Annual report [Section 13 and 15(d), not S-K Item 405]

Long-Term Debt

v3.25.0.1
Long-Term Debt
12 Months Ended
Dec. 31, 2024
Long-term Debt, Unclassified [Abstract]  
Long-Term Debt

9.

Long-Term Debt

Long-term debt consisted of the following:

Interest Rate

Balance

December 31, 

Maturities

December 31, 

    

2024

    

2023

    

Through

    

2024

    

2023

(in thousands)

Revolving Loan Facility

6.77

%  

2026

$

245,000

$

$862.5 million 6.000% exchangeable notes

6.00

%  

2024

146,044

$450.0 million 5.375% exchangeable notes

5.38

%  

5.38

%  

2025

448,527

446,027

$1,150.0 million 1.125% exchangeable notes

1.13

%  

1.13

%  

2027

1,137,711

1,132,079

$473.2 million 2.50% exchangeable notes

2.50

%  

2.50

%  

2027

467,764

465,339

$1,000.0 million 5.875% senior secured notes

5.88

%  

5.88

%  

2027

993,581

990,560

$315.0 million 6.25% senior unsecured notes

6.25

%

2030

310,623

$600.0 million 7.75% senior unsecured notes

7.75

%  

7.75

%  

2029

594,782

593,521

$790.0 million 8.125% senior secured notes

8.13

%  

8.13

%  

2029

781,372

779,241

$250.0 million 9.75% senior secured notes

9.75

%  

2028

239,695

$600.0 million 8.375% senior secured notes

8.38

%  

8.38

%  

2028

593,041

590,796

$525.0 million 6.125% senior unsecured notes

6.13

%  

6.13

%  

2028

521,495

520,402

$1,425.0 million 5.875% senior unsecured notes

5.88

%  

5.88

%  

2026

 

1,420,523

 

1,416,779

$565.0 million 3.625% senior unsecured notes

3.63

%  

2024

563,788

€529.8 million Breakaway one loan (1)

5.88

%  

6.73

%  

2026

 

56,343

 

140,721

€529.8 million Breakaway two loan (1)

5.12

%  

5.18

%  

2027

 

130,055

 

216,317

€590.5 million Breakaway three loan (1)

3.47

%  

3.86

%  

2027

 

212,637

 

303,184

€729.9 million Breakaway four loan (1)

3.32

%  

3.66

%  

2029

 

337,406

 

437,721

€710.8 million Seahawk 1 term loan (1)

4.10

%  

4.35

%  

2030

 

401,919

 

501,416

€748.7 million Seahawk 2 term loan (1)

4.06

%  

4.27

%  

2031

 

542,721

 

650,189

Leonardo newbuild one loan

2.68

%  

2.68

%  

2034

 

878,378

 

960,901

Leonardo newbuild two loan

2.77

%  

2.77

%  

2035

 

942,721

 

1,022,829

Leonardo newbuild three loan

1.88

%  

1.89

%  

2037

 

246,738

 

199,689

Leonardo newbuild four loan

1.97

%  

1.31

%  

2038

 

186,090

 

42,037

Explorer newbuild loan

3.97

%  

4.37

%  

2028

 

121,395

 

166,239

Splendor newbuild loan

3.41

%  

3.62

%  

2032

282,809

333,143

Grandeur newbuild loan

3.70

%  

3.70

%  

2035

462,691

501,987

Marina newbuild loan

6.78

%  

7.06

%  

2027

 

33,696

 

56,283

Riviera newbuild loan

6.00

%  

6.84

%  

2026

 

22,536

 

67,683

Vista newbuild loan

3.64

%  

3.64

%  

2035

515,151

560,943

Prestige newbuild loan

6.38

%  

2038

104,269

Prestige Class 2 newbuild loan

6.38

%  

2041

15,105

New Oceania Cruises class 1 newbuild loan

6.38

%  

2039

65,535

New Oceania Cruises class 2 newbuild loan

6.38

%  

2040

16,752

Finance lease and license obligations

Various

 

Various

 

2028

 

11,124

 

13,372

Total debt

 

  

13,100,490

 

14,058,925

Less: current portion of long-term debt

 

  

(1,323,769)

 

(1,744,778)

Total long-term debt

 

  

$

11,776,721

$

12,314,147

(1) Currently U.S. dollar-denominated.

