Norwegian Cruise Line Holdings Ltd. [NCLH] Filings

10-Q 1 nclh-20230930x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35784

NORWEGIAN CRUISE LINE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)


Bermuda		98-0691007
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7665 Corporate Center Drive, Miami, Florida 33126		33126
(Address of principal executive offices)		(zip code)

(305) 436-4000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary shares, par value $0.001 per share		NCLH		The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ⌧	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

There were 425,424,934 ordinary shares outstanding as of October 31, 2023.

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TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	41

Item 5.	Other Information	42

Item 6.	Exhibits	43

SIGNATURES		45

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenue
Passenger ticket	$	1,733,594	$	1,105,908	$	4,420,909	$	2,242,255
Onboard and other		802,443		509,602		2,142,559		1,082,376
Total revenue		2,536,037		1,615,510		6,563,468		3,324,631
Cruise operating expense
Commissions, transportation and other		546,026		352,798		1,462,565		696,946
Onboard and other		188,694		126,740		470,271		255,445
Payroll and related		323,862		287,390		936,237		790,697
Fuel		170,893		186,984		530,003		503,682
Food		87,839		76,810		271,575		177,483
Other		165,432		208,176		476,123		623,374
Total cruise operating expense		1,482,746		1,238,898		4,146,774		3,047,627
Other operating expense
Marketing, general and administrative		325,365		375,291		1,013,600		1,000,578
Depreciation and amortization		204,608		186,551		596,513		547,214
Total other operating expense		529,973		561,842		1,610,113		1,547,792
Operating income (loss)		523,318		(185,230)		806,581		(1,270,788)
Non-operating income (expense)
Interest expense, net		(181,201)		(152,330)		(530,150)		(624,392)
Other income (expense), net		12,060		31,461		(4,938)		100,572
Total non-operating income (expense)		(169,141)		(120,869)		(535,088)		(523,820)
Net income (loss) before income taxes		354,177		(306,099)		271,493		(1,794,608)
Income tax benefit (expense)		(8,309)		10,705		1,170		7,179
Net income (loss)	$	345,868	$	(295,394)	$	272,663	$	(1,787,429)
Weighted-average shares outstanding
Basic		425,398,415		420,798,538		424,087,517		419,224,710
Diluted		511,585,445		420,798,538		460,819,375		419,224,710
Earnings (loss) per share
Basic	$	0.81	$	(0.70)	$	0.64	$	(4.26)
Diluted	$	0.71	$	(0.70)	$	0.62	$	(4.26)

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income (loss)	$	345,868	$	(295,394)	$	272,663	$	(1,787,429)
Other comprehensive income (loss):
Shipboard Retirement Plan		63		95		191		2,665
Cash flow hedges:
Net unrealized gain (loss)		57,885		(195,543)		34,833		(246,742)
Amount realized and reclassified into earnings		(6,563)		(31,762)		(13,890)		(75,339)
Total other comprehensive income (loss)		51,385		(227,210)		21,134		(319,416)
Total comprehensive income (loss)	$	397,253	$	(522,604)	$	293,797	$	(2,106,845)

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	681,558	$	946,987
Accounts receivable, net		239,416		326,272
Inventories		166,063		148,717
Prepaid expenses and other assets		524,259		450,893
Total current assets		1,611,296		1,872,869
Property and equipment, net		15,974,272		14,516,366
Goodwill		98,134		98,134
Trade names		500,525		500,525
Other long-term assets		1,067,597		1,569,800
Total assets	$	19,251,824	$	18,557,694
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	1,240,088	$	991,128
Accounts payable		158,414		228,742
Accrued expenses and other liabilities		1,038,578		1,318,460
Advance ticket sales		2,965,280		2,516,521
Total current liabilities		5,402,360		5,054,851
Long-term debt		12,634,609		12,630,402
Other long-term liabilities		776,167		803,850
Total liabilities		18,813,136		18,489,103
Commitments and contingencies (Note 10)
Shareholders’ equity:
Ordinary shares, $0.001 par value; 980,000,000 shares authorized; 425,424,934 shares issued and outstanding at September 30, 2023 and 421,413,565 shares issued and outstanding at December 31, 2022		425		421
Additional paid-in capital		7,687,860		7,611,564
Accumulated other comprehensive income (loss)		(455,945)		(477,079)
Accumulated deficit		(6,793,652)		(7,066,315)
Total shareholders’ equity		438,688		68,591
Total liabilities and shareholders’ equity	$	19,251,824	$	18,557,694

