NCLH addresses its balance sheet and cash flow

2021-11-26T15:20:45+00:00 November 26th, 2021|Finance|

Norwegian Cruise Line Holdings (NCLH) has closed on a series of related balance sheet and cash flow optimisation transactions initiated last week.
NCLH claimed that the net result of the transactions is significantly favourable for the company and its shareholders, as it reduces annual interest expense, lowers leverage, extends the company’s debt maturity profile and increases its liquidity.
A key benefit of these related transactions is that assuming the newly issued 1.125% exchangeable senior notes, due 2027, are settled entirely in cash, at the company’s election, NCLH will benefit from a net reduction in its diluted shares outstanding of about 5.2 mill shares.
“The completion of these balance sheet and cash flow optimisation transactions represents an important milestone for our company, as we have now taken the first significant step forward in executing on our post-crisis financial recovery plan,” explained Mark Kempa, NCLH’s Executive Vice President and CFO (pictured).
“We are focused on maximising value for all of our key stakeholders and we believe this transaction delivers long-term benefits from multiple perspectives by reducing our annual interest expense, reducing our outstanding debt, extending our debt maturities and increasing liquidity, all while providing additional flexibility to limit future shareholder dilution.
“While our ability to clearly and fully communicate the significant and expected multiple benefits of these transactions to our valued shareholders was limited by contractual and legal restrictions prior to completion of these transactions, we are pleased to now be able to convey the highlights of the transactions to our various stakeholders,” he said.
Key elements of the optimisation transactions include:
• Issuance of $1,150 mill aggregate principal amount of 2027 exchangeable notes, which includes the full exercise of the greenshoe option. The initial exchange rate per $1,000 principal amount is 29.6850 ordinary shares, which is equivalent to an initial exchange price of about $33.69 per ordinary share, subject to adjustment in certain circumstances.
• Repurchase of $715.9 mill aggregate principal amount of its 6% exchangeable senior notes, due 2024, for around $1.4 bill.
• Issuance of 46,858,854 ordinary shares to certain existing holders of the 2024 exchangeable notes for $23.64 per share, resulting in net proceeds of about $1.1 bill.
• Part of the net proceeds from the issuance of the ordinary shares will be used to redeem $236.25 mill aggregate principal amount of NCLH’s 12.25% senior secured notes, due 2024 and $262.5 mill aggregate principal amount of the company’s 10.25% senior secured notes, due 2026.
The Company anticipates that the expected net effect of the optimization transactions, which are outlined as follows, will increase shareholder value:
By repurchasing the majority of the 2024 exchangeable notes, which are required to be settled entirely in the company’s ordinary shares, NCLH was able to remove about 52.1 mill shares from its diluted share count, which was partially offset by the issuance of around 46.9 mill shares in the equity offering.
The 2027 exchangeable notes may be settled at the company’s election, in cash, ordinary shares or a combination of cash and ordinary shares, preserving flexibility to manage shareholder dilution in the future.
Assuming the Company elects to settle the 2027 notes entirely in cash, the net result from the optimisation transactions would be a reduction in diluted shares outstanding of around 5.2 mill shares.