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Royal Caribbean Gets $700 Million Loan Facility From Morgan Stanley

Royal Caribbean's cruises have been grounded since March.
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Royal Caribbean  (RCL) - Get Royal Caribbean Group Report shares dropped Wednesday after the cruise company announced Morgan Stanley has committed to give it a $700 million term loan facility.

Shares recently traded at $55.97, down 4.61%, and have sunk 58% year to date.

The company can draw on the facility at any time prior to Aug. 12, 2021, Royal Caribbean said. The loan has an interest rate of Libor plus 3.75 percentage points. It matures 364 days after it’s taken.

“The facility will be guaranteed by RCI Holdings LLC, a wholly owned subsidiary of the company that owns the equity interests in subsidiaries that own seven of the company's vessels,” Royal Caribbean said in a statement.

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“The company has 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 of the Company. If drawn, the Company expects to use the net proceeds for general corporate purposes.”

The loan is necessary because Royal Caribbean cruises have been grounded since March, and most of them are on hold through Oct. 31.

Morningstar analyst Jaime Katz offered a mixed review for the company after its earnings report Monday.

“The demand picture painted implies travelers view the current pandemic as transitory, with bookings doubling the average levels experienced during the first eight weeks of the global cruise suspension,” she wrote.

But, “we still don’t expect Royal to surpass the number of 2019 passengers until 2023,” Katz said.