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Other Assets | 12 Months Ended
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Dec. 31, 2020
Other Assets [Abstract] |
Other Assets | Note 8. Other Assets A Variable Interest Entity ("VIE") is an entity in which the equity investors have not provided enough equity to finance the entity's activities or the equity investors (1) cannot directly or indirectly make decisions about the entity's activities through their voting rights or similar rights; (2) do not have the obligation to absorb the expected losses of the entity; (3) do not have the right to receive the expected residual returns of the entity; or (4) have voting rights that are not proportionate to their economic interests and the entity's activities involve or are conducted on behalf of an investor with a disproportionately small voting interest. We have determined that TUI Cruises GmbH ("TUIC"), our 50%-owned joint venture, which operates the brands TUI Cruises and Hapag-Lloyd Cruises, is a VIE. We have determined that we are not the primary beneficiary of TUIC. We believe that the power to direct the activities that most significantly impact TUIC’s economic performance are shared between ourselves and TUI AG, our joint venture partner. All the significant operating and financial decisions of TUIC require the consent of both parties, which we believe creates shared power over TUIC. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting. On June 30, 2020, TUIC acquired Hapag-Lloyd Cruises, a luxury and expedition brand for German-speaking guests, from TUI AG for approximately €1.2 billion, or approximately $1.3 billion as of the purchase date. Hapag-Lloyd Cruises operates two luxury liners and two smaller expedition ships. We and TUI AG each made an equity contribution of €75.0 million, or approximately $84.2 million to TUIC to fund a portion of the purchase price, the remainder of which was financed by third-party financing. As of December 31, 2020, the net book value of our investment in TUIC was $538.4 million, primarily consisting of $387.5 million in equity and a loan of €118.9 million, or approximately $145.5 million, based on the exchange rate at December 31, 2020. As of December 31, 2019, the net book value of our investment in TUIC was $598.1 million, primarily consisting of $443.1 million in equity and a loan of €133.2 million, or approximately $149.5 million, based on the exchange rate at December 31, 2019. The loan, which was made in connection with the sale of Splendour of the Seas in April 2016, accrues interest at a rate of 6.25% per annum and is payable over 10 years. This loan is 50% guaranteed by TUI AG and is secured by a first priority mortgage on the ship. The majority of these amounts were included within Other assets in our consolidated balance sheets. TUIC has various ship construction and financing agreements which include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUIC below 37.55% through May 2033. Our investment amount and outstanding term loan are substantially our maximum exposure to loss in connection with our investment in TUIC. In March 2009, we sold Celebrity Galaxy to TUI Cruises for €224.4 million, or $290.9 million as of the sale date, to serve as the original Mein Schiff 1. Due to the related party nature of this transaction, the gain on the sale of the ship of $35.9 million was deferred and was being recognized over the remaining life of the ship which was estimated to be 23 years. In April 2018, TUI Cruises sold the original Mein Schiff 1 and as a result we accelerated the recognition of the remaining balance of the deferred gain, which was $21.8 million. This amount is included within Other income (expense) in our consolidated statements of comprehensive income (loss) for the year ended December 31, 2018. We determined that Pullmantur Holdings, in which we have a 49% noncontrolling interest and Springwater Capital LLC has a 51% interest, is a VIE for which we are not the primary beneficiary as we do not have the power to direct the activities that most significantly impact the entity's economic performance. In 2020, Pullmantur Holdings and certain of its subsidiaries filed for reorganization under the terms of the Spanish insolvency laws due to the negative impact of the COVID-19 pandemic on the companies. We suspended the equity method of accounting for Pullmantur Holdings during the second quarter of 2020 as we do not intend to fund the entity's future losses and lost our ability to exert significant influence over the entity's activities as a result of the reorganization process. In connection with the reorganization, we terminated the agreements chartering three of our ships to Pullmantur Holdings and sold the ships to third parties during the quarter ended September 30, 2020 for amounts approximating their carrying values. Refer to Note 7. Property and Equipment for further discussion on the impact of the ships' sale on our consolidated financial statements. In addition, we recognized a loss of $69.0 million within Other expense in our consolidated statements of comprehensive (loss) income, during the quarter ended June 30, 2020 representing deferred currency translation adjustment losses, net of hedging, as we no longer had