10-K
Royal Caribbean Cruises Ltd (RCL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| (Mark One) | |
|---|---|
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2022
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to
Commission file number: 1-11884
ROYAL CARIBBEAN CRUISES LTD.
(Exact name of registrant as specified in its charter)
| Republic of Liberia<br><br>(State or other jurisdiction of<br><br>incorporation or organization) | 98-0081645<br><br>(I.R.S. Employer Identification No.) |
|---|
1050 Caribbean Way, Miami, Florida 33132
(Address of principal executive offices) (zip code)
(305) 539-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $.01 per share | RCL | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ |
|---|---|---|---|
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant's common stock at June 30, 2022 (based upon the closing sale price of the common stock on the New York Stock Exchange on June 30, 2022) held by those persons deemed by the registrant to be non-affiliates was approximately $8.1 billion.
There were 255,350,697 shares of common stock outstanding as of February 20, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Definitive Proxy Statement relating to its 2023 Annual Meeting of Shareholders are incorporated by reference in Part III, Items 10-14 of this Annual Report on Form 10-K as indicated herein.
F-1
Table of Contents
ROYAL CARIBBEAN CRUISES LTD.
TABLE OF CONTENTS
| Page | ||
|---|---|---|
| PART I | ||
| Item 1. | Business | 2 |
| Item 1A. | Risk Factors | 22 |
| Item 1B. | Unresolved Staff Comments | 23 |
| Item 2. | Properties | 23 |
| Item 3. | Legal Proceedings | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| PART II | ||
| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 24 |
| Item 6. | Reserved | 26 |
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 27 |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 50 |
| Item 8. | Financial Statements and Supplementary Data | 52 |
| Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 52 |
| Item 9A. | Controls and Procedures | 53 |
| Item 9B. | Other Information | 53 |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevents Inspections | 53 |
| PART III | ||
| Item 10. | Directors, Executive Officers and Corporate Governance | 54 |
| Item 11. | Executive Compensation | 54 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 54 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 54 |
| Item 14. | Principal AccountantFees and Services | 54 |
| PART IV | ||
| Item 15. | ExhibitsandFinancial Statement Schedules | 55 |
| Item 16. | Form 10-K Summary | 64 |
| Signatures | 65 |
F-2
As used in this Annual Report on Form 10-K, the terms “Royal Caribbean,” "Royal Caribbean Group," the “Company,” “we,” “our” and “us” refer to Royal Caribbean Cruises Ltd. and, depending on the context, Royal Caribbean Cruises Ltd.’s consolidated subsidiaries and/or affiliates. The terms “Royal Caribbean International,” “Celebrity Cruises,” and “Silversea Cruises” refer to our wholly owned global cruise brands. Throughout this Annual Report on Form 10-K, we also refer to our partner brands in which we hold an ownership interest, including “TUI Cruises,” and “Hapag-Lloyd Cruises.” However, because these partner brands are unconsolidated investments, our operating results and other disclosures herein do not include these brands unless otherwise specified. In accordance with cruise vacation industry practice, the term “berths” is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers.
This Annual Report on Form 10-K also includes trademarks, trade names and service marks of other companies. Use or display by us of other parties’ trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, these other parties other than as described herein.
Item 1. Business.
General
We are one of the leading cruise companies in the world. We own and operate three global cruise brands: Royal Caribbean International, Celebrity Cruises and Silversea Cruises (collectively, our "Global Brands"). We also own a 50% joint venture interest in TUI Cruises GmbH ("TUIC"), which operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands"). We account for our investments in our Partner Brands under the equity method of accounting. Together, our Global Brands and our Partner Brands have a combined fleet of 64 ships in the cruise vacation industry with an aggregate capacity of approximately 150,005 berths as of December 31, 2022.
Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations on all seven continents. In addition to our headquarters in Miami, Florida, we have offices and a network of international representatives around the world, which primarily focus on sales and market development.
We compete principally by operating valued brands that offer exceptional service provided by our crew and on the basis of innovation and quality of ships, variety of itineraries, choice of destinations and price. We believe that our commitment to build state-of-the-art ships and to invest in the maintenance and upgrade of our fleet to, among other things, incorporate many of our latest signature innovations, allows us to continue to attract new and loyal repeat guests.
Royal Caribbean was founded in 1968 as a partnership. Its corporate structure has evolved over the years and, the current parent corporation, Royal Caribbean Cruises Ltd., was incorporated on July 23, 1985 in the Republic of Liberia under the Business Corporation Act of Liberia.
As a result of the global pandemic impact of COVID-19, we paused our guest cruise operations in March 2020 and began resuming guest cruise operations in 2021, with our full fleet in service by June 2022. We continue to prioritize our financial recovery and the further enhancement of our financial results and liquidity.
Our Global Brands
Our Global Brands include Royal Caribbean International, Celebrity Cruises, and Silversea Cruises. We believe our Global Brands possess the versatility to enter multiple cruise market segments within the cruise vacation industry. Although each of our Global Brands has its own marketing style, as well as ships and crews of various sizes, the nature of the products sold and services delivered by our Global Brands share a common base (i.e., the sale and provision of cruise vacations). Our Global Brands also offer similar itineraries as well as similar cost and revenue components. In addition, our Global Brands have historically sourced passengers from similar markets around the world and operated in similar economic environments with a significant degree of commercial overlap. As a result, we strategically manage our Global Brands as a single business with the ultimate objective of maximizing long-term shareholder value.
Royal Caribbean International
Royal Caribbean International is the world's largest cruise brand. The brand competes in both the contemporary and premium segments of the cruise vacation industry and appeals to families with children of all ages, as well as both older and younger couples. Royal Caribbean International offers cruises and land destinations that generally feature a casual ambiance, as well as a variety of activities and entertainment venues. We believe that the quality of the Royal Caribbean International brand allows it to achieve market coverage that is among the broadest of any of the major cruise brands in the cruise vacation industry. Royal Caribbean International’s strategy is to attract an array of vacationing guests by offering a wide variety of itineraries to destinations worldwide, including Alaska, Asia, Australia, the Bahamas, Bermuda, Canada, the Caribbean, Europe, the Panama Canal and New Zealand, with cruise lengths generally ranging from two to 19 nights. Royal Caribbean International offers multiple innovative options for onboard dining, entertainment and other onboard activities. Because of the brand’s ability to deliver extensive and innovative product offerings at an excellent value to consumers, we believe Royal Caribbean International is well positioned to attract new consumers to cruising and to continue to bring loyal repeat guests back for their next vacation.
Royal Caribbean International operates 26 ships with an aggregate capacity of approximately 94,100 berths. Additionally, as of December 31, 2022, Royal Caribbean International had four ships on order with an aggregate capacity of approximately 22,500 berths. The ships on order include the first three ships of a new generation of vessels, known as the Icon-class, and our sixth Oasis-class ship, Utopia of the Seas. The first Icon-class ship, Icon of the Seas, is expected to be delivered in the fourth quarter of 2023 and enter service in the first quarter of 2024, and the second and third Icon-class ships, are expected to be delivered in the second quarters of 2025 and 2026, respectively. Utopia of the Seas is expected to be delivered in the second quarter of 2024.
Celebrity Cruises
Celebrity Cruises is positioned within the luxury segment of the cruise vacation industry. Celebrity Cruises’ strategy is to target affluent consumers by delivering a destination-rich experience on upscale ships that offer, among other things, culinary excellence, world-class service, luxurious spaces and accommodations, and holistic wellness experiences. Celebrity Cruises offers a range of itineraries to destinations, including Alaska, Asia, Australia, Bermuda, Canada, the Caribbean, Europe, the Galapagos Islands, Hawaii, New Zealand, the Panama Canal and South America, with cruise lengths ranging from three to 18 nights.
Celebrity Cruises operates 15 ships with an aggregate capacity of approximately 32,465 berths. Additionally, as of December 31, 2022, Celebrity Cruises had one Edge-class ship on order with an aggregate capacity of approximately 3,250 berths. This ship, Celebrity Ascent, is expected to be delivered in the fourth quarter of 2023. In addition, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship with capacity of approximately 3,250 berths, estimated for delivery in 2025, if certain conditions are met.
Silversea Cruises
Silversea Cruises is an ultra-luxury and expedition cruise line with smaller ships, high standards of accommodations, fine dining, personalized service and exotic itineraries. Silversea Cruises delivers distinctive destination experiences by visiting unique and remote destinations, including the Galapagos Islands, Antarctica and the Arctic with cruise itineraries generally ranging from five to 24 nights.
Silversea Cruises operates 11 ships, with an aggregate capacity of approximately 4,150 berths, including the brand's newest ship, Silver Endeavour, which was acquired in the third quarter of 2022 and commenced operations in the fourth quarter of 2022. Additionally, as of December 31, 2022, Silversea Cruises had on order two ships of a new generation, known as the Evolution-class, with an aggregate capacity of approximately 1,460 berths, which are expected to be delivered in the second quarters of 2023 and 2024, respectively.
The expected delivery dates for all of our ships on order are subject to change in the event of shipyard construction delays or in the event we agree to scope changes which impact the delivery timelines. See Part I. Item 1A. Risk Factors for further discussion on shipyard operations.
Our Partner Brands
Our Global Brands are complemented by our interest in TUIC, our 50%-owned joint venture that operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands").
TUIC is a joint venture owned 50% by us and 50% by TUI AG, a German tourism company, which is designed to serve the contemporary and premium segments of the German cruise market by offering products tailored for German guests. All onboard activities, services, shore excursions and menu offerings are designed to suit the preferences of this target market.
TUI Cruises operates seven ships, with an aggregate capacity of approximately 17,700 berths. Additionally, as of December 31, 2022, TUI Cruises had three ships on order with an aggregate capacity of approximately 11,100 berths, that are expected to be delivered in the second quarter of 2024, the fourth quarter of 2024 and the second quarter of 2026, respectively.
Hapag-Lloyd Cruises operates two luxury liners and three smaller expedition ships, with an aggregate capacity of approximately 1,590 berths. Hapag-Lloyd Cruises did not have any ships on order as of December 31, 2022.
Refer to Note 7. Other Assets to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further details.