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities
Net income (loss)	$	272,663	$	(1,787,429)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		649,958		593,423
(Gain) loss on derivatives		9,338		(151)
Loss on extinguishment of debt		2,801		188,433
Provision for bad debts and inventory obsolescence		3,640		5,438
Gain on involuntary conversion of assets		(4,583)		(1,880)
Share-based compensation expense		96,254		88,923
Net foreign currency adjustments on euro-denominated debt		(2,027)		(17,672)
Changes in operating assets and liabilities:
Accounts receivable, net		80,064		765,692
Inventories		(18,120)		(38,388)
Prepaid expenses and other assets		437,465		(555,561)
Accounts payable		(60,971)		(97,802)
Accrued expenses and other liabilities		(139,188)		116,947
Advance ticket sales		419,420		713,447
Net cash provided by (used in) operating activities		1,746,714		(26,580)
Cash flows from investing activities
Additions to property and equipment, net		(2,102,698)		(1,628,442)
Proceeds from maturities of short-term investments		—		240,000
Cash paid on settlement of derivatives		(118,610)		(214,035)
Other		14,678		10,991
Net cash used in investing activities		(2,206,630)		(1,591,486)
Cash flows from financing activities
Repayments of long-term debt		(2,629,681)		(1,465,439)
Proceeds from long-term debt		2,989,183		3,003,003
Proceeds from employee related plans		5,307		5,267
Net share settlement of restricted share units		(25,271)		(20,212)
Early redemption premium		—		(172,012)
Deferred financing fees		(145,051)		(52,474)
Net cash provided by financing activities		194,487		1,298,133
Net decrease in cash and cash equivalents		(265,429)		(319,933)
Cash and cash equivalents at beginning of period		946,987		1,506,647
Cash and cash equivalents at end of period	$	681,558	$	1,186,714

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2023
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity
Balance, June 30, 2023	$	425	$	7,661,646	$	(507,330)	$	(7,139,520)	$	15,221
Share-based compensation		—		23,563		—		—		23,563
Issuance of shares under employee related plans		—		2,689		—		—		2,689
Common share issuance for NCLC exchangeable notes		—		10		—		—		10
Net share settlement of restricted share units		—		(48)		—		—		(48)
Other comprehensive income, net		—		—		51,385		—		51,385
Net income		—		—		—		345,868		345,868
Balance, September 30, 2023	$	425	$	7,687,860	$	(455,945)	$	(6,793,652)	$	438,688

	Nine Months Ended September 30, 2023
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity
Balance, December 31, 2022	$	421	$	7,611,564	$	(477,079)	$	(7,066,315)	$	68,591
Share-based compensation		—		96,254		—		—		96,254
Issuance of shares under employee related plans		4		5,303		—		—		5,307
Common share issuance for NCLC exchangeable notes		—		10		—		—		10
Net share settlement of restricted share units		—		(25,271)		—		—		(25,271)
Other comprehensive income, net		—		—		21,134		—		21,134
Net income		—		—		—		272,663		272,663
Balance, September 30, 2023	$	425	$	7,687,860	$	(455,945)	$	(6,793,652)	$	438,688

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2022
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity
Balance, June 30, 2022	$	419	$	7,567,129	$	(377,292)	$	(6,288,441)	$	901,815
Share-based compensation		—		26,083		—		—		26,083
Issuance of shares under employee related plans		2		2,708		—		—		2,710
Net share settlement of restricted share units		—		(8,221)		—		—		(8,221)
Other comprehensive loss, net		—		—		(227,210)		—		(227,210)
Net loss		—		—		—		(295,394)		(295,394)
Balance, September 30, 2022	$	421	$	7,587,699	$	(604,502)	$	(6,583,835)	$	399,783