significant involvement in the Pullmantur operation. During the quarter ended June 30, 2020, we entered into an agreement with Springwater Capital LLC to settle the guarantees previously issued by them and for costs that we incurred as a result of Pullmantur S.A.'s reorganization. As part of this settlement, we agreed to provide Pullmantur guests the option to apply their paid deposits toward a Royal Caribbean International or Celebrity Cruises sailing, or request a cash refund. An amount of $21.6 million, approximating the estimated total cash refund expected to be paid to Pullmantur guests and other expenses incurred as part of the reorganization, was recorded in Other expense in our consolidated statements of comprehensive (loss) income for the quarter ended June 30, 2020. As of December 31, 2020, we did not have any exposure to credit loss in Pullmantur Holdings. As of December 31, 2019, our maximum exposure to loss in Pullmantur Holdings was $49.7 million, consisting of loans and other receivables. These amounts were included within Trade and other receivable s, net and Other assets in our consolidated balance sheets. We have determined that Grand Bahama Shipyard Ltd. ("Grand Bahama"), a ship repair and maintenance facility in which we have a 40% noncontrolling interest, is a VIE. This facility serves cruise and cargo ships, oil and gas tankers and offshore units. We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks, ship upgrades and certain emergency repairs as may be required. During the years ended December 31, 2020 and 2019, we made payments of $0.2 million. and $45.7 million, respectively, to Grand Bahama for ship repair and maintenance services. We have determined that we are not the primary beneficiary of this facility, as we do not have the power to direct the activities that most significantly impact the facility's economic performance. Accordingly, we do not consolidate this entity. Given the impact of the COVID-19 pandemic to our business, we evaluated whether our equity method investments were other than temporarily impaired. During the quarter ended March 31, 2020, we performed an impairment evaluation on our investment in Grand Bahama. As a result of the evaluation, we did not deem our investment balance to be recoverable and recorded an impairment charge of $30.1 million bringing our investment balance to zero. The impairment assessment and the resulting charge on our equity method investment in Grand Bahama were determined based on management’s estimates and projections. We are currently recognizing our share of equity method losses against the carrying value of our loans receivable from Grand Bahama. For further information on the measurements used to estimate the fair value of our equity investments, refer to Note 18. Fair Value Measurements and Derivative Instruments. As of December 31, 2020, we had exposure to credit loss in Grand Bahama consisting of $19.1 million in loans. Our loans to Grand Bahama mature between December 2020 and March 2026 and bear interest at LIBOR plus 2.0% to 3.75%, capped at 5.75% for the majority of the outstanding loan balance. Interest payable on the loans is due on a semi-annual basis. We did not receive principal and interest payments during the year ended December 31, 2020. During the year ended December 31, 2019, we received principal and interest payments of $8.6 million. The loan balances are included within Trade and other receivables, net and Other assets in our consolidated balance sheets. We monitor credit risk associated with the loans through our participation on Grand Bahama’s board of directors along with our review of Grand Bahama’s financial statements and projected cash flows. Effective April 1, 2020, we placed the loans in non-accrual status based on our review of Grand Bahama's projected cash flows which have been adversely affected by impacts to their operations caused by the 2019 crane accident related to Oasis of the Seas, Hurricane Dorian and most recently, COVID-19. During the year ended December 31, 2020, no credit losses were recorded related to these loans. In April 2019, Grand Bahama experienced an incident involving one of its drydocks where Oasis of the Seas was undergoing maintenance. The damage from the incident resulted in a write-off of the related drydock by Grand Bahama. Our equity investment income for the year ended December 31, 2019 reflects our equity share of the write-off and other incidental expenses. Grand Bahama's management is working with its insurance underwriter to determine coverage under their existing policies. The following tables set forth information regarding our investments accounted for under the equity method of accounting, including the entities discussed above, (in thousands):
|  | Year ended December 31,
|  | 2020 |  | 2019 |  | 2018
Share of equity (loss) income from investments |  | $ | (213,286) |  |  | $ | 230,980 |  |  | $ | 210,756 |
Dividends received (1) |  | $ | 2,215 |  |  | $ | 150,177 |  |  | $ | 243,101 |
(1) For the year ended December 31, 2019, TUI Cruises paid us dividends totaling €170.0 million, or approximately $190.3 million, based on the exchange rates at the time of the transactions. The amounts included in the table above are net of tax withholdings.
