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Debt | 9 Months Ended
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Sep. 30, 2020
Debt Disclosure [Abstract] |
Debt | Debt Debt consist of the following (in thousands):
|  | Interest Rate(1) |  | Maturities Through |  | As of September 30, 2020 |  | As of December 31, 2019
Fixed rate debt: |  |  |  |  |  |  |  |
Unsecured senior notes |  | 2.65% to 9.13% |  | 2020 - 2028 |  | $ | 2,765,079 |  |  | $ | 1,746,280 |
Secured senior notes |  | 7.25% to 11.50% |  | 2023 - 2025 |  | 3,893,665 |  |  | 662,398 |
Unsecured term loans |  | 2.53% to 5.41% |  | 2021 - 2032 |  | 3,305,031 |  |  | 2,806,774 |
Convertible notes |  | 4.25% |  | 2023 |  | 956,760 |  |  | — |
Total fixed rate debt |  |  |  |  |  | 10,920,535 |  |  | 5,215,452 |
Variable rate debt: |  |  |  |  |  |  |  |
Unsecured revolving credit facilities(2) |  | 1.48% |  | 2022 - 2024 |  | 3,382,000 |  |  | 165,000 |
Unsecured UK Commercial paper |  |  |  | 2021 |  | 386,683 |  |  | — |
USD Commercial paper |  |  |  | — |  | — |  |  | 1,434,180 |
USD Unsecured term loan |  | 0.74% - 4.05% |  | 2020- 2028 |  | 3,641,968 |  |  | 3,519,853 |
Euro Unsecured term loan |  | 1.15% - 1.58% |  | 2021 - 2028 |  | 657,977 |  |  | 676,740 |
Total variable rate debt |  |  |  |  |  | 8,068,628 |  |  | 5,795,773 |
Finance lease liabilities |  |  |  |  |  | 216,953 |  |  | 230,258 |
Total debt (3) |  |  |  |  |  | 19,206,116 |  |  | 11,241,483 |
Less: unamortized debt issuance costs |  |  |  |  |  | (315,669) |  |  | (206,607) |
Total debt, net of unamortized debt issuance costs |  |  |  |  |  | 18,890,447 |  |  | 11,034,876 |
Less—current portion including commercial paper |  |  |  |  |  | $ | (1,256,710) |  |  | $ | (2,620,766) |
Long-term portion |  |  |  |  |  | 17,633,737 |  |  | 8,414,110 |
(1) Interest rates based on outstanding loan balance as of September 30, 2020 and, for variable rate debt, include either LIBOR or EURIBOR plus the applicable margin. (2) Includes $1.9 billion facility due in 2024 and $1.5 billion facility due in 2022, each of which accrue interest at LIBOR plus 1.30%, which interest rate was 1.53% as of September 30, 2020 and each is subject to a facility fee of 0.20%. (3) At September 30, 2020 and December 31, 2019, the weighted average interest rate for total debt was 6.00% and 3.99%, respectively. In March 2020, we increased the capacity of our $1.7 billion and $1.2 billion unsecured revolving credit facilities due in 2024 and 2022, by $200 million and $400 million, respectively, utilizing their respective accordion features. As of September 30, 2020, our aggregate revolving borrowing capacity was $3.4 billion and was fully utilized through a combination of amounts drawn and letters of credit issued under the facilities. In March 2020, we took delivery of Celebrity Apex. To finance the purchase, we borrowed $722.2 million under a previously committed unsecured term loan which is 100% guaranteed by BpiFrance Assurance Export, the official export credit agency of France. The loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 3.23% per annum. In March 2020, we borrowed $2.2 billion pursuant to a 364-day senior secured term loan agreement (the "Secured Term Loan"). In May 2020, the Secured Term Loan was increased by an additional $150 million through the exercise of the accordion feature. The increased Secured Term Loan balance was repaid with proceeds from the $3.32 billion senior secured notes (as described below) issued in May 2020 and discussed below. The Senior Secured Term Loan would have matured 364 days after funding and maturity could have been extended at our option for an additional 364 days subject to customary conditions, including the payment of a 1.00% extension fee. Interest accrued at LIBOR plus a margin of 2.25% which would have increased to 2.50% and 2.75% at 180 days and 365 days, respectively, after funding. We would have also been required to pay a duration fee in an amount equal to 0.25% of the aggregate loan principal amount every 60 days. Additionally, two of our board members each purchased a participation interest equal to $100 million. The repayment of this Secured Term Loan in May 2020 resulted in a total loss on the extinguishment of debt of $41.1 million, which was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss) during the nine months ended September 30, 2020. In May 2020, we issued $3.32 billion in senior secured notes, less original issue discount (the "Senior Secured Notes"). We repaid the $2.35 billion, 364-day Secured Term Loan in its entirety with a portion of the proceeds of the Senior Secured Notes. $1.0 billion of the notes accrue interest at 10.875% and