	Nine Months Ended September 30, 2022
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity
Balance, December 31, 2021	$	417	$	7,513,725	$	(285,086)	$	(4,796,406)	$	2,432,650
Share-based compensation		—		88,923		—		—		88,923
Issuance of shares under employee related plans		4		5,263		—		—		5,267
Net share settlement of restricted share units		—		(20,212)		—		—		(20,212)
Other comprehensive loss, net		—		—		(319,416)		—		(319,416)
Net loss		—		—		—		(1,787,429)		(1,787,429)
Balance, September 30, 2022	$	421	$	7,587,699	$	(604,502)	$	(6,583,835)	$	399,783

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Notes to Consolidated Financial Statements

(Unaudited)

Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries, (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, (v) “Oceania Cruises” refers to the Oceania Cruises brand and (vi) “Regent” refers to the Regent Seven Seas Cruises brand.

References to the “U.S.” are to the United States of America, and “dollar(s)” or “$” are to U.S. dollars, the “U.K.” are to the United Kingdom and “euro(s)” or “€” are to the official currency of the Eurozone. We refer you to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations— Terminology” for the capitalized terms used and not otherwise defined throughout these notes to consolidated financial statements.

1. Description of Business and Organization

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of September 30, 2023, we had 31 ships with approximately 66,000 Berths and had orders for six additional ships to be delivered through 2028.

We have four Prima Class Ships on order with currently scheduled delivery dates from 2025 through 2028. We have one Explorer Class Ship on order for delivery in 2023. We have one Allura Class Ship on order for delivery in 2025. These additions to our fleet will increase our total Berths to approximately 82,000.

2. Summary of Significant Accounting Policies

Liquidity

As of September 30, 2023, we had liquidity of approximately $2.2 billion, including cash and cash equivalents of $681.6 million and borrowings available under our $875 million undrawn Revolving Loan Facility and $650 million undrawn commitment of Class B Notes and Backstop Notes issuable by NCLC less related fees (see Note 7 – “Long-Term Debt”). Additionally, in October 2023, we increased our Revolving Loan Facility to $1.2 billion (see Note 7 – “Long-Term Debt”). We believe that we have sufficient liquidity to fund our obligations and expect to remain in compliance with our financial covenants for at least the next twelve months from the issuance of these financial statements.

We will continue to pursue various opportunities to refinance future debt maturities to reduce interest expense and/or to extend the maturity dates associated with our existing indebtedness and obtain relevant financial covenant amendments or waivers, if needed.

Basis of Presentation

The accompanying consolidated financial statements are unaudited and, in our opinion, contain all normal recurring adjustments necessary for a fair statement of the results for the periods presented.

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months; however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually through May 2022. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 28, 2023.

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Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the basic weighted-average number of shares outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) and assumed conversion of exchangeable notes by diluted weighted-average shares outstanding.

A reconciliation between basic and diluted earnings (loss) per share was as follows (in thousands, except share and per share data):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income (loss) - Basic EPS	$	345,868	$	(295,394)	$	272,663	$	(1,787,429)
Effect of dilutive securities - exchangeable notes		17,510		—		13,809		—
Net income (loss) and assumed conversion of exchangeable notes - Diluted EPS	$	363,378	$	(295,394)	$	286,472	$	(1,787,429)
Basic weighted-average shares outstanding		425,398,415		420,798,538		424,087,517		419,224,710
Dilutive effect of share awards		3,676,562		—		2,594,108		—
Dilutive effect of exchangeable notes		82,510,468		—		34,137,750		—
Diluted weighted-average shares outstanding		511,585,445		420,798,538		460,819,375		419,224,710
Basic EPS	$	0.81	$	(0.70)	$	0.64	$	(4.26)
Diluted EPS	$	0.71	$	(0.70)	$	0.62	$	(4.26)