Industry
The cruising industry has been considered a well-established vacation sector in the North American, European and Australian markets and a developing sector in several other emerging markets. We believe that cruising will continue to be a popular vacation choice due to its inherent value, extensive itineraries and variety of shipboard and shoreside activities. The Company and other industry participants voluntarily suspended operations in March of 2020 and gradually resumed full operations starting in the second half of 2021 through the first half of 2022. As a result, comparative information regarding market penetration and other indicators are not meaningful for 2020, 2021, and 2022. For the five year period prior to 2020, industry data indicated that market penetration rates were still low and that a significant portion of cruise
guests carried in those years were first-time cruisers. We believe this presents an opportunity for operational and financial recovery and long-term growth for the industry.
During the five year period from 2015 through 2019, industry market penetration rates (computed based on the number of annual cruise guests as a percentage of the total population) grew from 3.36% to 3.89% for North America, from 1.25% to 1.41% for Europe, and from 0.08% to 0.20% for Asia/Pacific. The increased penetration shows the continued growth potential in the markets most served by the industry.
The global cruise fleet was served by a weighted average of approximately 634,000 berths during 2022 with approximately 359 ships at the end of 2022. As of December 31, 2022, there were approximately 63 ships on order with an estimated 143,000 berths that are expected to be placed in service in the global cruise market through 2028, not taking into account ships taken out of service or ordered during these periods. Cruise ships in the industry were taken out of service at an accelerated rate and new ship orders were deferred due to global cruise operation restrictions in 2020 and limited sailings in 2021 and 2022 resulting from the COVID-19 pandemic. The global cruise industry carried approximately 30 million cruise guests in 2019 and approximately 28.5 million in 2018.
The following table details the growth in global weighted average berths and the percentage of North American, European and Asia/Pacific cruise guests for 2022 and for each of the five years from 2015 through 2019:
| Year (1) | Weighted-Average<br><br>Supply of<br><br>Berths<br><br>Marketed<br><br>Globally(2) | Royal Caribbean Group Total Berths(3) | North American Cruise Guests(2)(4) | European Cruise Guests(2)(5) | Asia/Pacific Cruise Guests(2)(6) | Other Cruise Guests(2) |
|---|---|---|---|---|---|---|
| 2015 | 469,000 | 112,700 | 52% | 29% | 14% | 5% |
| 2016 | 493,000 | 123,270 | 51% | 27% | 19% | 3% |
| 2017 | 515,000 | 124,070 | 48% | 25% | 20% | 7% |
| 2018 | 546,000 | 135,520 | 49% | 26% | 20% | 5% |
| 2019 | 579,000 | 141,570 | 47% | 25% | 24% | 4% |
| 2022 | 634,000 | 150,005 | 65% | 28% | 2% | 5% |
___________________________________________________________________
(1)Historically, we have reported annual information for comparability across periods. The 2020 suspension of global cruise operations as a result of COVID-19 and the gradual resumption of full operations starting in the second half of 2021 through the first half of 2022 do not allow for a meaningful comparison to prior years' information and, as such, 2020 and 2021 data has been excluded from this table.
(2)Source: The estimates of the number of global cruise guests and the weighted-average supply of berths marketed globally are based on a combination of data that we obtain from various publicly available cruise industry trade information sources. We use data obtained from Seatrade Insider, Cruise Industry News and company press releases to estimate weighted-average supply of berths and CLIA and G.P. Wild to estimate cruise guest information. For 2022, cruise guest information includes data through the third quarter of 2022. In addition, our estimates incorporate our own analysis utilizing the same publicly available cruise industry data as a base.
(3)Total berths include our berths related to our Global Brands and Partner Brands.
(4)Our estimates include the United States and Canada.
(5)Our estimates include European countries relevant to the industry (most notably: the Nordics, Germany, France, Italy, Spain and the United Kingdom).
(6)Our estimates include Southeast Asia (most notably: Singapore, Thailand and the Philippines), East Asia (pre-2022, most notably: China and Japan), South Asia (most notably: India) and Oceania (most notably: Australia and New Zealand) regions. The decrease in Asia/Pacific cruise guests from 2019 to 2022 is partly driven by China remaining closed given its continued COVID-19 restrictions.
Competition
We compete with a number of cruise lines and other land-based vacations. Our principal competitors are Carnival Corporation & plc, which owns, among other brands, Aida Cruises, Carnival Cruise Line, Costa Cruises, Cunard Line, Holland America Line, P&O Cruises, Princess Cruises and Seabourn; Disney Cruise Line; MSC Cruises; Norwegian
Cruise Line Holdings Ltd, which owns Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises; and Virgin Voyages. Cruise lines also compete with other vacation alternatives such as land-based resort hotels, internet-based alternative lodging sites and sightseeing destinations for consumers’ leisure time.
Operating Strategies
Our mission is to deliver the best vacation experiences to our guests, responsibly. We continue to prioritize operating strategies that support this mission as well as operating strategies that support our financial recovery and the further enhancement of our financial results and liquidity. We strive to execute these strategies in a socially and environmentally responsible manner, working with our various business and community partners as we build toward a more sustainable cruise industry.
Our Company's operating strategies are as follows:
•deliver the best vacation experiences to our guests, responsibly;
•protect the health, safety and security of our guests and employees;
•deepen our customer relationships in order to enhance our revenues;
•focus on cost efficiency, adequate cash and liquidity, and strengthen our balance sheet, with the overall goals of maximizing our return on invested capital and shareholder value;
•protect the environment in which our vessels and organization operate, with a focus on decarbonization;
•invest in our workforce in order to better serve our global guest base and grow our business, and promote gender equality, diversity and inclusion;
•increase the awareness and market penetration of our brands globally;
•strategically invest in our fleet through the upgrade and maintenance of existing ships and the transfer of key innovations, while prudently expanding our fleet with new state-of-the-art cruise ships;
•capitalize on the portability and flexibility of our ships by deploying them into those markets and itineraries that provide opportunities to optimize returns, while continuing our focus on existing key markets;
•provide extraordinary destination experiences and state-of-the-art port facilities to our guests;
•continue to deploy technology capabilities and advanced uses of data and analytics to deliver innovative customer experiences as well as to create operational efficiencies that enhance employee satisfaction; and
•maintain strong relationships with travel advisors, while enhancing our consumer outreach and e-commerce programs
Safety, security and health policies
We are committed to protecting the health, safety and security of our guests, employees and others working on our behalf. Our efforts in these areas are managed by several departments within the Company that are responsible for maritime safety, global security, environmental stewardship and medical/public health activities. We also have a dedicated committee of our Board of Directors, the Safety, Environment, Sustainability and Health Committee, which is responsible for reviewing and monitoring our overall strategies, policies and programs that impact the safety and health of our guests and crew. Refer to the Regulation - Safety and Security Regulations section below for further information.
Consumer engagement
We place a strong focus on identifying the needs of our guests and creating product features and innovations that our customers value. We are focused on targeting and acquiring high-value guests by better understanding consumer data and insights to create communication strategies that resonate with our target audiences.
We target customers at important consumer decision points and identify underlying needs for which guests are willing to pay a premium. We rely on various programs and technologies during the cruise-planning, cruising and after-cruise periods aimed at increasing ticket prices, onboard revenues and occupancy. We have and expect to strategically invest in projects on our ships that we believe drive marketability, profitability and improve the guest experience.
Focus on cost efficiency, capital allocation, adequate cash and liquidity and improving our balance sheet
We are focused on maintaining a strong liquidity position and a balanced debt maturity profile, while making progress towards achieving an unsecured balance sheet, obtaining cost efficiencies including lowering interest expense, and reducing leverage. For example, in early 2023, we extended our revolving credit facility with our key relationship banks to ensure adequate liquidity on a going-forward basis. We believe these strategies enhance our ability to achieve our overall goal of maximizing our return on invested capital and long-term shareholder value.
Protect the environment
We are focused on the environmental health of the marine environment and communities in which we operate. This includes our Destination Net Zero strategy, and our partnership with the World Wildlife Fund, which together aim to reduce our carbon footprint, raise awareness about ocean conservation among guests and crew, and support ocean conservation projects around the world.
Destination Net Zero is our decarbonization strategy that focuses on how to achieve net zero emissions by 2050 and deliver a net zero capable ship by 2035. This strategy also includes achieving reductions on our carbon intensity by double digits by 2025, compared to 2019. Destination Net Zero’s four-pronged approach includes the modernization of our global brands fleet through the introduction of new energy-efficient and alternatively fueled vessels, continued investment in energy efficiency programs, development of alternative fuel and alternative power solutions, and optimized deployment and integration of strategic shore-based supply chains. While we continue to develop our roadmap to Destination Net Zero, it is already clear that our strategy will require new fuels and technologies that are not available today. Refer to Item 1A. Risk Factors - “Our sustainability activities, including environmental, social and governance (ESG) matters, could result in reputational risks, increased costs and other risks” for a discussion of the risks associated with our environmental initiatives.
Our long-term partnership with the World Wildlife Fund focuses on greenhouse gas ("GHG") reduction strategies, sustainable sourcing of food supplies, waste management, sustainable destinations and guest education on ocean conservation issues, which supports onboard conservation efforts such as our reduced use of plastics. We are also committed to assessing and managing potential impacts related to our operations in the communities in which we operate.
To achieve our carbon intensity goals, we have invested and plan to continue investing in energy and carbon efficient technologies included in the design of our new vessels, our ongoing fleet energy management program and other technologies. These investments include installation costs related to advanced emissions purification systems ("AEP") and other technologies that are expected to reduce fuel consumption and carbon footprint.
We believe in transparent reporting on our environmental and sustainability stewardship, as well as our social and governance efforts, and have annually published a Sustainability Report since 2008. This report, the current version of which is accessible on our corporate website, highlights our progress with regards to those environmental, social and governance aspects of our business that we believe are most significant to our organization and stakeholders. In addition to providing an overview on our sustainability efforts, the report references the guidelines of the Global Reporting Initiative and is aligned with the Sustainable Accounting Standards Boards Industry Standards for Cruise Lines. We continue to work on an initial report following the recommendations of the Task Force on Climate Related Financial Disclosures (TCFD), which we plan to file in 2023. Our corporate website also provides information about our environmental performance goals and sustainability initiatives. The foregoing information contained on our website is not part of any of these reports and is not incorporated by reference herein or in any other report or document we file with the Securities and Exchange Commission. Refer to the Regulation - Environmental Regulations section below for further information.