mature in 2023. The remaining $2.32 billion of the Senior Secured Notes accrue interest at a fixed rate of 11.5% and mature in 2025 (the "2025 Secured Notes"). The Senior Secured Notes are fully and unconditionally guaranteed by Celebrity Cruises Holdings Inc., Celebrity Cruises Inc., and certain of our wholly-owned vessel-owning subsidiaries. $1.66 billion of the obligations under the Senior Secured Notes and the related guarantees are secured by first priority security interests in the collateral (which generally includes certain of our material intellectual property, a pledge of 100% of the equity interests of certain of our vessel-owning subsidiaries and mortgages on the 28 vessels owned by such subsidiaries, subject to permitted liens and certain exclusions and release provisions), subject to certain adjustments after the date of issuance based on our debt rating as of the date of issuance and our lien basket amount in certain of our credit facilities. Prior to June 1, 2022, we may, at our option, redeem some or all of the 2025 Secured Notes at 100% of the principal amount plus accrued and unpaid interest plus the applicable “make-whole premium” described in the indenture relating to the Senior Secured Notes (the "Senior Secured Notes Indenture"). On or after June 1, 2022, we may, at our option, redeem some or all of the 2025 Secured Notes at the applicable redemption prices set forth in the Secured Notes Indenture. In June 2020, we issued $1.0 billion in senior unsecured notes which accrue interest at 9.125% and mature in 2023. The notes are fully and unconditionally guaranteed by RCI Holdings LLC, which owns 100% of the equity interests in certain of our wholly-owned vessel-owning subsidiaries. In June 2020, we issued $1.15 billion aggregate principal amount of convertible notes which accrue interest at 4.25% and mature in 2023. The notes are convertible into shares of common stock of the Company, cash, or a combination of common stock and cash, at the election of the Company. The initial conversion rate per $1,000 principal amount of the convertible notes is 13.8672 shares of our common stock, which is equivalent to an initial conversion price of approximately $72.11 per share, subject to adjustment in certain circumstances. Prior to March 15, 2023, the convertible notes will be convertible at the option of holders during certain periods, and only under the following conditions: •during any calendar quarter after September 30, 2020, if the last reported sale price per share of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; •if, prior to March 15, 2023, the trading price per $1,000 principal amount of notes is less than 98% of the product of the last reported sale price per share of our common stock and the conversation rate for ten consecutive trading days (in which case the notes are convertible at any time during the five business day period following the 10 consecutive trading day period); •if we call the notes for a tax redemption; or •upon the occurrence of specified corporate events. On or after March 15, 2023, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date. Holders of the convertible notes may require the Company, upon the occurrence of certain events that constitute a fundamental change under the indenture, to offer to repurchase the convertible notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. We allocated $907.9 million of the convertible notes' proceeds, net of debt issue costs, to Long-term debt and $209.0 million to Paid-in-capital on our Consolidated Balance Sheet. The amount allocated to Long-term debt represents the difference between the $1.15 billion aggregate principal amount of the convertible notes and the amount of the proceeds allocated to the debt component as a debt discount. The fair value of the convertible notes' debt component was determined utilizing a present value calculation. We recognized the equity component by ascribing the difference between the proceeds and the fair value of the debt component to Paid-in-capital and the corresponding debt discount will be amortized to interest expense over the term of the convertible notes using the straight-line method, which approximates the effective interest method. Debt issuance costs on the convertible notes were allocated to the debt and equity components in proportion to the allocation of proceeds to those components. We incurred total debt issue costs of $33.1 million on the issuance of the debt and allocated $6.2 million to Paid-in-capital. Debt issuance costs attributable to debt will be amortized to interest expense over the term of the convertible notes. The net carrying value of the liability component of the convertible notes was as follows:
