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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. OTHER ASSETS
Variable Interest Entities
A Variable Interest Entity (“VIE”), is an entity in which
the equity investors have not provided enough equity
to finance the entity’s activities or the equity investors
(1) cannot directly or indirectly make decisions about
the entity’s activities through their voting rights or
similar rights; (2) do not have the obligation to absorb
the expected losses of the entity; (3) do not have the
right to receive the expected residual returns of the
entity; or (4) have voting rights that are not propor-
tionate to their economic interests and the entity’s
activities involve or are conducted on behalf of an
investor with a disproportionately small voting interest.
We have determined that Grand Bahama Shipyard
Ltd. (“Grand Bahama”), a ship repair and maintenance
facility in which we have a 40% noncontrolling inter-
est, is a VIE. The facility serves cruise and cargo ships,
oil and gas tankers, and offshore units. We utilize this
facility, among other ship repair facilities, for our reg-
ularly scheduled drydocks and certain emergency
repairs as may be required. We have determined we
are not the primary beneficiary of this facility, as we
do not have the power to direct the activities that
most significantly impact the facility’s economic per-
formance. Accordingly, we do not consolidate this
entity and we account for this investment under the
equity method of accounting. As of December 31,
2013, the net book value of our investment in Grand
Bahama, was approximately $56.1 million, consisting
of $6.4 million in equity and $49.7 million in loans.
As of December 31, 2012, the net book value of our
investment in Grand Bahama was approximately
$59.3 million, consisting of $3.3 million in equity and
$56.0 million in loans. These amounts represent our
maximum exposure to loss as we are not contractually
required to provide any financial or other support
to the facility. The majority of our loans to Grand
Bahama are in non-accrual status and the majority of
this amount was included within Other assets in our
consolidated balance sheets. We received approxi-
mately $6.2 million and $5.5 million in principal and
interest payments related to loans that are in accrual
status from Grand Bahama in 2013 and 2012, respec-
tively, and recorded income associated with our
investment in Grand Bahama. We monitor credit risk
associated with these loans through our participation
on Grand Bahama’s board of directors along with our
review of Grand Bahama’s financial statements and
projected cash flows. Based on this review, we believe
the risk of loss associated with these loans was not
probable as of December 31, 2013.
In conjunction with our acquisition of Pullmantur in
2006, we obtained a 49% noncontrolling interest
in Pullmantur Air, S.A. (“Pullmantur Air”), a small air
business that operates four aircraft in support of
Pullmantur’s operations. As of December 31, 2013,
we have determined Pullmantur Air is a VIE for which
we are the primary beneficiary as we have the power
to direct the activities that most significantly impact
its economic performance and we are obligated to
absorb its losses. As a result, we have consolidated
the assets and liabilities of Pullmantur Air. We do
not separately disclose the assets and liabilities of
Pullmantur Air as they are immaterial to our December
31, 2013 and December 31, 2012 consolidated financial
statements. In December 2013, Pullmantur reached an
agreement to sell its controlling interest in its land-
based tour operations, travel agency as well as the
majority of its interest in Pullmantur Air, the closing
of which is subject to customary closing conditions.
See Note 16. Restructuring and Related Impairment
Charges for further discussion on the anticipated
transaction.
We have determined that TUI Cruises GmbH, our
50%-owned joint venture which operates the brand
TUI Cruises, is a VIE. As of December 31, 2013 and
December 31, 2012, our investment in TUI Cruises,
including equity and loans, was approximately $354.3
million and $287.0 million, respectively, and the major-
ity of this amount was included within Other assets in
our consolidated balance sheets. In addition, we and
TUI AG, our joint venture partner, have each guaran-
teed the repayment of 50% of a €180.0 million bank
loan provided to TUI Cruises and due 2016 (refer to
further details below). Our investment amount and
the potential obligations under this guarantee are
substantially our maximum exposure to loss. We have
determined that we are not the primary beneficiary of
TUI Cruises. We believe that the power to direct the
activities that most significantly impact TUI Cruises’
economic performance are shared between ourselves
and TUI AG. All the significant operating and financial
decisions of TUI Cruises require the consent of both
parties which we believe creates shared power over
TUI Cruises. Accordingly, we do not consolidate this
entity and account for this investment under the
equity method of accounting.
In connection with our sale of Celebrity Mercury to
TUI Cruises in 2011, we provided a debt facility to
TUI Cruises in the amount of up to €90.0 million.
The outstanding principal amount of the facility as of