Investing in our workforce and promoting equality, diversity and inclusion
We believe that our employees, both shipboard and shoreside, are a critical success factor for our business. We strive to identify, hire, develop, motivate and retain the best employees, who provide our guests with extraordinary vacations. Our ability to attract, engage, and retain key employees has been and will remain critical to our success. Our Talent and Compensation Committee of our Board of Directors oversees the Company's human capital management strategies, including initiatives for talent diversity, equity and inclusion, talent management, and corporate culture.
We focus on providing our employees with a competitive compensation structure, development opportunities, and other personal and professional growth opportunities in order to strengthen and support our human capital. We also select, develop and have strategies to retain high performing leaders to advance the enterprise now and in the future. To that end, we pay special attention to identifying high performing potential leaders and developing bench strength so these leaders can assume leadership roles throughout the organization.
We strive to maintain a work environment that reinforces collaboration, motivation and innovation, and believe that maintaining a strong employee-focused culture is beneficial to the growth and expansion of our business. We foster diversity and inclusion among our broad employee base. Refer to the Human Capital section below for further information.
Global awareness and market penetration
We increase brand awareness and market penetration of our cruise brands in various ways, including the use of communication strategies and marketing campaigns designed to emphasize the qualities of each brand, especially among target groups. Our marketing strategies include the use of travel advisors, traditional media, mobile and digital media as well as social media, influencers and brand websites. Our brands engage past and potential guests by collaborating with travel partners and through call centers, international offices and international representatives. In addition, our Global Brands target repeat guests with exclusive benefits offered through their respective loyalty programs.
We sell and market our Global Brands to guests outside of the United States and Canada through the combined efforts of internationally focused internal resources and a network of independent international representatives located throughout the world. While the majority of our guests for our Global Brands come from North America, we also sell and market our cruise brands to guests in countries outside of North America by tailoring itineraries and onboard product offerings to the cultural characteristics and preferences of our international guests. In addition, we explore opportunities that may arise to acquire or develop brands tailored to specific markets.
Refer to Item 1A. Risk Factors - “Conducting business globally results in increased costs and other risks” for a discussion of the risks associated with our international operations.
Delivery of state-of-the-art cruise ships, and fleet upgrade and maintenance
We place a strong focus on innovation, which we seek to achieve by introducing new concepts on our new ships and continuously making improvements to our existing fleet, such as large-scale atriums, double hulls for increased safety, and advanced steel structures. We are expanding our innovation efforts to cover multiple fronts, including naval and architectural design, guest facing features, energy efficiency, sustainability, and safety.
We are committed to building state-of-the-art ships at a moderate growth rate and we believe our success in this area provides us with a competitive advantage. Our newer vessels traditionally generate higher revenue yield premiums and are more efficient and environmentally friendly to operate than older vessels.
In 2023, we will introduce three new vessels to our fleet, including Royal Caribbean International’s new flagship – Icon of the Seas, Celebrity Cruises – Celebrity Ascent, and Silversea Cruises – Silver Nova. Each of these vessels will represent the latest hardware for their respective brands and both Icon of the Seas and Silver Nova are the first vessels of a new class. For Royal Caribbean International, new features on Icon of the Seas include a dedicated family neighborhood called “Surfside”, a pool deck featuring the largest swimming pool and waterpark at sea, and the “Aquadome” showcasing the tallest waterfall at sea in an 82-foot-tall dome. For Celebrity Cruises, Celebrity Ascent will represent an evolution of Celebrity Beyond and will build on the success that the Edge series of ships has brought to market. For Silversea, Silver Nova will be amongst our most environmentally friendly and energy efficient ships to date.
As of December 31, 2022, our Global Brands and Partner Brands have 10 ships on order. Refer to the Operations section below for further information on our ships on order. As we further develop our Newbuild program, we continue to utilize each vessel as an opportunity to pilot new technology towards Destination Net Zero.
In addition, we regularly evaluate opportunities to order new ships, purchase existing ships or sell ships in our current fleet while ensuring that we remain focused on the returns we generate on invested capital and maintaining a high level of discipline on capital spending and operating leverage.
Markets and itineraries
In an effort to penetrate untapped markets, diversify our consumer base and respond to changing economic and geopolitical market conditions, we continue to seek opportunities to deploy ships to new, and stronger markets and itineraries throughout the world. The portability of our ships allows us to deploy our ships to meet demand within our existing and new cruise markets. We make deployment decisions generally 18 to 28 months in advance, with the goal of optimizing the overall profitability of our portfolio. Additionally, the infrastructure investments we have made to create a flexible global sourcing model have made our brands relevant in a number of markets around the world, which allows us to be opportunistic and source the highest yielding guests for our itineraries.
Our ships offer a wide selection of itineraries that call on over 1,000 destinations in over 120 countries, spanning across all seven continents. We are focused on maximizing long-term shareholder returns by operating in established
markets while growing our presence in developing markets. New capacity has allowed our brands to expand into new markets and itineraries in an effort to address changes in market demand.
Destination experiences and port facilities
In order to provide unique destination experiences to our guests, we have and continue to invest in our private land destinations. In 2018, we announced our Perfect Day Island Collection, an initiative to develop a series of private island destinations around the world. The first island in the collection, Perfect Day at CocoCay, opened in Spring 2019 and includes a wide range of attractions, such as a full water park, zip line course, freshwater pools, helium balloon ride, splash pads and a beach club. In 2023, we plan to expand Perfect Day at CocoCay with the delivery of Hideaway Beach, an elevated, adults-only experience. Additionally, we are planning to introduce a new product, our Royal Beach Club offering, which will offer an exclusive and branded experience at high volume ports. As a result of the operational disruptions caused by the COVID-19 pandemic, we delayed previously announced Perfect Day site openings and are reassessing their timing as well as the timing of our Royal Beach Club offering portfolio. We continue to evaluate opportunities to develop additional destinations across the globe.
In an effort to secure desirable berthing facilities for our ships, and to provide new or enhanced cruise destinations for our guests, we have actively assisted or invested in the development or enhancement of certain port facilities and infrastructure, including mixed-use commercial properties, located in strategic ports of call, and reduction of our environmental impacts. For instance, in November 2022, we opened in Galveston, Texas our new Net Zero homeport cruise terminal, the first cruise terminal facility to generate 100% of its needed energy through on-site solar panels.
Generally, we collaborate with local, private or governmental entities by providing management and/or financial assistance and often enter into long-term port usage arrangements. Our participation in these efforts is most often accomplished via investments with the relevant government authority and/or various other strategic partnerships established to develop and/or operate the port facilities, by providing direct development and management expertise or in certain limited circumstances, by providing direct or indirect financial support. In exchange for our involvement, we generally secure preferential berthing rights for our ships.
Technological capabilities
Technology is a pervasive part of virtually every business process we use to support our operating strategies and provide a quality experience to our customers before, during and after their cruise. Technology also plays a critical role in the measures and protocols that we have developed and will continue operating on our cruise ships. For example, through the deployment of our innovative electronic safety drill ("Muster 2.0") program, we have added convenience, and improved our guests experience regarding the mandatory safety briefing.
We have continued to integrate digital capabilities into our operations and have increased our focus in bringing in data analytics and artificial intelligence into our processes to provide better insights on how to model our maintenance or operational actions. Also, we continue to develop tools to enhance our guests' digital experience and grow onboard revenue, by making it easier for our guests to plan and maximize their next vacation through our websites and apps. At the same time, we partnered with SpaceX to launch Starlink, the next generation in shipboard connectivity, unlocking an improved guest experience. In concert with our destination focus, our island technology solutions are now enabling our guests to remain connected with WiFi access, order food and beverages as well as take advantage of all the island based activities with the same ease as onboard our ships.
Investments in our core platforms, as well as the trade and direct distribution channels, are delivering the benefit of more modernized solutions with scalability and faster self-service response times while also deploying new features such as flight packages and additional promotional offer capabilities.
Cyber security and data privacy are an ongoing focus, and we have made and will continue to make investments to protect our customer data, intellectual property and global operations.
Travel advisor support, consumer outreach, and e-commerce
Travel advisors continue to be a significant sourcing channel of revenues for our ships. We believe in the value of this distribution channel and invest in maintaining strong relationships with our travel partners. To accomplish this goal, we seek to maintain competitive commission rates and incentive structures with the marketplace. We continuously work with travel advisors to sell upgrades and add-ons such as air and pre-cruise purchases to improve the retention and profitability
of the channel. We provide brand dedicated sales representatives who serve as consultants to our travel partners. We also provide trained customer service representatives, call centers and online training tools.
We continue to operate our Consumer Outreach department, which provides consumers 24-hour access to our vacation planners and customer service agents in our call centers, as well as invest in our websites, including mobile applications and mobile websites. We enable our guests to communicate and book with us through various channels such as phone, web, chat, text message, and/or email. Additionally, we continue to advance our e-commerce capabilities and the vacation shopping experience for our guests. In addition to offering a simplified booking experience, we leverage the mobile application for onboard experiences such as WiFi, beverages, shore excursions, and specialty dining – enabling guests to book their vacation end-to-end.
Guest Services
We offer to handle virtually all travel aspects related to guest reservations and transportation, including facilitating guest pre- and post-hotel stay arrangements and air transportation.
Royal Caribbean International, Celebrity Cruises and Silversea Cruises offer recognition and status upgrades to their guests through their loyalty programs, Crown & Anchor Society, Captain’s Club, and Venetian Society, respectively, to encourage repeat business. Crown & Anchor Society has approximately 17.8 million members worldwide. Captain’s Club and Venetian Society have approximately 5.4 million members combined worldwide. Members are awarded points or credits in proportion to the number of cruise days and stateroom category. The loyalty programs provide tiers of membership benefits which entitle guests to upgraded experiences and recognition relative to the status achieved once the guests have accumulated the number of cruise points or credits specified for each tier. In addition, upon achieving a certain level of cruise points or credits, the Crown & Anchor Society and Captain’s Club members benefit from reciprocal membership benefits between the loyalty programs. Examples of the benefits available under our loyalty programs include, but are not limited to, priority ship embarkation, priority waitlist for shore excursions, complimentary laundry service, complimentary internet, digital discount vouchers, upgraded bathroom amenities, private seating on the pool deck, ship tours and, in the case of our most loyal guests who have achieved the highest levels of cruise points or credits, complimentary cruises. We regularly work to enhance each of our loyalty programs by adding new features and amenities in order to reward our repeat guests.
Operations
Cruise Ships and Itineraries
As of December 31, 2022, our Global Brands and Partner Brands collectively operated 64 ships with a selection of worldwide itineraries that call on more than 1,000 destinations in over 120 countries.