2024 Transactions

In February 2024, NCLC and the purchasers named therein (collectively, the “Commitment Parties”) entered into a third amended and restated commitment letter (the “third amended commitment letter”), which became effective in March 2024. The third amended commitment letter amended and restated the commitment letter dated February 22, 2023 and

extended the commitments thereunder through March 2025. Pursuant to the third amended commitment letter, the Commitment Parties have agreed to purchase from NCLC an aggregate principal amount of $650 million of senior unsecured notes due five years after the issue date (the “Commitment Notes”) at NCLC’s option. If issued, the Commitment Notes will be subject to an issue fee of 0.50% and will bear interest at a rate per annum equal to (A) the greater of (i) the interest rate of the 7.75% senior notes due 2029 (“2029 Unsecured Notes”) and (ii) the then-current secondary trading yield applicable to the 2029 Unsecured Notes plus (B) 200 basis points. The Commitment Notes are subject to a one-time structuring fee of 0.50% and a quarterly commitment fee of 0.75% for so long as the commitments with respect to the Commitment Notes are outstanding.

In connection with the execution of the third amended commitment letter, NCLC agreed to repurchase all of the outstanding $250 million aggregate principal amount of 9.75% senior secured notes due 2028 (the “2028 Secured Notes”) at a negotiated premium plus accrued and unpaid interest thereon. In March 2024, in connection with the settlement of the repurchase, the aggregate principal amount outstanding under the 2028 Secured Notes was cancelled while also releasing the related collateral. The loss on extinguishment was $29.0 million, recognized in interest expense, net.

In November 2023, we executed an agreement for a commitment of €200 million in connection with financial support for our newbuilds, which became available in April 2024. The commitment if drawn will pay interest quarterly at a rate per annum based on an applicable margin plus Euribor 3-months. The commitment may be drawn at any time and is payable within 364 days, but no later than July 15, 2025. Any amount repaid prior to July 15, 2025 may be drawn again.

In September 2024, NCLC issued $315.0 million aggregate principal amount of 6.250% senior unsecured notes due March 1, 2030 (the “2030 Notes”). NCLC may, at its option, redeem the 2030 Notes, in whole or in part, (i) prior to March 1, 2027 (the “First Call Date”), at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed plus an applicable “make-whole” amount, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date, and (ii) on or after the First Call Date, at the redemption prices set forth in the 2030 Notes indenture, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. In addition, at any time and from time to time prior to the First Call Date, NCLC may redeem up to 40% of the aggregate principal amount of the 2030 Notes with the net proceeds of certain equity offerings at a redemption price equal to 106.250% of the principal amount of the 2030 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 2030 Notes issued remains outstanding following such redemption. The 2030 Notes pay interest at 6.250% per annum, semiannually in arrears on March 1 and September 1 of each year, to holders of record at the close of business on the immediately preceding February 15 and August 15, respectively. The 2030 Notes indenture contains covenants that limit the ability of NCLC and its restricted subsidiaries to, among other things: (i) grant or assume certain liens; (ii) enter into sale leaseback transactions; and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets.

The net proceeds for the 2030 Notes, after deducting the initial purchasers’ discount but before deducting estimated fees and expenses, together with cash on hand, were used to redeem $315.0 million aggregate principal amount of the 3.625% senior notes due 2024, including to pay any accrued and unpaid interest thereon.

2025 Transactions

In January 2025, the full amount of outstanding borrowings under the Breakaway one loan, Breakaway two loan, Marina newbuild loan and Riviera newbuild loan, plus any accrued and unpaid interest thereon, was repaid with funds drawn from the Revolving Loan Facility and also releasing the related collateral.

Also in January 2025, NCLC issued $1.8 billion aggregate principal amount of 6.750% senior unsecured notes due February 1, 2032 (the “2032 Notes”). NCLC may, at its option, redeem the 2032 Notes, in whole or in part, (i) prior to February 1, 2028 (the “First Call Date”), at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus an applicable “make-whole” amount, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date, and (ii) on or after the First Call Date, at the redemption prices set forth in the 2032 Notes indenture, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. In addition, at any time and from time to time prior to the First Call Date, NCLC may redeem up to

40% of the aggregate principal amount of the 2032 Notes with the net proceeds of certain equity offerings at a redemption price equal to 106.750% of the principal amount of the 2032 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 2032 Notes issued remains outstanding following such redemption. The 2032 Notes pay interest at 6.750% per annum, semiannually in arrears 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 2032 Notes indenture contains covenants that limit the ability of NCLC and its restricted subsidiaries to, among other things: (i) create liens on certain assets to secure debt; (ii) enter into sale leaseback transactions; and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets.

The net proceeds for the 2032 Notes, together with cash on hand, were used to redeem $1.2 billion aggregate principal amount of the 5.875% senior unsecured notes due 2026 and $600.0 million aggregate principal amount of the 8.375% senior secured notes due 2028, together with any accrued and unpaid interest thereon, and to pay any related transaction premiums, fees and expenses. The repayment of the 8.375% senior secured notes due 2028 also released the related collateral. During the three months ended March 31, 2025, the related losses on extinguishment are expected to be approximately $50.0 million, which will be recognized in interest expense, net.

