Royal Caribbean Cruise Lines 2013 Annual Report Download - page 32
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PART I
Our inability to satisfy the covenants required by our
credit facilities could adversely impact our liquidity.
Our debt agreements contain covenants, including
covenants restricting our ability to take certain actions
and financial covenants that require us to maintain
minimum net worth and fixed charge coverage ratios
and limit our net debt-to-capital ratio. Our ability to
comply with the terms of our outstanding facilities
may be affected by general economic conditions,
industry conditions and other events, some of which
may be beyond our control. In addition, our ability to
make borrowings under our available credit facilities
is subject to the absence of material adverse changes
in our business. Our ability to maintain our credit
facilities may also be impacted by changes in our
ownership base. More specifically, we may be required
to prepay a majority of our debt facilities if (i) any
person or entity other than A. Wilhelmsen AS. and
Cruise Associates and their respective affiliates (the
“Applicable Group”) acquires ownership of more than
33% of our common stock and the Applicable Group
owns less of our common stock than such person or
(ii) subject to certain exceptions, during any 24-month
period, a majority of the Board is no longer comprised
of individuals who were members of the Board on the
first day of such period. Certain of our outstanding debt
securities also contain change of control provisions
that would be triggered by the acquisition of greater
than 50% of our common stock by a person other
than a member of the Applicable Group coupled with
a ratings downgrade.
Our failure to comply with the terms of our debt
facilities could result in an event of default. Generally,
if an event of default under any debt agreement
occurs, then pursuant to cross default acceleration
clauses, our outstanding debt and derivative contract
payables could become due and/or terminated. We
cannot provide assurances that we would have suffi-
cient liquidity to repay or the ability to refinance the
borrowings under any of the credit facilities or settle
other outstanding contracts if such amounts were
accelerated upon an event of default.
In addition, under several of our agreements with
credit card processors that accept credit cards for
the sale of cruises and other services, the credit card
processor may hold back a reserve from our credit card
receivables following the occurrence of certain events,
including a default under our major credit facilities. As
of December 31, 2013, we were not required to main-
tain any reserve under such agreements.
Incidents or adverse publicity concerning the cruise
vacation industry, unusual weather conditions and
other natural disasters or disruptions could affect our
reputation as well as impact our sales and results of
operations.
The operation of cruise ships, airplanes, land tours,
port facilities and shore excursions involves the risk
of accidents, illnesses, mechanical failures, environ-
mental incidents and other incidents which may bring
into question safety, health, security and vacation
satisfaction which could negatively impact our repu-
tation. Incidents involving cruise ships, and, in par-
ticular the safety and security of guests and crew,
media coverage thereof, as well as adverse media
publicity concerning the cruise vacation industry have
impacted and could in the future impact demand for
our cruises and pricing in the industry. The consider-
able expansion in the use of social media over recent
years has compounded the potential scope of the
negative publicity that could be generated by those
incidents. If any such incident occurs during a time of
high seasonal demand, the effect could dispropor-
tionately impact our results of operations for the year.
In addition, incidents involving cruise ships may result
in additional costs to our business, increasing govern-
ment or other regulatory oversight and, in the case
of incidents involving our ships, potential litigation.
Our cruise ships and port facilities may also be
adversely impacted by unusual weather patterns or
natural disasters or disruptions, such as hurricanes and
earthquakes. It is possible that we could be forced to
alter itineraries or cancel a cruise or a series of cruises
due to these or other factors, which would have an
adverse effect on our sales and profitability. In addi-
tion, these and any other events which impact the
travel industry more generally may negatively impact
our ability to deliver guests or crew to our cruises
and/or interrupt our ability to obtain services and
goods from key vendors in our supply chain. Any of
the foregoing could have an adverse impact on our
results of operations and on industry performance.
The impact of disruptions in the global financial markets
may affect the ability of our counterparties and others
to perform their obligations to us.
The financial crisis of 2008, including failures of finan-
cial service and insurance companies and the related
liquidity crisis, disrupted the capital and credit markets.
A recurrence of these or similar disruptions could
cause our counterparties and others to breach their
obligations to us under our contracts with them. This
could include failures of banks or other financial service
companies to fund required borrowings under our loan
agreements or to pay us amounts that may become
due under our derivative contracts for hedging of fuel
prices, interest rates and foreign currencies or other