Each exchangeable note (see Note 7 – “Long-Term Debt”) is individually evaluated for its dilutive or anti-dilutive impact on EPS. Only the interest expense and weighted average shares for exchangeable notes that are dilutive are included in the effect of dilutive securities above. During the three months ended September 30, 2023, each of the exchangeable notes was dilutive. During the nine months ended September 30, 2023, only the 2027 1.125% Exchangeable Notes were dilutive. For the three months ended September 30, 2023 and 2022, a total of 3.8 million and 96.3 million shares, respectively, and for the nine months ended September 30, 2023 and 2022, a total of 54.4 million and 93.5 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. The resulting gains or losses are recognized in our consolidated statements of operations within other income (expense), net. We recognized gains of $15.7 million and $34.7 million for the three months ended September 30, 2023 and 2022, respectively, and a loss of $4.2 million and a gain of $79.4 million for the nine months ended September 30, 2023 and 2022, respectively, related to remeasurement of assets and liabilities denominated in foreign currencies. Remeasurements of foreign currency related to operating activities are recognized within changes in operating assets and liabilities in the consolidated statement of cash flows.

Depreciation and Amortization Expense

The amortization of deferred financing fees is included in depreciation and amortization expense in the consolidated statements of cash flows; however, for purposes of the consolidated statements of operations they are included in interest expense, net.

Accounts Receivable, Net

Accounts receivable, net included $42.0 million and $118.4 million due from credit card processors as of September 30, 2023 and December 31, 2022, respectively.

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3. Revenue Recognition

Disaggregation of Revenue

Revenue and cash flows are affected by economic factors in various geographical regions. Revenues by destination were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
North America	$	1,234,852	$	892,971	$	3,817,082	$	2,053,909
Europe		1,284,421		718,435		2,245,868		1,243,149
Asia-Pacific		15,972		2,957		311,524		24,611
Other		792		1,147		188,994		2,962
Total revenue	$	2,536,037	$	1,615,510	$	6,563,468	$	3,324,631

North America includes the U.S., the Caribbean, Canada and Mexico. Europe includes the Baltic region, Canary Islands and Mediterranean. Asia-Pacific includes Australia, New Zealand and Asia. Other includes all other international territories.

Segment Reporting

We have concluded that our business has a single reportable segment. Each brand, Norwegian, Oceania Cruises and Regent, constitutes a business for which discrete financial information is available and management regularly reviews the brand level operating results and, therefore, each brand is considered an operating segment. Our operating segments have similar economic and qualitative characteristics, including similar long-term margins, products and services; therefore, we aggregate all of the operating segments into one reportable segment.

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations through the U.S. Revenue attributable to U.S.-sourced guests has approximated 83-87% of total revenue over the preceding three fiscal years. No other individual country’s revenues exceed 10% in any given period.

Contract Balances

Receivables from customers are included within accounts receivable, net. As of September 30, 2023 and December 31, 2022, our receivables from customers were $91.0 million and $94.2 million, respectively, primarily related to in-transit credit card receivables.

Our standard payment and cancellation penalties apply for all sailings after March 31, 2023. Future cruise credits that have been issued as face value reimbursement for cancelled bookings due to COVID-19 are approximately $71.3 million. The future cruise credits are not contracts, and therefore, guests who elected this option are excluded from our contract liability balance; however, the credit for the original amount paid is included in advance ticket sales.

Our contract liabilities are included within advance ticket sales. As of September 30, 2023 and December 31, 2022, our contract liabilities were $2.1 billion and $1.7 billion, respectively. Of the amounts included within contract liabilities as of September 30, 2023, approximately 40% were refundable in accordance with our cancellation policies. Of the deposits included within advance ticket sales, the majority are refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds. For the nine months ended September 30, 2023, $1.7 billion of revenue recognized was included in the contract liability balance at the beginning of the period.

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4. Leases

Operating lease balances were as follows (in thousands):


	Balance Sheet location	September 30, 2023		December 31, 2022
Operating leases
Right-of-use assets	Other long-term assets	$	702,125	$	707,086
Current operating lease liabilities	Accrued expenses and other liabilities		36,579		39,689
Non-current operating lease liabilities	Other long-term liabilities		582,836		588,064

5. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the nine months ended September 30, 2023 was as follows (in thousands):


	Nine Months Ended September 30, 2023
						Change
	Accumulated		Change			Related to
	Other		Related to			Shipboard
	Comprehensive		Cash Flow			Retirement
	Income (Loss)		Hedges			Plan
Accumulated other comprehensive income (loss) at beginning of period	$	(477,079)	$	(480,578)		$	3,499
Current period other comprehensive income before reclassifications		34,833		34,833			—
Amounts reclassified into earnings		(13,699)		(13,890)	(1)		191	(2)
Accumulated other comprehensive income (loss) at end of period	$	(455,945)	$	(459,635)	(3)	$	3,690

