Royal Caribbean plans debt transactions

Jason · June 1, 2006

By the end of the year, Royal Caribbean Cruises said it expects to redeem $543 million in notes and buy back 4.1 million shares to fund another note redemption.

The Miami-based cruise line said the first redemption is for its outstanding Liquid Yield Option Notes (LYONS) due 2021.

Royal Caribbean (NYSE: RCL) said it expects holders to redeem the LYONS at their accreted principal amount which, or about $543 million.

In addition, Royal Caribbean said it expects to call for redemption all of its outstanding zero coupon convertible notes due 2021.

For those notes, Royal Caribbean said it expects holders to exercise their right to convert them into Royal Caribbean common shares.

That is why the company is planning to buy back about 4.1 million shares. It estimates that is the approximate number of shares it will issue to satisfy zeros holders' conversion requests.

Royal Caribbean said it expects to finance the transactions through public debt offerings and/or bank financing.

The company treats the LYONS and zeros as debt for balance sheet purposes. Because of that, Royal Caribbean said it doesn't expect debt to finance the transactions to materially increase its debt level.

Also, because it expects to repurchase shares to offset shares issued, Royal Caribbean said it does not expect the transactions to have a material impact on earnings per share.

Shares closed up $2.39, or 6.7 percent, to $38.08. The 52-week high was $49.47 on July 11. The 52-week low was $35.29 on Friday.

Source: South Florida Business Journal