Royal Caribbean Cruise Lines 2014 Annual Report Download - page 97

96 Royal Caribbean Cruises Ltd.
The effect of derivatives not designated as hedging instruments on the consolidated financial statements was
as follows:
Amount of Gain (Loss) Recognized in
Income on Derivative
Derivatives Not Designated as Hedging
Instruments under ASC 815-20
Location of Gain (Loss)
Recognized in Income
on Derivative
YearEnded
December
YearEnded
December
(In thousands)
Foreign currency forward contracts Other income (expense) () ()
Fuel swaps Other income (expense) () 
Fuel call options Other income (expense) — ()
() ()
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 or on any succeeding
fifth-year anniversary 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 positive 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 features in net lia-
bility positions as of December 31, 2014 and December
31, 2013 were $65.8 million and $66.9 million, respec-
tively, 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, 2014, 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, 2014, we
had two Quantum-class ships and two Oasis-class
ships on order for our Royal Caribbean International
brand with an aggregate capacity of approximately
19,200 berths.
In February 2015, we reached conditional agreements
with STX France to build two ships of a new generation
of Celebrity Cruises ships, known as “Project Edge.”
The agreement is subject to certain conditions to
effectiveness expected to occur in the second quarter
of 2015. The ships will each have a capacity of approx-
imately 2,900 berths and are expected to enter service
in the second half of 2018 and the first half of 2020.
During 2014, our conditional agreement with STX
France to build the fourth Oasis-class ship for Royal
Caribbean International became effective. We
received commitments for the unsecured financing
of the ship for up to 80% of the ship’s contract price
through a facility to be guaranteed 100% by COFACE,
the official export credit agency of France. The ship
will have a capacity of approximately 5,450 berths
and is expected to enter service in the second quarter
of 2018. In January 2015, we entered into a credit
agreement for the US dollar financing of the fourth
Oasis-class ship. The credit agreement makes avail-
able to us an unsecured term loan in an amount up to
the US Dollar equivalent of €931.2 million, or approxi-
mately $1.1 billion, based on the exchange rate as of
the transaction date. The loan amortizes semi-annually
and will mature 12 years following delivery of the ship.
At our election, prior to the ship delivery, interest on
the loan will accrue either (1) at a fixed rate of 3.82%
(inclusive of the applicable margin) or (2) at a floating
rate equal to LIBOR plus 1.10%.
In 2014, we entered into a credit agreement for the US
dollar financing of a portion of the third Oasis-class
ship. The credit agreement makes available to us an
unsecured term loan in an amount up to the US dollar
equivalent of €178.4 million, or approximately $215.9
million, based on the exchange rate at December 31,
2014. The loan amortizes semi-annually and will mature
12 years following delivery of the ship. At our election,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS