installments for shipbuilding contracts.
- Availability: Up to three drawings between January 10, 2019, and April 1, 2019.
- Interest Rate: LIBOR + 1.00% (increasing to 1.10% if maturity is extended).
- Maturity: January 10, 2021 (extendable to January 10, 2022, subject to conditions including a minimum S&P rating of BB-).
- Repayment: Full repayment on maturity date.
- Security: Guaranteed by Pride of America Ship Holding, LLC; secured by first lien ship mortgage on the PRIDE OF AMERICA vessel.
Material Changes
The filing represents a material increase in the company's potential debt obligations and fleet expansion commitments. Specifically, NCLH has secured financing capacity for a new luxury vessel and established a new credit line for general corporate liquidity. No historical financial performance metrics (revenue, profit, cash flow) are reported in this document as it is a current report on specific events rather than a periodic financial statement.
Guidance, Outlook, and Risks
Management Commentary and Outlook
Management indicated the new ship order and financing arrangements are part of the company's fleet expansion strategy. The Regent Vessel is expected to be delivered in 2023. The Pride of America credit facility provides flexibility for funding shipbuilding progress payments.
Risks and Contingencies
The filing includes a comprehensive cautionary statement regarding forward-looking statements. Key risks identified include:
- Adverse events impacting travel security (terrorism, armed conflict, piracy).
- Economic factors such as unemployment, fuel price volatility, and consumer confidence.
- Spread of epidemics and viral outbreaks.
- Delays in shipbuilding programs and repairs.
- Volatility in global credit markets affecting borrowing ability.
- Restrictions imposed by existing debt agreements limiting operational flexibility.
- Regulatory changes regarding data privacy, environment, and taxation.
Investor Verification Checklist
- Verify the final contract price of the Regent Vessel and any potential cost overruns.
- Confirm the approval status of the SACE insurance policy required for the Regent Vessel financing.
- Monitor NCLH's credit rating to ensure it meets the BB- threshold required to extend the Pride of America Credit Agreement maturity.
- Assess the impact of the new debt covenants on the company's liquidity and future borrowing capacity.
- Review the timeline for the three drawings under the Pride of America Credit Agreement to ensure alignment with shipbuilding payment schedules.