(in thousands) | As of September 30, 2020 |
Principal | 1,150,000 |  |
Less: Unamortized debt discount and transaction costs | 220,117 |  |
| $ | 929,883 |  |
The interest expense recognized related to the convertible notes was as follows:
(in thousands) | Nine Months Ended September 30, 2020 |
Contractual interest expense | 15,206 |  |
Amortization of debt discount and transaction costs | 24,920 |  |
| $ | 40,126 |  |
In June 2020, RCL Cruises Ltd., our subsidiary that operates and manages our business in the United Kingdom, established a commercial paper facility for the purpose of issuing short-term, unsecured Sterling-denominated notes that are eligible for purchase under the Joint HM Treasury and Bank of England’s COVID Corporate Financing Facility commercial paper program (the “Program”) in an aggregate principal amount up to £300.0 million. The maturities of the commercial paper notes can vary by note, but cannot exceed 364 days from the date of issuance. As of September 30, 2020, we had £300.0 million, or approximately $387.9 million, based on the exchange rate at September 30, 2020, of commercial paper notes outstanding under this program. As of December 31, 2019, we had $1.4 billion of commercial paper notes outstanding under our US commercial paper program established on June 14, 2018. We terminated this commercial paper program as of August 5, 2020. In August 2020, we secured a binding commitment from Morgan Stanley Senior Funding Inc. for a $700 million term loan facility. We may draw on the facility at any time prior to August 12, 2021. Once drawn, the loan will bear interest at LIBOR + 3.75% and will mature 364 days from funding. The facility will be guaranteed by RCI Holdings, LLC, our wholly owned subsidiary that owns the equity interests in subsidiaries that own seven of our vessels. We have the ability to increase the capacity of the facility by an additional $300 million from time to time subject to the receipt of additional or increased commitments and the issuance of guarantees from additional subsidiaries. In October 2020, we issued $575 million aggregate principal amount of senior convertible notes which accrue interest at 2.875% and mature in 2023. The notes are convertible into shares of common stock of the Company, cash, or a combination of common stock and cash, at the election of the Company. The initial conversion rate per $1,000 principal amount of the convertible notes is 12.1212 shares of our common stock, which is equivalent to an initial conversion price of approximately $82.50 per share, subject to adjustment in certain circumstances. Prior to August 15, 2023, the convertible notes will be convertible at the option of holders during certain periods, and only under the following conditions: •during any calendar quarter after December 31, 2020, if the last reported sale price per share of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; •if, prior to August 15, 2023, the trading price per $1,000 principal amount of notes is less than 98% of the product of the last reported sale price per share of our common stock and the conversation rate for ten consecutive trading days (in which case the notes are convertible at any time during the five business day period following the 10 consecutive trading day period); •if we call the notes for a tax redemption; or •upon the occurrence of specified corporate events. On or after August 15, 2023, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date. Holders of the convertible notes may require the Company, upon the occurrence of certain events that constitute a fundamental change under the indenture, to offer to repurchase the convertible notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. We expect to use a portion of the net proceeds from the offering to repay the 2.650% Senior Notes due November 2020, with the remainder to be used for general corporate purposes. In October 2020, we took delivery of Silver Moon. To finance the purchase, we borrowed $300 million under a previously committed unsecured term loan facility, guaranteed by us, to pay a portion of the ship's contract price. The loan is due and payable at maturity in June 2028, provided however, that each lender may elect to cause us to repay the outstanding amount of any advances held by such lender on June 2026 upon 90 days advance notice. The loan amortizes semi-annually starting six months after funding, with 1/24th of the outstanding principal payable every six months and the balance payable upon maturity. Interest on the loan accrues at LIBOR plus 1.50%. During the quarters ended June 30, 2020 and September 30, 2020, we amended