The following table presents summary information concerning ships that we expect will be in our fleet in 2023 under our Global Brands and Partner Brands.
| Ship | Year Ship<br>Built | Year ship entered service / will enter service | Approximate<br>Berths |
|---|---|---|---|
| Royal Caribbean International | |||
| Icon of the Seas (1) | 2023 | 2024 | 5,600 |
| Wonder of the Seas | 2022 | 2022 | 5,700 |
| Odyssey of the Seas | 2021 | 2021 | 4,200 |
| Spectrum of the Seas | 2019 | 2019 | 4,150 |
| Symphony of the Seas | 2018 | 2018 | 5,500 |
| Harmony of the Seas | 2016 | 2016 | 5,500 |
| Ovation of the Seas | 2016 | 2016 | 4,150 |
| Anthem of the Seas | 2015 | 2015 | 4,150 |
| Quantum of the Seas | 2014 | 2014 | 4,150 |
| Allure of the Seas | 2010 | 2010 | 5,500 |
| Oasis of the Seas | 2009 | 2009 | 5,600 |
| Independence of the Seas | 2008 | 2008 | 3,850 |
| Ship | Year Ship<br>Built | Year ship entered service / will enter service | Approximate<br>Berths |
| --- | --- | --- | --- |
| Liberty of the Seas | 2007 | 2007 | 3,800 |
| Freedom of the Seas | 2006 | 2006 | 3,950 |
| Jewel of the Seas | 2004 | 2004 | 2,200 |
| Mariner of the Seas | 2003 | 2003 | 3,350 |
| Serenade of the Seas | 2003 | 2003 | 2,150 |
| Navigator of the Seas | 2002 | 2002 | 3,400 |
| Brilliance of the Seas | 2002 | 2002 | 2,150 |
| Adventure of the Seas | 2001 | 2001 | 3,350 |
| Radiance of the Seas | 2001 | 2001 | 2,150 |
| Explorer of the Seas | 2000 | 2000 | 3,300 |
| Voyager of the Seas | 1999 | 1999 | 3,450 |
| Vision of the Seas | 1998 | 1998 | 2,050 |
| Enchantment of the Seas | 1997 | 1997 | 2,300 |
| Rhapsody of the Seas | 1997 | 1997 | 2,050 |
| Grandeur of the Seas | 1996 | 1996 | 2,000 |
| Celebrity Cruises | |||
| Celebrity Ascent | 2023 | 2023 | 3,250 |
| Celebrity Beyond | 2022 | 2022 | 3,250 |
| Celebrity Apex | 2020 | 2020 | 2,900 |
| Celebrity Flora | 2019 | 2019 | 100 |
| Celebrity Edge | 2018 | 2018 | 2,900 |
| Celebrity Reflection | 2012 | 2012 | 3,050 |
| Celebrity Silhouette | 2011 | 2011 | 2,900 |
| Celebrity Eclipse | 2010 | 2010 | 2,850 |
| Celebrity Equinox | 2009 | 2009 | 2,850 |
| Celebrity Solstice | 2008 | 2008 | 2,850 |
| Celebrity Xploration | 2007 | 2016 | 15 |
| Celebrity Constellation | 2002 | 2002 | 2,200 |
| Celebrity Summit | 2001 | 2001 | 2,200 |
| Celebrity Infinity | 2001 | 2001 | 2,150 |
| Celebrity Xpedition | 2001 | 2004 | 50 |
| Celebrity Millennium | 2000 | 2000 | 2,200 |
| Silversea Cruises | |||
| Silver Nova | 2023 | 2023 | 730 |
| Silver Endeavour | 2021 | 2022 | 200 |
| Silver Dawn | 2021 | 2022 | 600 |
| Silver Origin | 2020 | 2020 | 100 |
| Silver Moon | 2020 | 2020 | 600 |
| Silver Muse | 2017 | 2017 | 600 |
| Silver Spirit | 2009 | 2009 | 600 |
| Silver Whisper | 2001 | 2001 | 400 |
| Silver Shadow | 2000 | 2000 | 400 |
| Silver Wind | 1995 | 1995 | 250 |
| Silver Cloud | 1994 | 1994 | 250 |
| Ship | Year Ship<br>Built | Year ship entered service / will enter service | Approximate<br>Berths |
| --- | --- | --- | --- |
| Silver Explorer | 1989 | 2008 | 150 |
| TUI Cruises | |||
| Mein Schiff 2 | 2019 | 2019 | 2,900 |
| Mein Schiff 1 | 2018 | 2018 | 2,900 |
| Mein Schiff 6 | 2017 | 2017 | 2,500 |
| Mein Schiff 5 | 2016 | 2016 | 2,500 |
| Mein Schiff 4 | 2015 | 2015 | 2,500 |
| Mein Schiff 3 | 2014 | 2014 | 2,500 |
| Mein Schiff Herz | 1997 | 2011 | 1,900 |
| Hapag-Lloyd | |||
| Hanseatic Spirit | 2021 | 2021 | 230 |
| Hanseatic Inspiration | 2019 | 2019 | 230 |
| Hanseatic Nature | 2019 | 2019 | 230 |
| Europa 2 | 2013 | 2013 | 500 |
| Europa | 1999 | 1999 | 400 |
| Total | 159,585 |
_________________________________________________________________
(1)Icon of the Seas is expected to be delivered in the fourth quarter of 2023 and is expected to commence cruise revenue operations in the first quarter of 2024.
As of December 31, 2022, our Global Brands and our Partner Brands have 10 ships on order. Two ships on order are being built in Germany by Meyer Werft GmbH, four are being built in Finland by Meyer Turku shipyard, two are being built in France by Chantiers de l’Atlantique and two are being built in Italy by Fincantieri. As of December 31, 2022, the dates that the ships on order are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:
| Ship | Shipyard | Expected Delivery | Approximate<br>Berths |
|---|---|---|---|
| Royal Caribbean International — | |||
| Oasis-class: | |||
| Utopia of the Seas | Chantiers de l’Atlantique | 2nd Quarter 2024 | 5,700 |
| Icon-class: | |||
| Icon of the Seas | Meyer Turku Oy | 4th Quarter 2023 | 5,600 |
| Unnamed | Meyer Turku Oy | 2nd Quarter 2025 | 5,600 |
| Unnamed | Meyer Turku Oy | 2nd Quarter 2026 | 5,600 |
| Celebrity Cruises — | |||
| Edge-class: | |||
| Celebrity Ascent | Chantiers de l’Atlantique | 4th Quarter 2023 | 3,250 |
| Silversea Cruises — | |||
| Evolution-class: | |||
| Silver Nova | Meyer Werft | 2nd Quarter 2023 | 730 |
| Silver Ray | Meyer Werft | 2nd Quarter 2024 | 730 |
| TUI Cruises (50% joint venture) — | |||
| Mein Schiff 7 | Meyer Turku Oy | 2nd Quarter 2024 | 2,900 |
| Unnamed | Fincantieri | 4th Quarter 2024 | 4,100 |
| Unnamed | Fincantieri | 2nd Quarter 2026 | 4,100 |
| Total Berths | 38,310 |
__________________________________________________________________
In addition, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship for delivery in 2025, which is contingent upon completion of conditions precedent and financing.
Seasonality
Our revenues have historically been seasonal based on the demand for cruises. Demand is typically strongest for cruises during the Northern Hemisphere’s summer months and holidays. In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, our brands have focused on deployment in the Caribbean, Asia and Australia during that period.
Passengers and Capacity
Selected statistical information is shown in the following table (see Financial Presentation- Description of Certain Line Items and Selected Operational and Financial Metrics under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, for definitions). Passengers Carried, Passenger Cruise Days, Available Passenger Cruise Days and Occupancy reflect the impact of our suspension of operations during parts of 2020 and 2021 due to the COVID-19 pandemic and the gradual resumption of full operations starting the second half of 2021 through the first half of 2022:
| Year Ended December 31, (3) | |||||
|---|---|---|---|---|---|
| 2022 | 2021 (1)(3) | 2020 (2) | 2019 (2) | 2018 (2) | |
| Passengers Carried | 5,536,335 | 1,030,403 | 1,295,144 | 6,553,865 | 6,084,201 |
| Passenger Cruise Days | 35,051,935 | 5,802,582 | 8,697,893 | 44,803,953 | 41,853,052 |
| Available Passenger Cruise Days (APCD) | 41,197,650 | 11,767,441 | 8,539,903 | 41,432,451 | 38,425,304 |
| Occupancy | 85.1% | 49.3% | 101.9% | 108.1% | 108.9% |
___________________________________________________________________
(1) Due to the elimination of the Silversea Cruises three-month reporting lag in October of 2021, we include Silversea Cruises' metrics from October 1, 2020 through June 30, 2021 and October 1 through December 31, 2021 in the year ended December 31, 2021. The year ended December 31, 2021 does not include July, August, and September 2021 statistics as Silversea Cruises' results of operations for those months are included within Other (expense) income in our consolidated statements of comprehensive loss for the year ended December 31, 2021. Refer to Note 1. General to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for more information on the three-month reporting lag.
(2) Due to the three-month reporting lag effective through September 30, 2021, we include Silversea Cruises' metrics from October 1, 2019 through September 30, 2020 in the year ended December 31, 2020, from October 1, 2018 through September 30, 2019 in the year ended December 31, 2019, and from August 1, 2018 through September 30, 2018 in the year ended December 31, 2018.
(3) For the year ended December, 31, 2021, we include Azamara Cruises' metrics through March 19, 2021, the effective sale date of the brand. Refer to Note 1. General to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for more information on the sale of the Azamara Cruises brand. For the years ended December 31, 2020, 2019, and 2018, we include the full year of operations for Azamara Cruises.
Cruise Pricing
Our cruise ticket prices include accommodations and a wide variety of activities and amenities, including meals and entertainment. Prices vary depending on many factors including the destination, cruise length, stateroom category selected and the time of year the cruise takes place.
Although we grant credit terms in select markets mainly outside of the United States, our payment terms generally require an upfront deposit to confirm a reservation, with the balance due prior to the sailing. Our cruises are generally available for sale at least one year in advance and often more than two years in advance of sailing. During the selling period of a cruise, we continually monitor and adjust our cruise ticket prices for available guest staterooms based on demand, with the objective of maximizing net yields.
