Royal Caribbean Cruises Enters $2.2 Billion Loan Facility

Royal Caribbean shares soared after the cruise line obtained a $2.2 billion secured term credit line.
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Royal Caribbean Cruises  (RCL) - Get Report shares jumped on Tuesday after the cruise line operator said it had obtained a $2.2 billion secured term credit line to bolster its liquidity in response to the industrywide shutdown caused by the coronavirus.

Cruise-line operators Carnival Corp.  (CCL) - Get Report and Norwegian Cruise Line Holdings  (NCLH) - Get Report also saw double-digit gains. Airlines, such as United Continental Holdings  (UAL) - Get Report, were also advancing.

Including this new financing, Royal Caribbean said it has more than $3.6 billion of liquidity, made up of cash deposits and its current undrawn revolving credit facilities. 

The company said it has also committed financing for all its new ships on order. 

'"This is a period of unprecedented disruption for the cruise industry," Jason T. Liberty, executive vice president and chief financial officer, said in a statement. 

"We continue to take decisive actions to protect the company's financial and liquidity positions as they enable us to keep focused on our guests, our crew and our long-term plans."

The loan matures on March 22, 2021. The maturity can be extended another 364 days subject to conditions, including a 1% extension fee. 

Morgan Stanley, J.P. Morgan, Bank of America, BNP Paribas and Goldman Sachs acted as joint lead arrangers and book runners on the secured term loan facility.

Earlier this month, Royal Caribbean Cruises withdrew its 2020 financial guidance and increased its revolving-credit facility by $550 million due to the outbreak.

The cruise-ship industry has been battered by the coronavirus, as health experts say that it is the most susceptible to spreading the disease.

The Centers for Disease Control and Prevention specifically lists avoiding cruise ships for all travelers but specifically for travelers with underlying health issues. 

On Monday, the CDC released a report saying the coronavirus survived for as long as 17 days aboard the Diamond Princess cruise ship. The study examined outbreaks on the Diamond Princess ship in Japan and the Grand Princess ship in California. 

Both ships are owned by Carnival Corp. 

On March 13,  President Donald Trump said on Twitter that four major cruise corporations, including Royal Caribbean, would suspend their customer operations for 30 days in light of the coronavirus pandemic. 

Royal Caribbean said at that time that it expected to return to service on April 11.

At last check, Royal Caribbean shares leaped 34% to $37.81, Carnival also climbed 34%, to $16.11, and Norwegian advanced 63% to $15.76.