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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The effect of derivatives not designated as hedging instruments on the consolidated financial statements was
as follows:
LocationofGain(Loss)
Amount of Gain (Loss) Recognized in
Income on Derivative
Derivatives Not Designated as Hedging
Instruments under ASC 815-20
RecognizedinIncome
onDerivative
YearEnded
December
YearEnded
December
(In thousands)
Foreign currency forward contracts Other(expense)income ()
Fuel swaps Other(expense)income ()
Fuel call options Other(expense)income () ()
() ()
Credit Related Contingent Features
Our current interest rate derivative instruments may
require us to post collateral if our Standard & Poor’s
and Moody’s credit ratings remain below specified
levels. Specifically, if on the fifth anniversary of enter-
ing into a derivative transaction and on all succeeding
fifth-year anniversaries our credit ratings for our senior
unsecured debt were to be below BBB- by Standard &
Poor’s and Baa3 by Moody’s, then each counterparty
to such derivative transaction with whom we are in a
net liability position that exceeds the applicable mini-
mum call amount may demand that we post collateral
in an amount equal to the net liability position. The
amount of collateral required to be posted following
such event will change each time our net liability posi-
tion increases or decreases by more than the applica-
ble minimum call amount. If our credit rating for our
senior unsecured debt is subsequently equal to, or
above BBB- by Standard & Poor’s or Baa3 by Moody’s,
then any collateral posted at such time will be released
to us and we will no longer be required to post collat-
eral unless we meet the collateral trigger requirement
at the next fifth-year anniversary. Currently, our senior
unsecured debt credit rating is BB with a stable out-
look by Standard & Poor’s and Ba1 with a stable out-
look by Moody’s. We currently have five interest rate
derivative hedges that have a term of at least five
years. The aggregate fair values of all derivative
instruments with such credit-related contingent fea-
tures in net liability positions as of December 31, 2013
and December 31, 2012 were $66.9 million and $55.5
million, respectively, which do not include the impact
of any such derivatives in net asset positions. The
earliest that any of the five interest rate derivative
hedges will reach their fifth anniversary is November
2016. Therefore, as of December 31, 2013, we were not
required to post collateral for any of our derivative
transactions.
NOTE 15. COMMITMENTS AND
CONTINGENCIES
Capital Expenditures
Our future capital commitments consist primarily
of new ship orders. As of December 31, 2013, we
had three Quantum-class ships and one Oasis-class
ship on order for our Royal Caribbean International
brand with an aggregate capacity of approximately
17,850 berths.
In 2013, we entered into an agreement with Meyer
Werft to build the third Quantum-class ship for
Royal Caribbean International. The ship will have
a capacity of approximately 4,150 berths and is
expected to enter service in the second quarter of
2016. We entered into a credit agreement for the
financing of the ship for up to 80.0% of the ship’s
contract price. The credit agreement makes available
to us, at delivery, an unsecured term loan in an amount
up to €636.7 million, or approximately $877.3 million,
based on the exchange rate at December 31, 2013.
Euler Hermes Deutschland AG (“Hermes”), the official
export credit agency of Germany, has agreed to guar-
antee to the lenders payment of 95.0% of the financ-
ing. The loan amortizes semi-annually and will mature
12 years following delivery of the ship. Interest on the
loan will accrue at our election at either a fixed rate
of 3.32% or a floating rate at LIBOR plus a margin of
1.00%. A commitment fee varying from 0.15% to 0.30%
per annum is due through funding.
In 2013, we entered into a credit agreement for the
financing of the third Oasis-class ship, which is sched-
uled for delivery in the second quarter of 2016. The
credit agreement makes available to us, at delivery,
an unsecured term loan in an amount up to €892.2
million, or approximately $1.2 billion, based on the
exchange rate at December 31, 2013. Compagnie