As our business has grown globally, our sale arrangements with travel advisors may vary. For instance, although our direct business has historically grown at a rapid pace, sale arrangements through travel advisor charter and group sales are proportionately higher in the China market than in our other markets which are primarily through retail agency and direct sales.
We have developed and implemented enhancements to our reservations system that provide us and our travel partners with additional capabilities, making it easier to do business with us. For example, we offer air transportation to our guests through our air transportation program available in major cities around the world.
Passenger ticket revenues accounted for approximately 66%, 61% and 68% of total revenues in 2022, 2021 and 2020, respectively.
Onboard Activities and Other Revenues
Our cruise brands offer modern fleets with a wide array of onboard services, amenities and activities which vary by brand and ship. While many onboard activities are included in the base price of a cruise, we realize additional revenues from, among other things, gaming, the sale of alcoholic and other beverages, internet and other telecommunication services, gift shop items, shore excursions, photography, spa/salon and fitness services, art auctions, retail shops and a wide variety of specialty restaurants and dining options. Many of these services are available for pre-booking prior to embarkation. These activities are offered either directly by us or by independent concessionaires from which we receive a percentage of their revenues. The all-inclusive pricing programs that we offer currently, add some of these onboard activity and other services to the base price of the cruise.
In conjunction with our cruise vacations, we offer pre- and post-cruise hotel packages to our Royal Caribbean International, Celebrity Cruises and Silversea Cruises guests. We also offer cruise vacation protection coverage to guests in a number of markets, which provides guests with coverage for trip cancellation, medical protection and baggage protection. Onboard and other revenues accounted for approximately 34%, 39%, and 32% of total revenues in 2022, 2021, and 2020, respectively.
Segment Reporting
We believe our brands possess the versatility to enter multiple cruise market segments within the cruise vacation industry. Although each of our brands has its own marketing style as well as ships and crews of various sizes, the nature of the products sold and services delivered by our brands share a common base (i.e., the sale and provision of cruise vacations). Our brands also have similar itineraries as well as similar cost and revenue components. In addition, our Global
Brands have historically sourced passengers from similar markets around the world and operated in similar economic environments with a significant degree of commercial overlap. As a result, our brands have been aggregated as a single reportable segment based on the similarity of their economic characteristics, types of consumers, regulatory environment, maintenance requirements, supporting systems and processes as well as products and services provided. Our President and Chief Executive Officer has been identified as the chief operating decision-maker and all significant operating decisions including the allocation of resources are based upon the analyses of the Company as one segment. (For financial information, see Item 8. Financial Statements and Supplementary Data.)
Human Capital
Our human capital strategy focuses on attracting, developing and retaining the best talent in the industry. Some key elements of these strategies include: assessing current and future talent needs; a diverse and inclusive workforce; robust opportunities for employee growth and development; support for health and well-being; and an active listening strategy to make sure voices are heard and continuous improvement occurs. We review our human capital metrics and our diversity equity and inclusion (DEI) program with the Talent and Compensation Committee of our Board of Directors on a regular basis.
As of December 31, 2022, our three global cruise brands employed approximately 102,500 employees spanning across our shipboard fleet and shoreside locations. Our shoreside workforce, including private destinations, consisted of approximately 8,100 full time and 100 part-time employees. Our shipboard workforce consisted of 94,300 employees, and as of December 31, 2022, approximately 88% were covered by collective bargaining agreements.
The following table details the distribution of our workforce by employee type and region as of December 31, 2022:
| Employee Type | U.S. Based Employees | International Employees |
|---|---|---|
| Shoreside Operations(1) | 4,100 | 3,000 |
| Shipboard Employees | — | 94,300 |
| Private Destinations (2) | — | 1,100 |
(1) Includes full time and part-time employees.
(2) Private Destinations includes Coco Cay, Labadee and Galapagos based employees.
As a global operation, we take great pride in the broad diversity of our workforce and the value it brings to our company. Our shoreside workforce is gender diverse with 58% female representation. Our shipboard workforce is comprised of employees from approximately 139 countries. The majority of our shipboard workforce comes from the Philippines (30%), Indonesia (18%) and India (14%). Our shoreside workforce is primarily based out of the U.S. (57%), Philippines (21%), Mexico (7%), and U.K. (5%).
The following table details the gender distribution of our workforce by employee location as of December 31, 2022:
| Employee Location | Male | Female |
|---|---|---|
| Shoreside - U.S. | 44% | 56% |
| Shoreside - International | 41% | 59% |
| Shipboard | 78% | 22% |
Our U.S. shoreside workforce is ethnically diverse with approximately 55% comprised of non-White ethnic groups.
| U.S. Shoreside Representation by Ethnicity | % of Total U.S. Shoreside Population |
|---|---|
| White | 42% |
| Hispanic | 40% |
| African American | 9% |
| Asian | 5% |
| Others(1) | 4% |
(1) No other individual category is greater than 1%.
We offer a variety of learning and development programs to our workforce, which includes a combination of instructor led (classroom and virtual) and web based (self-learning) courses. In 2022, our workforce invested approximately 2.5 million hours in learning programs across a variety of areas ranging from Ethics, Compliance, Data Analysis, Business Software and Tools, Finance/Accounting, Professional development, Project Management skills, Cyber Security, Leadership and Safety/Security. In total, our workforce completed approximately 1.2 million courses within our learning management systems.
We run our employee pulse surveys periodically to understand and positively impact our employees’ experience. In 2022, our shoreside employee engagement scores remained high and above most global industry benchmarks.
Insurance
We maintain insurance on the hull and machinery of our ships, with insured values generally equal to the net book value of each ship. This coverage is maintained with reputable insurance underwriters from the British, Scandinavian, French, United States and other reputable international insurance markets.
We are members of four Protection and Indemnity ("P&I") clubs, which are part of a worldwide group of 12 P&I clubs, known as the International Group of P&I Clubs (the “IG”). Liabilities, costs and expenses for illness and injury to crew, guest injury, pollution and other third-party claims in connection with our cruise activities are covered by our P&I clubs, subject to the clubs’ rules and the limits of coverage determined by the IG. P&I coverage provided by the clubs is on a mutual basis and we are subject to additional premium calls in the event of a catastrophic loss incurred by any member of the 12 P&I clubs, whereby the reinsurance limits purchased by the IG are exhausted. We are also subject to additional premium calls based on investment and underwriting shortfalls experienced by our own individual insurers.
We maintain war risk insurance for legal liability to crew, guests and other third parties as well as for loss or damage to our vessels arising from acts of war, including invasion, insurrection, terrorism, rebellion, piracy and hijacking. Our primary war risk coverage is provided by a Norwegian war risk insurance association and our excess war risk insurance is provided by our four P&I clubs. Consistent with most marine war risk policies, our coverage is subject to cancellation in the event of a change in risk. In the event of a war between major powers, our primary policies terminate after thirty days’ notice and our excess policies terminate immediately. Our excess policies are also subject to cancellation after a notice period of seven days in the event of other changes in risk. These notice periods allow for premiums to be renegotiated based on changes in risk.
Insurance coverage for other exposures, such as shoreside property and casualty, passenger off-vessel, directors and officers and network security and privacy, are maintained with various global insurance companies.
We do not carry business interruption insurance for our ships based on our evaluation of the risks involved and protective measures already in place, as compared to the cost of insurance.
All insurance coverage is subject to certain limitations, exclusions and deductible levels. In addition, in certain circumstances, we either self-insure or co-insure a portion of these risks. Premiums charged by insurance carriers, including carriers in the maritime insurance industry, increase or decrease from time to time and tend to be cyclical in nature. These cycles are impacted both by our own loss experience and by losses incurred in direct and reinsurance markets. We historically have been able to obtain insurance coverage in amounts and at premiums we have deemed to be commercially acceptable. No assurance can be given that affordable and secure insurance markets will be available to us in the future, particularly for war risk insurance.
Trademarks
We own a number of registered trademarks related to the Royal Caribbean International, Celebrity Cruises and Silversea Cruises cruise brands. The registered trademarks include the name “Royal Caribbean International” and its crown and anchor logo, the name “Celebrity Cruises” and its “X” logo, the name “Silversea Cruises” and its logo, and the names of various cruise ships, ship venues and other marketing programs. We believe our largest brands' trademarks are widely recognized throughout the world and have considerable value. The duration of trademark registrations varies from country to country. However, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.
Regulation
Our ships are regulated by various international, national, state and local laws, regulations and treaties in force in the jurisdictions in which they operate. In addition, our ships are registered in the Bahamas, Cyprus, Malta or in the case of our ships operating in the Galapagos Islands, Ecuador. Each ship is subject to regulations issued by its country of registry, including regulations issued pursuant to international treaties governing the safety of our ships, guests and crew as well as environmental protection. Each country of registry conducts periodic inspections to verify compliance with these regulations as discussed more fully below. Ships operating out of ports of call around the world are also subject to inspection by the maritime authorities of that country for compliance with international treaties and local regulations. Additionally, ships operating out of the United States ports are subject to inspection by the United States Coast Guard for compliance with international treaties and by the United States Public Health Service for sanitary and health conditions. Our ships are also subject to similar inspections pursuant to the laws and regulations of various other countries our ships visit.
We believe that we are in material compliance with all the regulations applicable to our ships and that we have all licenses necessary to conduct our business. Health, safety, security, environmental and financial responsibility issues are, and we believe will continue to be, an area of focus by the relevant government authorities in the United States and internationally. From time to time, various regulatory and legislative changes may be implemented that could impact our operations and subject us to increasing compliance costs in the future.
Safety and Security Regulations
Our ships are required to comply with international safety standards defined in the International Convention for Safety of Life at Sea (“SOLAS”), which, among other things, establish requirements for ship design, structural features, materials, construction, lifesaving equipment and safe management and operation of ships for guest and crew safety. The SOLAS standards are revised from time to time and incorporated in our ship design and operation, as applicable. The latest enhancements include the addition of the Polar Code which sets goal-based standards for ships operating in the polar region as well as damage stability requirements for new designs and operational measures for existing vessels. Compliance with these modified standards have not historically had a material effect on our operating costs. SOLAS incorporates the International Safety Management Code (“ISM Code”), which provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code is mandatory for all vessels, including passenger vessel operators.
All of our operations and ships are regularly audited by various national authorities, and we are required to maintain the relevant certificates of compliance with the ISM Code.
