Norwegian Cruise Line Holdings Ltd. current report, 24 May 2013

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.