Thanks a Billion

OK, OASIS is a wonderful ship but it costs $1.4 billion.  How do we pay for it?

We’ve just publicly answered that question.  With most ships, we borrow 80% of the contract price and we fund the remaining 20% plus the non contract expenses (architects, interest, owner supply, etc.) from our operating cash flow.  Normally, we arrange that borrowing a few months before delivery and – normally – this is a relatively easy process.  But, in case anyone missed it, these are not normal times and normal financing is abnormal today. 

Fortunately, we have a few advantages over most companies.  Most importantly are the relationships we have established over decades of working with others.  In addition, we always make contingency plans in case of abnormal times. 

In this case, the relationships I am talking about are with our commercial banks, the shipyard and the Finnish government and agencies.  As we have just announced, we have finalized financing commitments for the 80% financing.  And we have been paying the equity portion as we go out of operating cash flow.  The banks in the deal are NORDEA, SEB, and BNP.  Our relationship with these banks and many of their executives goes back as much as 35 years; some to when I was a junior financial analyst.  Our relationship with the shipyard and Finland goes back over 40 years to when the company ordered its first ships in 1969. 

In this case, our contingency plan included a guarantee from FINNVERA, the Finnish export credit guarantee agency who originally agreed to guarantee 80% of the financing and subsequently raised that to 95%.  Armed with the FINNVERA guarantee and funding from Finnish Export Credit. Ltd., we were able to finalized the deal and announce it earlier this morning. We completed the deal somewhat earlier than usual because of all the turmoil in the market and the uncertainty that caused.

I know there were many observers who thought we would have trouble arranging this financing.  After all, banks are not lending to each other; why would they lend a billion dollars to us?  But we always thought those concerns were naïve – those naysayers underestimated the financial value of the ship; they underestimated the strengths of our relationships with Finland and with our bankers; and they underestimated the determination and ability of our team to make it happen.  My hat is off to Brian Rice our CFO and to Antje Gibson our VP, Treasury.

13 Responses to “Thanks a Billion”

  1. Arvids says:

    Very happy that you got the financing. Yes my hat goes off to Brian Rice also.

    On my upcoming cruise if I win really big in the casino I will donate my money back to RCCL so that Oasis and Allure will be a part of the fleet.

    Thanks for the Blogs Its nice to hear the real deals versus some of the things you read on boards and in the papers.

    Keep the blogs coming Richard

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  2. Elizanessie says:

    Great to read Richard that the financing is now sorted out.

    Way to go Brian & Antje.

    I know the International Critters from Cruise Critic will be very happy when they hear the news.
    They are all so looking forward to 1st Dec & 5th Dec sailings.

    Really enjoying this Blog, great idea Richard (maybe see you 29th July in UK?)

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  3. MarilynS says:

    This blog is wonderful and makes the cruiser feel that you care. I know because I worked for a major cruise line for 17 years and I know how important it is to have a presence.

    Congratulations…..the lofts sound incredible and I look foward to reading your blog.

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  4. Cruise Lines says:

    Royal can afford Oasis after all…

    Everyone at Royal Caribbean Cruises must be breathing several sighs of relief after securing funding for Oasis of the Seas. The 220,000-ton 5,400-passenger behemoth is costing an eye-watering $1.4 billion and up until yesterday Royal didn’t have the m…

  5. Per Arne says:

    Great news! Of course we all know that Royal Caribbean is a strong brand, but it is still a big relief to hear that you have managed to sort out the financing for Oasis. She will be a beautyful ship – I hope to be able to take my family on her. We did our first cruise two years ago (on Jewel) and the whole family loved it. Many thanks for your dedication to bringing great and beautyful ships to the world.

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  6. Joey M says:

    Glad to hear all is going well with financing. I had some thoughts on changes to Anchor Society changes. Since your larger ships already have a Diamond Lounge with full services, can’t you let lower levels into the concierge lounge. These are areas that may need major upgrading. Loyalty is a major rebooking selling point. I realy like that your sister company Celebrity has a concierge class of balcony staterooms which to me is a big selling point . Joey

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  7. Mike P says:

    The question that comes to my mind is this:

    Considering the reduction in orders for new builds, it seems the industry is going to go through a period of harvesting based on existing fleets for some years before it starts building more inventory again. This should allow healthy operators such as RCI to build up cash. What would it take for RCI to become completely debt free and start building new builds out of cash reserves?

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  8. SuzanneHyde says:

    And with the relationship with your loyal Crown & Anchor cruisers that debt will be paid off in no time! I am very happy to hear that the financing is secure for the Oasis of the Seas. My family and I enjoyed a fantastic vacation on Liberty of the Seas in March and we hope to sail on the Oasis next year!

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  9. Cruise Lines says:

    Diamond Club on Oasis starts to shine…

    I am so glad to read that I am not the only one who looks at a cruise ship under construction and sees, well, a building site. In his latest blog on the progress of Oasis of the Seas, Royal……

  10. dkintu says:

    Its really interesting that RCI not only shares intimate information such as financing details, but its leaders get it-treat your customers like part of the family. Me and my family are RCI cruisers for life. Great great job.

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  11. john61 says:

    A $1.4 billion ship might explain all of the cut backs on all of the other ships.

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  12. Nicsbest says:

    This looks like an absolutely beautiful ship. And how I would love to spend my 40th birthday with my family and friends. But looking at my dates (late Jan) it is so much more expensive then what’s out there. Any reason why?

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  13. [...] (1) Quoted by Chairman and CEO Richard D Fain. [...]

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