certain export-credit backed ship debt facilities to benefit from a 12-month debt amortization deferral (the "Debt Deferral"). Under the Debt Deferral, deferred debt amortization of approximately $0.9 billion will be paid over a period of four years after the 12-month deferral period. The Debt Deferral was offered by certain export credit agencies as a result of the current impact to cruise-line borrowers as a result of COVID-19. Except for the financings incurred to acquire Celebrity Flora, Azamara Pursuit and Silver Moon, all of our unsecured ship financing term loans are guaranteed by the export credit agency in the respective country in which the ship is constructed. As of September 30, 2020, in consideration for these guarantees, depending on the financing arrangement, we pay to the applicable export credit agency (1) a fee of 2.97% per annum based on the outstanding loan balance semi-annually over the term of the loan (subject to adjustments based upon our credit ratings) or (2) an upfront fee of 2.35% to 2.37% of the maximum loan amount. We amortize the fees that are paid upfront over the life of the loan and those that are paid semi-annually over each respective payment period. Prior to the loan being drawn, we present these fees within Other assets in our consolidated balance sheets. Once the loan is drawn, such fees are classified as a discount to the related loan, or contra-liability account, within Current portion of debt or long-term debt. In our consolidated statements of cash flows, we classify these fees within Amortization of debt issuance costs. Both our export credit facilities and our non-export credit facilities totaling an outstanding principal amount of approximately $11.0 billion as of September 30, 2020 contain covenants that, among other things, require us to maintain financial ratios, including in certain cases, a fixed charge coverage ratio of at least 1.25x and/or minimum shareholders' equity and limit our net debt-to-capital ratio. During the quarter ended June 30, 2020, we amended all of our export credit facilities, all of our non-export credit facilities and certain of our credit card processing agreements which contain financial covenants to suspend the testing of these covenants through and including the first quarter of 2021. During the quarter ended September 30, 2020, we further amended each of these agreements, with the exception of a $130.0 million term loan due 2023, to extend the financial covenant waiver through and including the fourth quarter of 2021. The $130.0 million term loan, which remains subject to a covenant waiver through the end of the first quarter of 2021, is prepayable at any time without penalty. Certain of these amendments impose a new monthly-tested minimum liquidity covenant. The minimum liquidity requirement was $500.0 million as of September 30, 2020; however, this amount was subsequently reduced to $350.0 million upon completion of our capital raising activities in October. As of September 30, 2020 and the date of these financial statements, we were in compliance with the applicable minimum liquidity covenant. Pursuant to these amendments, we also agreed that we will not pay cash dividends or effectuate share repurchases during the waiver period unless we are in compliance with the fixed charge coverage covenant as of the end of the most recently completed quarter. For information related to the covenants in our Port of Miami Terminal "A" operating lease agreement, refer to Note 8. Leases. Under certain of our agreements, the contractual interest rate, facility fee and/or export credit agency fee vary with our debt rating. On August 24, 2020, Moody’s downgraded our senior unsecured rating from Ba2 to B2, and on August 31, 2020, S&P Global downgraded our senior unsecured rating from BB to B+. The following is a schedule of annual maturities on our total debt net of debt issuance costs, and including finance leases and commercial paper, as of September 30, 2020 for each of the next five years (in thousands):
Year |
Remainder of 2020 | 333,655 |
2021 | 1,379,400 |
2022 | 4,322,300 |
2023 | 4,327,465 |
2024 | 3,519,209 |
Thereafter | 5,008,418 |
| 18,890,447 |
Finance Leases Silversea Cruises operates the Silver Whisper, under a finance lease. The finance lease for the Silver Whisper will expire in 2022, subject to an option to purchase the ship. The total aggregate amount of the finance lease liabilities recorded for this ship was $31.5 million and $55.6 million at September 30, 2020 and December 31, 2019, respectively. The lease payments on the Silver Whisper are subject to adjustments based on the LIBOR rate.

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