Additionally, we are required to meet, and we fully comply with, the provisions outlined in the Standards of Training, Certification, and Watchkeeping for Seafarers (STCW). This convention sets the training and competency standards for all our crew who are responsible for operating the vessels or who have designated roles in ensuring the safety of our guests and crew during an emergency. Regulatory bodies routinely check that our crews’ training credentials are up-to-date and assess competency by observing safety and emergency drills. As amendments are made to STCW, we ensure that our crew training is updated accordingly.
Our ships are subject to various security requirements, including the International Ship and Port Facility Security Code (“ISPS Code”), which is part of SOLAS, and the U.S. Maritime Transportation Security Act of 2002 (“MTSA”), which applies to ships that operate in U.S. ports. In order to satisfy these security requirements, we implement security measures, conduct vessel security assessments, and develop security plans. The security plans for all of our ships have been submitted to and approved by the Recognized Security Organization on behalf of the ships' flag state and are in compliance with the ISPS Code and the MTSA.
The Cruise Vessel Security and Safety Act of 2010, which applies to passenger vessels which embark or include port stops within the United States, requires the implementation of certain safety design features as well as the establishment of
practices for the reporting of and dealing with allegations of crime. The cruise industry supported this legislation and we believe that our internal standards are generally as strict or stricter than the law requires. Some provisions of the act call for regulations which have not been finalized. We do not expect the pending regulations to have a material impact to our operations.
Environmental Regulations
We are subject to various international and national laws and regulations relating to environmental protection. Under such laws and regulations, we are generally prohibited from discharging materials other than food waste into the waterways. We have made, and will continue to make, capital and other expenditures to comply with environmental laws and regulations. From time to time, environmental and other regulators consider more stringent regulations, which may affect our operations and increase our compliance costs. We believe that the impact of ships on the global environment will continue to be an area of focus by the relevant authorities throughout the world and, accordingly, may subject us to increasing compliance costs in the future, including the items described below.
Our ships are subject to the International Maritime Organization’s (‘‘IMO’’) regulations under the International Convention for the Prevention of Pollution from Ships (the ‘‘MARPOL Regulations’’) and the International Convention for the Control and Management of Ships Ballast Water and Sediments (Ballast Water Management Convention), in addition to other regional and national regulations such as EU Directives and the US Vessel General Permit, which includes requirements designed to minimize pollution by oil, sewage, garbage, air emissions and the transfer of non-native/non-indigenous species. We have obtained the relevant international compliance certificates relating to oil, sewage, air pollution prevention and ballast water for all of our ships.
Emissions
The MARPOL Regulations imposed reduced global limitations on the sulfur content of emissions emitted by ships operating worldwide to 0.5% as of January 1, 2020, which was reduced from 3.5%. We do not expect for this increased limitation to have a material impact to our results of operations largely due to a number of mitigating steps we have taken over the last several years, including equipping all of our new ships delivered since 2014 with Advanced Emissions Purification ("AEP") systems covering all engines and actively developing and installing AEP systems on the majority of our remaining fleet; resulting in 70% of our fleet being equipped with AEP systems. In addition, the majority of our ships on order are being delivered with Liquified Natural Gas ("LNG") technology that meet all sulfur requirements. These efforts will provide us with additional operational and deployment flexibility.
The MARPOL Regulations also establish special Emission Control Areas ("ECAs") with additional stringent limitations on sulfur emissions in certain geographical areas. There are four established ECAs and one additional ECA being established beginning in May of 2025 that restrict sulfur emissions: the Baltic Sea, the North Sea/English Channel, certain waters surrounding the North American coast, and the waters surrounding Puerto Rico and the U.S. Virgin Islands (the "Caribbean ECA") and the Mediterranean Sea. Ships operating in these sulfur ECAs are required to reduce their emissions sulfur content to 0.1%. This reduction has not, and with the addition of the new ECA will not, have a significant impact on our results of operations to date due to the mitigating steps described above.
Additionally, all new ships operating within the North American and U.S. Caribbean Sea ECA that began construction on or after January 1, 2016, and North and Baltic Sea ships constructed on or after January 1, 2021 are required to meet more stringent nitrogen oxide emission limits. We comply with these rules for those relevant ships in service. As an added measure, all of our ships under construction are being built to comply with these rules. The rules have not had and are not expected to have a significant impact to our operations or costs.
Beginning in 2018 and 2019, respectively, the European Union (EU) and IMO both implemented requirements for ships to monitor and report their carbon emissions. Compliance with these regulations have not materially impacted our costs or results of operations. However, the legislations contemplate the enactment of further obligations and restrictions focused on reducing carbon emissions from ships. The EU has proposed a series of significant carbon reforms under its Fit for 55 package designed to meet its 2030 emission goals, which would require us, among other things, to increase the use of low carbon fuel onboard our vessels, connectivity to shore power, and to purchase carbon allowances. The Fit for 55 Package includes proposals for the EU Emission Trading System (ETS), and the FuelEU Maritime initiative. The ETS’s current proposed structure will subject ship operators to the program, and will impose requirements to purchase carbon emission allowances beginning in 2024 for 40% of our emissions within Europe, growing to 70% in 2025, and to 100% by 2026. The FuelEU Maritime initiative, still under development, currently proposes requirements on fuel mix of 2-6% lower carbon fuels beginning in 2024 to 2026 and connecting to shore power by 2030. If enacted, the Fit for 55 proposals could individually and collectively have a material adverse effect on our business and results of operations due to increased costs
associated with compliance and modified itineraries in the affected regions. The impact of the regulation is uncertain as elements of the proposals have not been finalized and the costs of ETS allowances will depend on future markets.
In November of 2020, IMO approved amendments to the MARPOL convention that will require ships, beginning in 2023, to combine a technical and an operational approach (Energy Efficiency Existing Ship Index ("EEXI") and Carbon Intensity Indicator ("CII")) to reduce their carbon intensity in line with the ambition of the Initial IMO GHG Strategy, which aims to reduce carbon intensity of international shipping by 40% by 2030 as compared to 2008. The approved framework for the EEXI and CII amendments are not expected to have a material impact on our operations, however IMO is expected to review the CII framework in 2026, which could result in further requirements which could lead to changes to our itinerary flexibility for some of our ships depending on the final operational measures needed to comply. Furthermore, the IMO is also considering various other measures, including a possible fuel standard or a global market-based measures, such as carbon taxes, that would reduce greenhouse gas emissions even further. While the exact impact is uncertain at this time as the proposals have yet to be finalized, the global nature of the regulation could result in increased compliance costs. We will continue to monitor and be engaged in the discussions.
Ballast Water
The IMO Ballast Water Management Convention, which came into effect in 2017, requires ships that carry and discharge ballast water to meet specific discharge standards by installing Ballast Water Treatment Systems by 2023. Compliance with this regulation has not had a material effect on our results of operations and we do not expect the continuing compliance with this regulation to have a material effect on our results of operations.
Refer to Item 1A. Risk Factors - "Environmental, labor, health and safety, financial responsibility and other maritime regulations could affect operations and increase costs" for further discussion of the risks associated with the regulations discussed above.
Consumer Financial Responsibility Regulations
We are required to obtain certificates from the United States Federal Maritime Commission relating to our ability to satisfy liability in cases of non-performance of obligations to guests, as well as casualty and personal injury. As a condition to obtaining the required certificates, we generally arrange through our insurers for the provision of surety for our ship-operating companies. The required amount of the surety bonds for non-performance of obligations to guests is currently $32 million per operator and is subject to additional consumer price index based adjustments.
We are also required by the United Kingdom, Norway, Finland, Iceland and the Baltics to establish our financial responsibility for any liability resulting from the non-performance of our obligations to guests from these jurisdictions. In the United Kingdom we are currently required by the Association of British Travel Agents to provide performance bonds in varying amounts during the course of the year, up to £154 million during the peak season. Additionally, we are required by the Civil Aviation Authority to provide performance bonds totaling £35 million. We maintain with the Norwegian Travel Guarantee Fund performance bonds in varying amounts during the course of the year to cover our financial responsibility in Norway, Finland, Iceland and the Baltics.
Certain other jurisdictions also require that we establish financial responsibility to our guests resulting from the non-performance of our obligations; however, the related amounts do not have a material effect on our costs.
Taxation of the Company
The following is a summary of our principal taxes, exemptions and special regimes. In addition to or instead of income taxation, virtually all jurisdictions where our ships call impose some tax or fee, or both, based on guest headcount, tonnage or some other measure. We also collect and remit value added tax (VAT) or sales tax in many jurisdictions where we operate.
Our consolidated operations are primarily foreign corporations engaged in the owning and operating of passenger cruise ships in international transportation.
U.S. Income Taxation
The following is a discussion of the application of the U.S. federal and state income tax laws to us and is based on the current provisions of the U.S. Internal Revenue Code, Treasury Department regulations, administrative rulings, court decisions and the relevant state tax laws, regulations, rulings and court decisions of the states where we have business operations. All of the foregoing is subject to change, and any such change could affect the accuracy of this discussion.
Application of Section 883 of the Internal Revenue Code
Royal Caribbean Cruises Ltd., Celebrity Cruises, Inc. and Silversea Cruises Ltd. are engaged in a trade or business in the United States, and many of our ship-owning subsidiaries, depending upon the itineraries of their ships, receive income from sources within the United States. Silversea Cruises Ltd. and our United Kingdom tonnage tax company are classified as disregarded entities, or divisions for U.S. federal income tax purposes that may earn U.S. source income. Under Section 883 of the Internal Revenue Code, certain foreign corporations may exclude from gross income (and effectively from branch profits tax as such earnings do not give rise to effectively connected earnings and profits) U.S. source income derived from or incidental to the international operation of a ship or ships, including income from the leasing of such ships.
A foreign corporation will qualify for the benefits of Section 883 if, in relevant part: (1) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the United States; and (2) the stock of the corporation (or the direct or indirect corporate parent thereof) is “primarily and regularly traded on an established securities market” in the United States. In the opinion of our U.S. tax counsel, Faegre Drinker Biddle & Reath LLP, based on the representations and assumptions set forth in that opinion, Royal Caribbean Cruises Ltd., including Silversea Cruises Ltd., Celebrity Cruises Inc., and relevant ship-owning subsidiaries with U.S. source shipping income qualify for the benefits of Section 883 because Royal Caribbean Cruises Ltd. and each of those subsidiaries are incorporated in Liberia, which is a qualifying country, and our common stock is primarily and regularly traded on an established securities market in the United States (i.e., we are a “publicly traded” corporation). If, in the future, (1) Liberia no longer qualifies as an equivalent exemption jurisdiction, and we do not reincorporate in a jurisdiction that does qualify for the exemption, or (2) we fail to qualify as a publicly traded corporation, we and all of our ship-owning or operating subsidiaries that rely on Section 883 to exclude qualifying income from gross income would be subject to U.S. federal income tax on their U.S. source shipping income and income from activities incidental thereto.
