Bond offering from Royal Caribbean offers 28 vessels as collateral

Royal Caribbean Cruises has launched a $3.3bn bond offering after the Covid-19 pandemic has devastated the global cruise ship sector.

RCC has pledged 28 of its ships as collateral. It forecast heavy losses for Q1 2020, which was before the global standstill of the industry took full force.

The company did not say which ships it had pledged. At the end of 2019 it had vessels with a net book value of about $22.7bn. It has estimated its cash burn to be between $250m and $275m a month during this prolonged suspension of operations, which effectively began in mid-March following no-sail orders in the US.

Royal Caribbean has cut about a quarter of its US workforce. It said that Covid-19 had reduced its first-quarter net income by about $453m and it anticipated reporting a preliminary first-quarter net loss of $1.44bn, compared to a profit of $249.7m in Q1 2019. Preliminary total revenue for Q1 was down 16.7% year on year, to $2bn.

It is preparing to write down the value of its Silversea Cruises unit and several ships by to $1.3bn, from a previous valuation of $2.3bn.

The company will use the funds raised to repay a $2.35bn 364-day term loan agreement with Morgan Stanley.