|  | As of December 31,
|  | 2020 |  | 2019
Total notes receivable due from equity investments |  | $ | 164,596 |  |  | $ | 184,558 |
Less-current portion (1) |  | 29,501 |  |  | 25,933 |
Long-term portion (2) |  | $ | 135,095 |  |  | $ | 158,625 |
___________________________________________________________________ (1) Included within Trade and other receivables, net in our consolidated balance sheets. (2) Included within Other assets in our consolidated balance sheets. We also provide ship management services to TUI Cruises GmbH and provided management services to Pullmantur Holdings (which filed for reorganization in Spain in June 2020) and Skysea Holding (which ceased cruising operations in September 2018). Additionally, we bareboat chartered to Pullmantur Holdings the vessels previously operated by its brands, which were retained by us following the sale of our 51% interest in Pullmantur Holdings. These bareboat charters were terminated when Pullmantur Holdings filed for reorganization in Spain. We recorded the following as it relates to these services in our operating results within our consolidated statements of comprehensive income (loss) (in thousands):
|  | Year ended December 31, |  |
|  | 2020 |  | 2019 |  | 2018 |  |
Revenues |  | $ | 21,372 |  |  | $ | 47,242 |  |  | $ | 54,705 |  |  |
Expenses |  | $ | 4,986 |  |  | $ | 4,304 |  |  | $ | 11,531 |  |  |
Summarized financial information for our affiliates accounted for under the equity method of accounting was as follows (in thousands):
|  | As of December 31,
|  | 2020 |  | 2019
Current assets |  | $ | 488,329 |  |  | $ | 435,152 |
Non-current assets |  | 5,456,061 |  |  | 4,019,394 |
Total assets |  | $ | 5,944,390 |  |  | $ | 4,454,546 |
Current liabilities |  | $ | 1,106,700 |  |  | $ | 1,094,552 |
Non- current liabilities |  | 3,771,992 |  |  | 2,267,936 |
Total liabilities |  | $ | 4,878,692 |  |  | $ | 3,362,488 |
Equity attributable to: |  |  |  |
Noncontrolling interest |  | $ | — |  |  | $ | 1,784 |
|  | Year ended December 31,
|  | 2020 |  | 2019 |  | 2018
Total revenues |  | $ | 619,795 |  |  | $ | 2,354,744 |  |  | $ | 2,255,352 |
Total expenses |  | (939,481) |  |  | (1,875,952) |  |  | (1,779,160) |
Net income |  | $ | (319,686) |  |  | $ | 478,792 |  |  | $ | 476,192 |
Credit Losses We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements. In evaluating the credit loss allowance, management considered factors such as historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. Based on these credit loss estimation factors, during the year ended December 31, 2020, we recorded a loss provision of $187.1 million primarily on notes receivable of approximately $81.6 million related to our previous sales of property and equipment to third parties and on receivables of approximately $103.5 million mostly related to loans and other receivables due from Pullmantur Holdings. We also wrote-off a credit loss allowance amount of $107.3 million during 2020, primarily due to loans and other receivables related to Pullmantur Holdings. The following table summarizes our credit loss allowance related to receivables for the year ended December 31, 2020 (in thousands):
|  | Credit Loss Allowance |  |
Balance at January 1, 2020 |  | $ | 5,635 |  |  |  |  |
Loss provision for receivables |  | 187,128 |  |  |  |
Write-offs |  | (107,316) |  |  |  |
Balance at December 31, 2020 |  | $ | 85,447 |  |  |  |  |
Our credit loss allowance balance for the year ended December 31, 2020 primarily related to a $81.6 million loss provision recognized during 2020 on notes receivable related to our previous sale of property and equipment mostly to third parties.

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