We believe that most of our income and the income of our ship-owning subsidiaries, is derived from or incidental to the international operation of a ship or ships and, therefore, is exempt from taxation under Section 883.
Regulations under Section 883 list activities that are not considered by the Internal Revenue Service to be incidental to the international operation of ships including the sale of air and land transportation, shore excursions and pre- and post-cruise tours. Our income from these activities that is earned from sources within the United States will be subject to U.S. taxation.
Taxation in the Absence of an Exemption Under Section 883
If Royal Caribbean Cruises Ltd., the operator of our vessels, Celebrity Cruises Inc., or our ship-owning subsidiaries were to fail to meet the requirements of Section 883 of the Internal Revenue Code, or if the provision was repealed, then, as explained below, such companies would be subject to U.S. income taxation on a portion of their income derived from or incidental to the international operation of our ships.
Because Royal Caribbean Cruises Ltd. and Celebrity Cruises Inc. conduct a trade or business in the United States, Royal Caribbean Cruises Ltd., including Silversea Cruises Ltd., and Celebrity Cruises Inc. would be taxable at regular corporate rates on our separate company taxable income (i.e., without regard to the income of our ship-owning subsidiaries) on income which is effectively connected with our U.S. trade or business (generally only income from U.S. sources). In addition, if any of our earnings and profits effectively connected with our U.S. trade or business were withdrawn, or were deemed to have been withdrawn, from our U.S. trade or business, those withdrawn amounts would be subject to a “branch profits” tax at the rate of 30%. Royal Caribbean Cruises Ltd., which includes Silversea Cruises Ltd. for tax purposes, and Celebrity Cruises Inc. would also be potentially subject to tax on portions of certain interest paid by us at rates of up to 30%.
If Section 883 were not available to our ship-owning subsidiaries, each such subsidiary would be subject to a special 4% tax on its U.S. source gross transportation income, if any, each year because it does not have a fixed place of business in the United States and its income is derived from the leasing of a ship.
Other United States Taxation
Royal Caribbean Cruises Ltd., which includes Silversea Cruises Ltd., and Celebrity Cruises Inc. earn U.S. source income from activities not considered incidental to international shipping. The tax on such income is not material to our results of operation for all years presented.
State Taxation
Royal Caribbean Cruises Ltd., Celebrity Cruises Inc., and certain of our subsidiaries are subject to various U.S. state income taxes which are generally imposed on each state’s portion of the U.S. source income subject to federal income taxes. Additionally, the state of Alaska subjects an allocated portion of the total income of companies doing business in Alaska and certain other affiliated companies to Alaska corporate state income taxes and also imposes a 33% tax on adjusted gross income from onboard gambling activities conducted in Alaska waters. This did not have a material impact to our results of operations for all years presented.
United Kingdom Income Taxation
During the year ended December 31, 2022, we operated 15 ships under the United Kingdom tonnage tax regime (“U.K. tonnage tax”).
Companies subject to U.K. tonnage tax pay a corporate tax on a notional profit determined with reference to the net tonnage of qualifying vessels. The requirements for a company to qualify for the U.K. tonnage tax regime include being subject to U.K. corporate income tax, operating qualifying ships, which are strategically and commercially managed in the United Kingdom, and fulfilling a seafarer training requirement.
Relevant shipping profits include income from the operation of qualifying ships and from shipping related activities. Our U.K. income from non-shipping activities which do not qualify under the U.K. tonnage tax regime and which are not considered significant, remain subject to regular U.K. corporate income tax.
Other Taxation
We and certain of our subsidiaries are subject to value-added and other indirect taxes most of which are reclaimable, zero-rated or exempt.
In December 2022, the European Union announced it would implement the Organization for Economic Co-operation Development’s (OECD’s) 15% Global Minimum Tax initiative (known as “Pillar 2”). If enacted, these rules generally impose a 15% corporate minimum tax on large multi-national companies, and we expect to be in scope of the rules beginning in 2025. The OECD model rules provide an exclusion for “International Shipping Income,” and certain ancillary income, for which certain of our earnings may be eligible. We are still pending final guidance on several material open technical issues and assessing the impact on our financial statements.
Website Access to Reports
We make available, free of charge, access to our Annual Reports, all quarterly and current reports and all amendments to those reports, as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission through our website at www.rclinvestor.com. The information contained on our website is not a part of any of these reports and is not incorporated by reference herein.
Information About our Executive Officers
As of February 23, 2023, our executive officers are:
| Name | Age | Position |
|---|---|---|
| Jason T. Liberty | 47 | President and Chief Executive Officer |
| Naftali Holtz | 45 | Chief Financial Officer |
| Michael W. Bayley | 64 | President and Chief Executive Officer, Royal Caribbean International |
| Lisa Lutoff-Perlo | 65 | President and Chief Executive Officer, Celebrity Cruises |
| Harri U. Kulovaara | 70 | Executive Vice President, Maritime |
| R. Alexander Lake | 51 | Senior Vice President, Chief Legal Officer and Secretary |
Jason T. Liberty has served as President and Chief Executive Officer since January 2022. Mr. Liberty has held several roles since joining the Company in 2005. Most recently, Mr. Liberty served as Executive Vice President and Chief Financial Officer since 2017 and, prior to that, as Senior Vice President and Chief Financial Officer since 2013. Before his role as Chief Financial Officer, Mr. Liberty served as Senior Vice President, Strategy and Finance from 2012 through 2013; as Vice President of Corporate and Revenue Planning from 2010 through 2012; and as Vice President of Corporate
and Strategic Planning from 2008 to 2010. Before joining Royal Caribbean, Mr. Liberty was a Senior Manager at the international public accounting firm of KPMG LLP. Mr. Liberty currently serves on the Board of Directors of WNS Holdings.
Naftali Holtz has served as Chief Financial Officer since January 2022. In his role as Chief Financial Officer, Mr. Holtz is responsible for overseeing the company’s financial planning and analysis, corporate strategy, treasury, corporate tax matters, investor relations, investments, internal audit, accounting and financial reporting. Prior to his role as Chief Financial Officer, Mr. Holtz served as Senior Vice President of Finance, responsible for financial planning and analysis, risk management and treasury. Mr. Holtz worked for Goldman Sachs as a Managing Director and Head of Lodging and Leisure Investment Banking before joining Royal Caribbean Group in 2019. Mr. Holtz is also a veteran of the Israeli Air Force.
Michael W. Bayley has served as President and Chief Executive Officer of Royal Caribbean International since December 2014. Prior to this, he served as President and Chief Executive Officer of Celebrity Cruises since August 2012. Mr. Bayley has been employed by Royal Caribbean for over 40 years, having started as an Assistant Purser onboard one of the Company’s ships. He has served in a number of roles including as Executive Vice President, Operations from February 2012 until August 2012. Other positions Mr. Bayley has held include Executive Vice President, International from May 2010 until February 2012; Senior Vice President, International from December 2007 to May 2010; Senior Vice President, Hotel Operations for Royal Caribbean International; and Chairman and Managing Director of Island Cruises.
Lisa Lutoff-Perlo has served as President and Chief Executive Officer of Celebrity Cruises since December 2014 and has been with the company since 1985. She also leads the Company’s Global Marine Organization. Ms. Lutoff-Perlo was the Executive Vice President, Operations of Royal Caribbean International from 2012 to 2014; Senior Vice President, Hotel Operations of Celebrity Cruises from 2007 to 2012; and Vice President, Onboard Revenue of Celebrity Cruises from 2005 to 2007. Ms. Lutoff-Perlo held various senior positions in sales and marketing with Royal Caribbean International from 1985 to 2005. Ms. Lutoff-Perlo currently serves on the Board of Directors of AutoNation and is Vice Chair for United Way of Broward County.
Harri U. Kulovaara has served as Executive Vice President, Maritime since January 2005. Mr. Kulovaara is responsible for fleet design and newbuild operations. Mr. Kulovaara also chairs our Maritime Safety Advisory Board. Mr. Kulovaara has been employed with Royal Caribbean since 1995 in a variety of positions, including Senior Vice President, Marine Operations, and Senior Vice President, Quality Assurance. Mr. Kulovaara is a naval architect and engineer.
R. Alexander Lake has served as Chief Legal Officer and Secretary of the Company since June 2021, in which role he has global responsibility for the Company's legal and compliance functions. Mr. Lake joined the Company from World Fuel Services Corporation, a global energy services company, where he spent over 17 years leading the legal, regulatory and compliance areas, serving most recently as Executive Vice President, Chief Legal Officer and Corporate Secretary from 2017 to 2021. Prior to World Fuel Services, Mr. Lake served as Assistant General Counsel at America Online Latin America, Inc. and practiced as a corporate lawyer in leading law firms in New York and Miami.
Item 1A. Risk Factors
The risk factors set forth below and elsewhere in this Annual Report on Form 10-K are important factors that could cause actual results to differ from expected or historical results. It is not possible to predict or identify all such risks. There may be additional risks that we consider not to be material, or which are not known, and any of these risks could affect our operations. The ordering of the risk factors set forth below is not intended to reflect a risk's potential likelihood or magnitude. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a cautionary note regarding forward-looking statements.
Macroeconomic, Business, Market and Operational Risks
Adverse economic or other conditions could reduce the demand for cruises and passenger spending, adversely impacting our operating results, cash flows and financial condition including impairing the value of our goodwill, ships, trademarks and other assets and potentially affecting other critical accounting estimates where the impact may be material to our operating results.
Demand for cruises is affected by international, national, and local economic conditions. Weak or uncertain economic conditions may impact consumer confidence and pose a risk as vacationers postpone or reduce discretionary spending. This, in turn, may result in cruise booking slowdowns, decreased cruise prices and lower onboard revenues. Given the global nature of our business, we are exposed to many different economies, and our business could be negatively impacted by challenging conditions in any of the markets in which we operate, and/or related reactions by our competitors in such markets.
Our operating costs could increase due to market forces and economic or geopolitical factors beyond our control.