Accumulated other comprehensive income (loss) for the nine months ended September 30, 2022 was as follows (in thousands):


	Nine Months Ended September 30, 2022
						Change
	Accumulated		Change			Related to
	Other		Related to			Shipboard
	Comprehensive		Cash Flow			Retirement
	Income (Loss)		Hedges			Plan
Accumulated other comprehensive income (loss) at beginning of period	$	(285,086)	$	(279,696)		$	(5,390)
Current period other comprehensive income (loss) before reclassifications		(244,361)		(246,742)			2,381
Amounts reclassified into earnings		(75,055)		(75,339)	(1)		284	(2)
Accumulated other comprehensive income (loss) at end of period	$	(604,502)	$	(601,777)		$	(2,725)

(1)	We refer you to Note 8 – “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations.

(2)	Amortization of prior-service cost and actuarial loss reclassified to other income (expense), net.

(3)	Includes $24.3 million of gains expected to be reclassified into earnings in the next 12 months.

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6.Property and Equipment, Net

Property and equipment, net increased $1.5 billion for the nine months ended September 30, 2023 primarily due to the delivery of Norwegian Viva, a Prima Class Ship, and Oceania Cruises’ Vista, an Allura Class Ship. We determine the weighted average useful lives of each class of ships based primarily on our estimates of the useful lives of the ships’ major component systems on the date of acquisition, such as cabins, main diesels, main electric, superstructure and hull, and their related proportional weighting to the ship as a whole. We have assessed the weighted-average useful life of the components of Oceania Cruises’ Vista and assigned a useful life of 35 years and residual value of 10% to the Allura Class Ships. The useful life and residual value consider the historical useful lives of similar assets, manufacturer recommended lives, planned maintenance programs, anticipated changes in technological conditions and the related proportional weighting of the major components of the Allura Class Ships. We refer you to our Annual Report on Form 10-K for a discussion of the useful life and residual value assigned to Prima Class Ships.

7. Long-Term Debt

In February 2023, NCLC issued $600.0 million aggregate principal amount of 8.375% senior secured notes due 2028 (the “2028 Senior Secured Notes”). The 2028 Senior Secured Notes and related guarantees are secured by first-priority interests in, among other things and subject to certain agreed security principles, fourteen of our vessels that also secure the Sixth ARCA and 2029 Senior Secured Notes (each as defined below). The 2028 Senior Secured Notes are guaranteed by our subsidiaries that own the vessels that secure the 2028 Senior Secured Notes. NCLC may redeem the 2028 Senior Secured Notes at its option, in whole or in part, at any time and from time to time prior to February 1, 2025, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the 2028 Senior Secured Notes at its option, in whole or in part, at any time and from time to time on or after February 1, 2025, at the redemption prices set forth in the indenture governing the 2028 Senior Secured Notes plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to February 1, 2025, NCLC may choose to redeem up to 40% of the aggregate principal amount of the 2028 Senior Secured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 108.375% of the principal amount of the 2028 Senior Secured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the 2028 Senior Secured Notes issued remains outstanding following such redemption. The 2028 Senior Secured Notes pay interest at 8.375% per annum, semiannually on February 1 and August 1 of each year, to holders of record at the close of business on the immediately preceding January 15 and July 15, respectively.

The proceeds from the 2028 Senior Secured Notes were used to repay the loans outstanding under our Term Loan A Facility that otherwise would have become due in January 2024, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.