Concurrently with the above January 2025 transactions, NCLC entered into an amended and restated Revolving Loan Facility (the “Seventh ARCA”). The Seventh ARCA, among other things, increased the aggregate amount of commitments under the Revolving Loan Facility from $1.2 billion to $1.7 billion. The commitments and any loans under the Revolving Loan Facility mature on January 22, 2030, provided that (a) if, on the date that is 91 days prior to the final maturity date of any of NCLC’s outstanding senior notes (other than the exchangeable notes), (i) such senior notes (other than the exchangeable notes) have not been repaid or refinanced with indebtedness maturing after April 23, 2030 and (ii) the aggregate principal amount outstanding under such senior notes exceeds $400,000,000, the maturity date will be such date if such date is earlier than January 22, 2030, (b) if, on November 17, 2026, the 2027 1.125% Exchangeable Notes have not been repaid or refinanced with indebtedness maturing after April 23, 2030 and a liquidity test is not satisfied, the maturity date will be November 17, 2026 and (c) if, on November 17, 2026, the 2027 2.5% Exchangeable Notes have not been repaid or refinanced with indebtedness maturing after April 23, 2030 and a liquidity test is not satisfied, the maturity date will be November 17, 2026. Loans under 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 1.00% and (y) in the case of term benchmark loans, at a per annum rate based on the adjusted term SOFR plus a margin of between 1.00% and 2.00%. The commitments under the Revolving Loan Facility will accrue an unused commitment fee on the amount of available unused commitments at a rate of between 0.15% and 0.30%. The applicable margin and unused commitment fee will depend on the total leverage ratio as of the applicable date.

The Seventh ARCA also modified certain existing negative covenant thresholds and the related collateral. The Seventh ARCA and related guarantees are now secured by first-priority interests in, among other things and subject to certain agreed security principles, ten of our vessels. In January 2025, NCLC also entered into a supplemental indenture that modified the collateral for the 8.125% senior secured notes due 2029 such that collateral is the same as the Seventh ARCA.

Exchangeable Notes

Each of the 2024 Exchangeable Notes, 2025 Exchangeable Notes, 2027 1.125% Exchangeable Notes and 2027 2.5% Exchangeable Notes (as defined below) contain conversion options that may be settled with NCLH’s ordinary shares. As the options are both indexed to and settled in our ordinary shares, they are not accounted for separately as derivatives.

As of December 31, 2024, NCLC had outstanding $450.0 million aggregate principal amount of 5.375% exchangeable senior notes due August 1, 2025 (the “2025 Exchangeable Notes”). The 2025 Exchangeable Notes are guaranteed by NCLH on a senior basis. Holders may exchange their 2025 Exchangeable Notes at their option into redeemable preference shares of NCLC. Upon exchange, the preference shares will be immediately and automatically exchanged, for each $1,000 principal amount of exchanged 2025 Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate will initially be 53.3333 ordinary shares per $1,000 principal amount of 2025 Exchangeable Notes (equivalent to an initial exchange price of approximately $18.75 per ordinary share). The maximum

exchange rate is 66.6666 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events. The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction. The 2025 Exchangeable Notes pay interest at 5.375% 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.

As of December 31, 2024, NCLC had outstanding $1,150.0 million aggregate principal amount of 1.125% exchangeable senior notes due February 15, 2027 (the “2027 1.125% Exchangeable Notes”). The 2027 1.125% Exchangeable Notes are guaranteed by NCLH on a senior basis. Holders may exchange their 2027 1.125% Exchangeable Notes for, at the election of NCLC, cash, ordinary shares of NCLH or a combination of cash and ordinary shares of NCLH, at any time prior to the close of business on the business day immediately preceding August 15, 2026, subject to the satisfaction of certain conditions and during certain periods, and on or after August 15, 2026 until the close of business on the business day immediately preceding the maturity date, regardless of whether such conditions have been met. Upon exchange, the preference shares will be immediately and automatically exchanged, for each $1,000 principal amount of exchanged 2027 1.125% Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The initial exchange rate is 29.6850 ordinary shares per $1,000 principal amount of 2027 1.125% Exchangeable Notes (equivalent to an initial exchange price of approximately $33.69 per ordinary share). The maximum exchange rate is 42.3012 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events. The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction. The 2027 1.125% Exchangeable Notes pay interest at 1.125% per annum, semiannually on February 15 and August 15 of each year, to holders of record at the close of business on the immediately preceding February 1 and August 1, respectively.

