Report: Royal Caribbean looks to Finland to finance world's biggest cruise ship

[mercedes]

Are banks balking at financing Oasis of the Seas?

That's one way to read a report today that Royal Caribbean is in talks with the Finnish government over having the government increase its loan guarantees for the much-ballyhooed, 5,400-passenger cruise ship or even directly put up some of the needed money.

Royal Caribbean investor relations chief Ian Bailey tells Bloomberg the company “is comfortable we’re going to be able to get this financing done.” But he says a larger Finnish government role would make the $1.24 billion project more attractive to private lenders. Bailey added that discussions with lenders over Oasis -- under construction at a Finnish shipyard for more than a year -- are ahead of Royal Caribbean’s normal schedule.

The groundbreaking, 220,000-ton cruise ship is the largest ever built and is designed to usher in a new era of cruising with such innovative amenities as a family-focused amusement zone called Boardwalk and a tree-lined Central Park. It's scheduled to be delivered to Royal Caribbean in November.

While Royal Caribbean already has made several cash down payments for Oasis, it currently has none of the financing it needs to pay the nearly $1 billion due at delivery. What it does have is a commitment from the Finnish government to guarantee 80% of the amount the company eventually does line up from banks.

Normally, such a guarantee is all the assurance banks need to lend money against a new ship. But the turmoil in credit markets and the worldwide economic downturn has made banks more skittish.

“We’re taking every possible action to make this the strongest possible basket for the lending groups,” Royal Caribbean's Bailey tells Bloomberg. “Obviously a higher guarantee and direct participation from the government entity is going to send a strong signal and provide more reassurance.”

Still, Bailey tells the Miami Herald today that Royal Caribbean could get the financing done for the ship even without the additional aid from the Finnish government.

Royal Caribbean warned in a regulatory filing Tuesday that financing the ship was not a given.

"Although we believe that we will be able to (finance the ship), there can be no assurance that we will be able to do so or that we will be able to do so on acceptable terms," the company said in its annual 10-K filing with the U.S. Securities and Exchange Commission.