The indenture governing the 2028 Senior Secured Notes includes requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

In July 2022, NCLC entered into a $1 billion amended and restated commitment letter (the “commitment letter”) with the purchasers named therein (collectively, the “Commitment Parties”), which superseded a $1 billion commitment letter previously executed in November 2021. The commitment letter, among other things, extended the commitments thereunder through March 31, 2023. In February 2023, the Commitment Parties further amended the commitment letter (the “amended commitment letter”) to extend certain commitments thereunder through February 2024, with an option for NCLC to further extend such commitments through February 2025 at its election. We may extend or replace the commitments in or before February 2024. Pursuant to the amended commitment letter, the Commitment Parties have agreed to purchase from NCLC an aggregate principal amount of up to $650 million of senior secured notes at NCLC’s option. NCLC has the option to make up to two draws, consisting of (i) $250 million of senior secured notes due 2028 that, if issued, will accrue interest at a rate of 11.00% per annum subject to a 1.00% increase or decrease based on certain

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market conditions at the time drawn (the “Class B Notes”) and (ii) $400 million aggregate principal amount of 8.00% senior secured notes due five years after the issue date (the “Backstop Notes”). The Class B Notes and the Backstop Notes are subject to a quarterly commitment fee of 0.75% for so long as the commitments with respect to Class B Notes or the Backstop Notes, as applicable, are outstanding, which fee will be increased to 1.00% if NCLC extends the commitments through February 2025 at its election. If drawn, the Class B Notes will be subject to an issue fee of 2.00%, and the Backstop Notes will be subject to a quarterly duration fee of 1.50%, as well as an issue fee of 3.00%.

In February 2023, in connection with the execution of the amended commitment letter, NCLC issued $250 million aggregate principal amount of 9.75% senior secured notes due 2028 (the “Class A Notes” and, collectively with the Class B Notes and the Backstop Notes, the “Notes”), subject to an issue fee of 2.00%. NCLC used the net proceeds from the Class A Notes for general corporate purposes. NCLC may redeem the Class A Notes at its option, in whole or in part, at any time and from time to time prior to February 22, 2025, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the Class A Notes at its option, in whole or in part, at any time and from time to time on or after February 22, 2025, at the redemption prices set forth in the indenture governing the Class A Notes, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. The Class A Notes pay interest at 9.75% per annum, quarterly on February 15, May 15, August 15 and November 15 of each year, to holders of record at the close of business on the immediately preceding February 1, May 1, August 1 and November 1, respectively.

The Class A Notes are, and the Class B Notes and the Backstop Notes, if issued, will be, secured by first-priority interests in, among other things and subject to certain agreed security principles, shares of capital stock in certain guarantors, our material intellectual property and two islands that we use in the operations of our cruise business. The Class A Notes are, and the Class B Notes and the Backstop Notes, if issued, will be, guaranteed by our subsidiaries that own the property that secures the Notes as well as certain additional subsidiaries whose assets do not secure the Notes.

The indenture governing the Class A Notes includes requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

In February 2023, NCLC entered into a Backstop Agreement with Morgan Stanley & Co. LLC (“MS”), pursuant to which MS agreed to provide backstop committed financing to refinance and/or repay in whole or in part amounts outstanding under the Senior Secured Credit Facility. Pursuant to the Backstop Agreement, we could, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes up to an aggregate principal amount sufficient to generate gross proceeds of $300 million at any time between October 4, 2023 and January 2, 2024. As a result of the refinancing of the Senior Secured Credit Facility in October 2023 (discussed below), the backstop committed financing is no longer applicable.

In April 2023, $82.5 million in aggregate principal amount of the Revolving Loan Facility due January 2024 was assigned to a new lender, and the maturity date was extended by one year to January 2025. The terms of the assigned principal were the same as the existing lenders who extended commitments in December 2022 under Amendment No. 4 to the Senior Secured Credit Facility.

In April 2023, we took delivery of Oceania Cruises’ Vista. We had export credit financing in place for 80% of the contract price. The associated $632.6 million term loan bears interest at a fixed rate of 3.64% with a maturity date of April 30, 2035. Principal and interest payments are payable semiannually.

In May and June 2023, certain of NCLC’s export-credit backed facilities were amended to replace LIBOR with Term SOFR. In connection with these amendments, the Company adopted Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted

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by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. As of June 30, 2023, we have applied certain optional expedients in our accounting for these amendments and the impact was immaterial.

In August 2023, we took delivery of Norwegian Viva. We had export credit financing in place for 80% of the contract price. The associated $1.1 billion term loan bears interest at a fixed rate of 2.77% with a maturity date of August 3, 2035. Principal and interest payments are payable semiannually.