As of December 31, 2024, NCLC had outstanding $473.2 million in aggregate principal amount of 2.5% exchangeable senior notes due February 15, 2027 (the “2027 2.5% Exchangeable Notes”). The 2027 2.5% Exchangeable Notes are guaranteed by NCLH on a senior basis. At their option, holders may exchange their 2027 2.5% Exchangeable Notes for, at the election of NCLC, cash, ordinary shares of NCLH or a combination of cash and ordinary shares of NCLH, at any time prior to the close of business on the business day immediately preceding August 15, 2026, subject to the satisfaction of certain conditions and during certain periods, and on or after August 15, 2026 until the close of business on the business day immediately preceding the maturity date, regardless of whether such conditions have been met. If NCLC elects to satisfy its exchange obligation solely in ordinary shares or in a combination of ordinary shares and cash, upon exchange, the 2027 2.5% Exchangeable Notes will convert into redeemable preference shares of NCLC, which will be immediately and automatically exchanged, for each $1,000 principal amount of exchanged 2027 2.5% Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate initially will be 28.9765 ordinary shares per $1,000 principal amount of 2027 2.5% Exchangeable Notes (equivalent to an initial exchange price of approximately $34.51 per ordinary share). The maximum exchange rate is 44.1891 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events. The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction. The 2027 2.5% Exchangeable Notes pay interest at 2.5% per annum, semiannually on February 15 and August 15 of each year, to holders of record at the close of business on the immediately preceding February 1 and August 1, respectively.

The following is a summary of NCLC’s exchangeable notes as of December 31, 2024 (in thousands):

Unamortized

Principal

Deferred

Net Carrying

Fair Value

    

Amount

    

Financing Fees

    

Amount

    

Amount

    

Leveling

2025 Exchangeable Notes (1)

$

449,990

$

(1,463)

$

448,527

$

641,560

Level 2

2027 1.125% Exchangeable Notes

1,150,000

(12,289)

1,137,711

1,177,347

Level 2

2027 2.5% Exchangeable Notes

473,175

(5,411)

467,764

492,395

Level 2

The following is a summary of NCLC’s exchangeable notes as of December 31, 2023 (in thousands):

Unamortized

Principal

Deferred

Net Carrying

Fair Value

    

Amount

    

Financing Fees

    

Amount

    

Amount

    

Leveling

2024 Exchangeable Notes (2)

$

146,601

$

(557)

$

146,044

$

217,790

Level 2

2025 Exchangeable Notes

449,990

(3,963)

446,027

572,567

Level 2

2027 1.125% Exchangeable Notes

1,150,000

(17,921)

1,132,079

1,068,431

Level 2

2027 2.5% Exchangeable Notes

473,175

(7,836)

465,339

453,784

Level 2

(1) Classified within current portion of long-term debt as of December 31, 2024. We expect that the holders of the 2025 Exchangeable Notes will exchange their 2025 Exchangeable Notes for NCLH ordinary shares if not refinanced prior to maturity.
(2) Classified within current portion of long-term debt as of December 31, 2023. During the year ended December 31, 2024, substantially all the holders of 2024 Exchangeable Notes elected to exchange their 2024 Exchangeable Notes for 10,658,607 NCLH ordinary shares and the remaining unexchanged notes were repaid in cash at maturity.

The following provides a summary of the interest expense recognized related to the exchangeable notes (in thousands):

Year Ended

Year Ended

Year Ended

    

December 31, 2024

    

December 31, 2023

    

December 31, 2022

Coupon interest

52,222

57,750

55,759

Amortization of deferred financing fees

11,086

11,669

11,143

Total

$

63,308

$

69,419

$

66,902

The effective interest rate is 5.97%, 1.64% and 3.06% for the 2025 Exchangeable Notes, 2027 1.125% Exchangeable Notes and 2027 2.5% Exchangeable Notes, respectively.

Interest Expense

Interest expense, net for the year ended December 31, 2024 was $747.2 million which included $81.6 million of amortization of deferred financing fees and an approximately $29.2 million loss on extinguishment of debt. Interest expense, net for the year ended December 31, 2023 was $727.5 million which included $73.5 million of amortization of deferred financing fees and a $8.8 million loss on extinguishment and modification of debt. Interest expense, net for the year ended December 31, 2022 was $801.5 million which included $59.3 million of amortization of deferred financing fees and a $193.4 million loss on extinguishment and modification of debt.

Debt Repayments

The following are scheduled principal repayments on our long-term debt including exchangeable notes which can be settled in shares and finance lease obligations as of December 31, 2024 for each of the next five years (in thousands):

Year

    

Amount

2025

$

1,323,769

2026

 

2,486,641

2027

 

3,309,072

2028

 

1,720,518

2029

 

1,935,834

Thereafter

 

2,612,675

Total

$

13,388,509

We had an accrued interest liability of $202.6 million and $195.2 million as of December 31, 2024 and 2023, respectively.

Debt Covenants

As of December 31, 2024, we were in compliance with all of our debt covenants. If we do not continue to remain in compliance with our covenants, we would have to seek additional amendments to or waivers of our covenants. However, no assurances can be made that such amendments or waivers would be approved by our lenders. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact on our operations and liquidity.