Royal Caribbean Cruise Lines 2005 Annual Report Download - page 40

During 2005, we amended our $1.0 billion unsecured revolving
credit facility to extend its maturity date from March 27, 2008 to
March 27, 2010, and reduce the effective interest rate to LIBOR plus
1.0% and the commitment fee to 0.2% of the undrawn portion of the
facility at December 31, 2005. In addition, in 2005, we entered into
two $100.0 million unsecured term loans, due 2010, at an effective
interest rate of LIBOR plus 0.8% at December 31, 2005.
During 2004, we entered into an eight-year, $225.0 million unse-
cured term loan, at LIBOR plus 1.75%, which was amended in 2005
to reduce the effective interest rate to LIBOR plus 1.0% at December
31, 2005.
The Liquid Yield Option™ Notes and the zero coupon convertible
notes are unsecured zero coupon bonds with yields to maturity of
4.875% and 4.75%, respectively, due 2021. Each Liquid Yield
Option™ Note and zero coupon convertible note was issued at a
price of $381.63 and $391.06, respectively, and will have a principal
amount at maturity of $1,000. Each Liquid Yield Option™ Note and
zero coupon convertible note is convertible at the option of the
holder into 11.7152 and 15.6675 shares of common stock, respec-
tively, if the market price of our common stock reaches certain lev-
els. These conditions were met at December 31, 2005 and 2004 for
the zero coupon convertible notes and at December 31, 2004 for the
Liquid Yield Option™ Notes. Since February 2, 2005, we have the
right to redeem the Liquid Yield Option™ Notes and commencing on
May 18, 2006, we will have the right to redeem the zero coupon con-
vertible notes at their accreted values for cash as a whole at any
time, or from time to time in part. Holders may require us to pur-
chase any outstanding Liquid Yield Option™ Notes at their accreted
value on February 2, 2011 and any outstanding zero coupon con-
vertible notes at their accreted value on May 18, 2009 and May 18,
2014. We may choose to pay the purchase price in cash or common
stock or a combination thereof.
During 2005, holders of our Liquid Yield Option™ Notes and zero
coupon convertible notes converted approximately $10.4 million
and $285.0 million, respectively, of the accreted value of these
notes into approximately 0.3 million and 9.4 million shares, respec-
tively, of our common stock and cash for fractional shares. In addi-
tion, we called for redemption $182.3 million of the accreted bal-
ance of outstanding Liquid Yield Option™ Notes. Most holders of
the Liquid Yield Option™ Notes elected to convert into shares of our
common stock, rather than redeem for cash, resulting in the
issuance of approximately 4.5 million shares.
During 2005, we prepaid a total of $297.0 million on a term loan
secured by a certain Celebrity ship and on a variable rate unsecured
term loan.
In 1996, we entered into a $264.0 million capital lease to finance
Splendour of the Seas and in 1995 we entered into a $260.0 million
capital lease to finance
Legend of the Seas . During 2005, we paid
$335.8 million in connection with the exercise of purchase options
on these capital lease obligations.
Under certain of our agreements, the contractual interest rate and
commitment fee vary with our debt rating.
The unsecured senior notes and senior debentures are not
redeemable prior to maturity.
Our debt agreements contain covenants that require us, among
other things, to maintain minimum net worth and fixed charge cov-
erage ratio and limit our debt to capital ratio. We are in compliance
with all covenants as of December 31, 2005. Following is a schedule
of annual maturities on long-term debt as of December 31, 2005 for
each of the next five years (in thousands):
Year
2006 $ 600,883
2007 329,493
2008 245,257
2009 1361,449
2010 687,376
1The $137.9 million accreted value of the zero coupon convertible notes at December
31, 2005 is included in year 2009. The holders of our zero coupon convertible notes
may require us to purchase any notes outstanding at an accreted value of $161.7 mil-
lion on May 18, 2009. This accreted value was calculated based on the number of
notes outstanding at December 31, 2005. We may choose to pay any amounts in cash
or common stock or a combination thereof.
Note 6. Shareholders’ Equity
On September 25, 2005, we announced that we and an investment
bank had finalized a forward sale agreement relating to an ASR
transaction. As part of the ASR transaction, we purchased 5.5 million
shares of our common stock from the investment bank at an initial
price of $45.40 per share. Total consideration paid to repurchase
such shares, including commissions and other fees, was approxi-
mately $249.1 million and was recorded in shareholders’ equity as a
component of treasury stock.
The forward sale contract matured in February 2006. During the
term of the forward sale contract, the investment bank purchased
shares of our common stock in the open market to settle its obliga-
tion related to the shares borrowed from third parties and sold to us.
Upon settlement of the contract, we received 218,089 additional
shares of our common stock. These incremental shares will be
recorded in shareholders’ equity as a component of treasury stock in
the first quarter of 2006.
Our Employee Stock Purchase Plan (“ESPP”), which has been in
effect since January 1, 1994, facilitates the purchase by employees
of up to 800,000 shares of common stock. Offerings to employees
are made on a quarterly basis. Subject to certain limitations, the pur-
chase price for each share of common stock is equal to 90% of the
average of the market prices of the common stock as reported on
the New York Stock Exchange on the first business day of the pur-
chase period and the last business day of each month of the pur-
chase period. Shares of common stock of 14,476, 13,281 and 21,280
38 Royal Caribbean Cruises Ltd.
Notes to the Consolidated
Financial Statements (continued)