In October 2023, NCLC issued $790.0 million aggregate principal amount of senior secured notes due 2029 (the “2029 Senior Secured Notes”). The 2029 Senior Secured Notes and related guarantees are secured by first-priority interests in, among other things and subject to certain agreed security principles, fourteen of our vessels that also secure the Sixth ARCA (as defined below) and the 2028 Senior Secured Notes. The 2029 Senior Secured Notes are guaranteed by our subsidiaries that own the vessels that secure the 2029 Senior Secured Notes. NCLC may redeem the 2029 Senior Secured Notes at its option, in whole or in part, at any time and from time to time prior to January 15, 2026, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the 2029 Senior Secured Notes at its option, in whole or in part, at any time and from time to time on or after January 15, 2026, at the redemption prices set forth in the indenture governing the 2029 Senior Secured Notes plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to January 15, 2026, NCLC may choose to redeem up to 40% of the aggregate principal amount of the 2029 Senior Secured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 108.125% of the principal amount of the 2029 Senior Secured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the 2029 Senior Secured Notes issued remains outstanding following such redemption. The 2029 Senior Secured Notes pay interest at 8.125% per annum, semiannually on January 15 and July 15 of each year, commencing on July 15, 2024, to holders of record at the close of business on the immediately preceding January 1 and July 1, respectively.

NCLC used the net proceeds from the 2029 Senior Secured Notes offering, together with cash on hand, to repay the Term Loan A Facility, which would have matured in January 2025, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.

The indenture governing the 2029 Senior Secured Notes includes requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

In October 2023, NCLC amended and restated the Senior Secured Credit Facility (the “Sixth ARCA”). The Sixth ARCA, among other things, increased the aggregate amount of the Revolving Loan Facility from $875 million to $1.2 billion. The Sixth ARCA and related guarantees are secured by first-priority interests in, among other things and subject to certain agreed security principles, fourteen of our vessels that also secure the 2028 Senior Secured Notes and 2029 Senior Secured Notes. The commitments and any loans under the Revolving Loan Facility mature on October 18, 2026, provided that (a) if, on September 16, 2024, NCLC’s 3.625% senior notes due 2024 have not been repaid or refinanced with indebtedness maturing after January 16, 2027 and a liquidity test is not satisfied, the maturity date will be September 16, 2024, (b) if, on May 2, 2025, NCLC’s 2025 Exchangeable Notes have not been repaid or refinanced with indebtedness maturing after January 16, 2027 and a liquidity test is not satisfied, the maturity date will be May 2, 2025, and (c) if, on December 15, 2025, more than $300 million of NCLC’s 5.875% senior notes due 2026 remain outstanding and the remainder has not been repaid or refinanced with indebtedness maturing after January 16, 2027, the maturity date will be December 15, 2025. The Revolving Loan Facility will accrue interest (x) in the case of alternate base rate loans, at a per annum rate based on an alternate base rate plus a margin of between 0.00% and 1.25% and (y) in the case of term benchmark loans, at a per annum rate based on the adjusted term Secured Overnight Financing Rate plus a margin of between 1.00% and 2.25%. The Revolving Loan Facility commitments will accrue an unused commitment fee

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Norwegian Cruise Line Holdings Ltd. [NCLH] Filings
10-Q	[2023-11-08]
10-Q	[2023-08-08]
10-Q	[2023-05-05]
10-K	[2023-02-28]
10-Q	[2022-11-08]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-09]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-02-26]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-05-15]
10-K	[2020-02-27]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-10]
10-K	[2019-02-27]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-07]
10-K	[2018-02-27]
10-Q	[2017-11-09]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-02-27]
10-Q	[2016-11-09]
10-Q	[2016-08-09]
10-Q	[2016-05-10]
10-K	[2016-02-29]
10-Q	[2015-11-04]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-02-27]
10-Q	[2014-10-31]
10-Q	[2014-07-31]
10-Q	[2014-05-01]
10-K	[2014-02-21]
S-1	[2013-11-20]
10-Q	[2013-10-31]
10-Q	[2013-07-30]
S-1	[2013-07-30]
10-Q	[2013-05-08]
10-K	[2013-02-20]