Royal Caribbean Stock Slides, Debt Financing, and Credit Suisse Maintains Its Positive Outlook

Royal Caribbean Stock NYSE:RCL

Royal Caribbean stock was trading at $44.41 s of 11:30 AM EDT on Friday.

To help refinance debt that is due for payment in the future year, Royal Caribbean Cruises (NYSE:RCL) turned to the US corporate high-yield bond market. In a statement released on Thursday, the cruise line operator said that it had obtained $2 billion to assist restructure all of its outstanding 9.125% bonds due in 2023 and 10.875% notes due in the same year. In 2029, the fresh bonds will come due.

According to those with knowledge of the situation, the corporation divided the funds into two parts: $1 billion of secured notes that sold at an 8.25% yield and $1 billion of priority guarantee notes that were priced at 9.25%.

Trace bond transaction statistics show that the price of Royal Caribbean stock 9.125% notes due 2023 increased by around 0.8 cents to 101.8 cents. While this was going on, the secondary market saw a decrease in the price of its 5.5% and 11.625% bonds that mature in 2026 and 2027, respectively, of around 1.6 cents and 1.25 cents.

Most businesses were using the junk-debt market because they are in immediate need of financing, frequently for a merger or acquisition. Since the Federal Reserve started hiking interest rates at the beginning of the year, refinancings have been hard to come by.

In order to discuss a private transaction, the individual who spoke with us on condition of anonymity stated that Morgan Stanley served as the only book-runner for the bond sale. Inquiries for comment were not immediately answered by Morgan Stanley or Royal Caribbean (NYSE:RCL) representatives.

Royal Caribbean Stock, Debt Downgrade, and Forecast.

Last month, Royal Caribbean’s credit rating was reduced by Moody’s Investors Service from B1 to B2, which is five levels below junk. On another refinancing in the junk-bond market the same month, the cruise ship paid more than 11% for debt with 2022 and 2023 maturities totaling $1.25 billion.

The company will have less than $1 billion in earnings before interest, taxes, depreciation, and amortization this year due to a weaker-than-anticipated recovery in 2022, according to Moody’s, which downgraded the company. The credit rating agency also referred to the company’s substantial debt load, which will require refinancing at probably higher interest rates and put pressure on its bottom line.

According to Moody’s analysis, “a number of headwinds hindered the company’s earnings recovery in early 2022, including the impact on bookings and increased cancellations owing to the Omicron variant and Russia’s invasion of Ukraine, considerably higher fuel prices, and food cost inflation. Royal Caribbean, on the other hand, is able to command a higher price because of its younger, smaller fleet and a broader variety of upscale or lux services.

RCL financials

In order to repurchase $350 million in senior notes due in November 2023 and $800 million in senior notes due in June 2023, Royal Caribbean (NYSE:RCL) additionally raised $1 billion in 6% convertible senior notes due in 2025 earlier in August. According to its recent Q4 filings, the corporation has over $23 billion in debt on its balance sheet as of June 30, 2022, having tapped corporate loan markets during the pandemic.

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