Finland steps in to help finance Royal Caribbean's Oasis of the Seas

mercedes · April 16, 2009

It wasn't easy, but it's done.

Royal Caribbean today announced it had arranged loans to pay for the much-ballyhooed Oasis of the Seas, currently under construction in Finland. But the funding came only after an arm of the Finnish government stepped in to guarantee 95% of the loans and even provide a sizeable chunk of the money outright.

Royal Caribbean says three European banks -- BNP Paribas, Nordea Bank and SEB -- each have committed to provide 20% of the $1.05 billion it needs to take delivery of the groundbreaking, 5,400-passenger cruise ship -- the largest ever built. The remaining 40% will come from a Finnish government agency, Finnish Export Credit Ltd.

The agency is a subsidiary of Finnvera, the government agency that is providing the 95% guarantee -- an unusually high percentage.

Royal Caribbean is scheduled to take delivery of Oasis in November, and the sharp tightening of credit markets over the past year had raised concerns on Wall Street over the company's ability to fund the ship and a sister vessel scheduled to debut next year. The structure of the deal announced today is an indication of just how difficult such fundraising for new ships has become.

"This is the first time we can recall a government agency not just guaranteeing a portion of the outstanding debt, but also providing actual financing," notes financial analyst Robin Farley of UBS in a report.

The 95% guarantee, Farley adds, "is higher than the 80% guarantees historically provided by Finnvera and potentially indicative of difficulty finding financing without this government backstop."

Royal Caribbean also noted each of the three banks can opt-out of the loans after six years.

Finland has an interest in Royal Caribbean getting financing for Oasis as the shipyard where the vessl is under construction is an important employer in the country.

Royal Caribbean didn't offer details on the interest rate it expects to pay for the loans. The company said that under the terms of the loans it has an option of a floating or fixed rate of interest, and overall terms will fall within the company's financial projections.

In it's announcement, Royal Caribbean noted the $1.05 billion in loans it is receiving amounts to 80% of the contract price for Oasis of the Seas, putting the overall cost of the vessel at $1.31 billion.

"We are very pleased to have secured the financing for Oasis of the Seas," the company's chief financial officer, Brian Rice, says in a statement. "With the tight credit environment and lack of liquidity in the financial markets today, this financing is a testimony to the strength of our company, the terrific partnership we have with Finland, and the outstanding long-term relationships we enjoy with our banks."

cruisetarp · April 16, 2009

I was think about this after Joey posted it. Doesn't it seem like they should have arranged financing BEFORE they began to build this huge ship?

Silly me, we always arrange our financing before we make a big purchase.

JoeyandDavid · April 16, 2009

I was think about this after Joey posted it. Doesn't it seem like they should have arranged financing BEFORE they began to build this huge ship?
Silly me, we always arrange our financing before we make a big purchase.

silly you .... :tongue: that would be the smart way of doing things!