Our operating costs, including fuel, food, payroll and benefits, airfare, taxes, insurance, and security costs, can be and have been subject to increases due to market forces and economic or geopolitical conditions or other factors beyond our control, including global inflationary pressures, which have increased our operating costs. Increases in these operating costs have affected, and may continue to adversely affect, our future profitability.
In particular, increases in fuel prices have and could continue to materially and adversely affect our business as fuel prices impact not only our fuel costs, but also some of our other expenses, such as crew travel, freight, and commodity prices. Mandatory fuel restrictions may also create uncertainty related to the price and availability of certain fuel types potentially impacting operating costs.
Price increases for commercial airline services for our guests or major changes or reduction in commercial airline services and/or availability could adversely impact the demand for cruises and undermine our ability to provide reasonably priced vacation packages to our guests.
Many of our guests depend on scheduled commercial airline services to transport them to or from the ports where our cruises embark or disembark. Increases in the price of airfare would increase the overall price of the cruise vacation to our guests, which may adversely impact demand for our cruises. In addition, changes in the availability and/or regulations governing commercial airline services could adversely affect our guests’ ability to obtain air travel, as well as our ability to transfer our guests to or from our cruise ships, which could adversely affect our results of operations.
Terrorist attacks, war, and other similar events could have a material adverse impact on our business and results of operations.
We are susceptible to a wide range of adverse events, including terrorist attacks, war, conflicts, civil unrest and other hostilities. The occurrence of these events or an escalation in the frequency or severity of them, and the resulting political instability, travel restrictions and advisories and concerns over safety and security aspects of traveling or the fear of any of the foregoing, have had, and could have in the future, a significant adverse impact on demand and pricing in the travel and vacation industry. These events could also result in additional security measures taken by local authorities which have, and may in the future, impact access to ports and/or destinations. In addition, such events have led, and could lead, to disruptions, instability and volatility in global markets, supply chains and industries, increased operating costs, such as fuel and food, and disruptions affecting our newbuild construction and fleet modernization efforts, any of which could materially and adversely impact our business and results of operations. Further, such events could have the effect of heightening the other risks we have described in this report, any of which also could materially and adversely affect our business and results of operations.
Disease outbreaks and an increase in concern about the risk of illness could adversely impact our business and results of operations, and may cause significant disruptions, create new risks, and exacerbate existing risks.
Disease outbreaks and increased concern related to illness when traveling to, from, and on our ships such as COVID-19 could cause a drop in demand for cruises, guest cancellations, travel restrictions, an unavailability of ports and/or destinations, cruise cancellations, ship redeployments and an inability to source our crew, provisions or supplies from certain places. In addition, we may be subject to increased concerns that cruises are more susceptible than other vacation alternatives to the spread of infectious diseases. For example, the unprecedented responses by governments and other authorities to control and contain the COVID-19 outbreak,
including related variants, led to our voluntary suspension of our global cruise operations starting in March 2020. While we have resumed our global cruise operations, there is no assurance that our cruise operations will continue uninterrupted. In response to disease outbreaks, our industry, including our passengers and crew, may be subject to enhanced health and safety requirements in the future which may be costly and take a significant amount of time to implement across our fleet. For example, local governments may establish their own set of rules for self-quarantines and/or require proof of individuals' health status or vaccination prior to or upon visiting. Based on our assessment of these requirements and recommendations, or for other reasons, we may determine it necessary to cancel or modify certain of our Global Brands’ cruise sailings. The impact of any of these factors could have a material adverse effect on our business and results of operations. In addition, any operating or health protocols that we may develop or that may be required by law in the future in response to infectious diseases may be costly to develop and implement and may be less effective than we expected in reducing the risk of infection and spread of such disease on our cruise ships, all of which will negatively impact our operations and expose us to reputational and legal risks.
Incidents on ships, at port facilities, land destinations and/or affecting the cruise vacation industry in general, and the associated negative media coverage and publicity, have affected and could continue to affect our reputation and impact our sales and results of operations.
Cruise ships, private destinations, port facilities and shore excursions operated and/or offered by us and third parties may be susceptible to the risk of accidents, illnesses, mechanical failures, environmental incidents and other incidents which could bring into question safety, health, security and vacation satisfaction and negatively impact our sales, operations and reputation. Incidents involving cruise ships, and, in particular the safety, health and security of guests and crew and the media coverage thereof, including those related to the COVID-19 pandemic, have impacted and could continue to impact demand for our cruises and pricing in the industry. In particular, we cannot predict the impact on our financial performance and the public’s concern regarding the health and safety of travel, especially by cruise ship, and related decreases in demand for travel and cruising. Moreover, our ability to attract and retain guests and crew depends, in part, upon the perception and reputation of our company and our brands and the public’s concerns regarding the health and safety of travel generally, as well as regarding the cruising industry and our ships specifically. Our reputation and our business could also be damaged by continued or additional negative publicity regarding the cruise industry in general, including publicity regarding the spread of contagious disease such as COVID-19, over-tourism in key ports and destinations and the potentially adverse environmental impacts of cruising. The considerable expansion in the use of social and digital media has compounded the potential scope and reach of any negative publicity. In addition, incidents involving cruise ships may result in additional costs to our business, increasing government or other regulatory oversight and, in certain cases, potential litigation.
Significant weather, climate events and/or natural disasters could adversely impact our business and results of operations.
Natural disasters (e.g., earthquakes, volcanos, wildfires), weather and/or climate events (including hurricanes and typhoons) could impact our source markets and operations resulting in travel restrictions, guest cancellations, an inability to source our crew or our provisions and supplies from certain places. We are often forced to alter itineraries and occasionally cancel a cruise or a series of cruises or to redeploy our ships due to these types of events, which could have an adverse effect on our sales, operating costs and profitability in the current and future periods. Increases in the frequency, severity or duration of these types of events could exacerbate their impact and disrupt our operations or make certain destinations less desirable or unavailable impacting our revenues and profitability further. Any of the foregoing could have an adverse impact on our results of operations and on industry performance.
Our sustainability activities, including environmental, social and governance (ESG) matters, could result in reputational risks, increased costs and other risks.
Customers, investors, lenders, regulators and other industry stakeholders have placed increasing importance on corporate ESG practices and on the implications and social cost of their investments, which could cause us to incur additional costs and changes to our operations. If our ESG practices or disclosures do not meet stakeholders' evolving expectations and standards, our customer and employee retention, our access to certain types of capital, including export credit financing, and our brands and reputation may be negatively impacted, which could affect our business operations and financial condition. We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices, which could increase our operating costs and affect our results of operations and financial condition.
In addition, from time to time, we communicate certain initiatives regarding climate change and other ESG matters. We could fail or be perceived to fail to achieve such initiatives, which may negatively affect our reputation. The future adoption of new technology or processes to achieve the initiatives could also result in the impairment of existing assets.
Our reliance on shipyards, their subcontractors and our suppliers to implement our newbuild and ship upgrade programs and to repair and maintain our ships exposes us to risks which could adversely impact our business.
We rely on shipyards, their subcontractors and our suppliers to effectively construct our new ships and to repair, maintain, and upgrade our existing ships on a timely basis and in a cost effective manner. There are a limited number of shipyards with the capability
and capacity to build, repair, maintain and/or upgrade our ships. As such, any disruptions affecting the newbuild or fleet modernization supply chain will adversely impact our business as there are limited substitutes.
Suspensions and/or slowdowns of work at shipyards, have impacted and could continue to impact our ability to construct new ships as planned, our ability to timely and cost-effectively procure new capacity, and our ability to execute scheduled drydocks and/or fleet modernizations. For instance, the effects of the COVID-19 pandemic on the shipyards, their subcontractors, and our suppliers have resulted in delays in our previously scheduled ship deliveries. Variations from our plan could have a significant negative impact on our business operations and financial condition.
Building, repairing, maintaining and/or upgrading a ship is sophisticated work that involves significant risks. Material increases in commodity and raw material prices, and other cost pressures impacting the construction of a new ship, such as the cost of labor and financing, could adversely impact the shipyard’s ability to build the ship on a cost-effective basis. We may be impacted if shipyards, their subcontractors, and/or our suppliers encounter financial difficulties, supply chain, technical or design problems when building or repairing a ship. These problems have impacted and may in the future impact the timely delivery or cost of new ships or the ability of shipyards to repair and upgrade our fleet in accordance with our needs or expectations. In addition, delays, mechanical faults and/or unforeseen incidents may result in cancellation of cruises or delays of new ship orders or necessitate unscheduled drydocks. Such events could result in lost revenue, increased operating expenses, or both, and thus adversely affect our results of operations.
An increase in capacity worldwide or excess capacity in a particular market could adversely impact our cruise sales and/or pricing.
Although our ships can be redeployed, cruise sales and/or pricing may be impacted by the introduction of new ships into the marketplace, reductions in cruise capacity, overall market growth and deployment decisions of ourselves and our competitors. As of December 31, 2022, a total of 63 new ships with approximately 143,000 berths were on order for delivery through 2028 in the cruise industry, including 10 ships currently scheduled to be delivered to our Global and Partner Brands. The further net growth in capacity from these new ships and future orders, without an increase in the cruise industry’s demand and/or share of the vacation market, could depress cruise prices and impede our ability to achieve yield improvement.
In addition, to the extent that we or our competitors deploy ships to a particular itinerary/region and the resulting capacity in that region exceeds the demand, it may negatively affect our pricing and profitability. Any of the foregoing could have an adverse impact on our results of operations, cash flows and financial condition, including potentially impairing the value of our ships and other assets.
Unavailability of ports of call may adversely affect our results of operations.
We believe that port destinations are a major reason why guests choose to go on a particular cruise or on a cruise vacation. The availability of ports and destinations is affected by a number of factors, including industry demand and competition for key ports and destinations, existing capacity constraints, constraints related to the size of certain ships, security, financial limitations on port development, exclusivity arrangements that ports may have with our competitors, geopolitical developments, local governmental regulations, environmental regulations, and governmental response to disease outbreaks. Higher fuel costs also may adversely impact the destinations on certain of our itineraries as they become too costly to include.
In addition, certain ports and destinations have faced a surge of both cruise and non-cruise tourism which, in certain cases, has fueled anti-tourism sentiments and related countermeasures to limit the volume of tourists allowed in these destinations. In certain destinations, countermeasures to limit the volume of tourists have been contemplated and/or put into effect, including proposed limits on cruise ships and cruise passengers, which could limit the itinerary and destination options we can offer our passengers going forward.
Increased demand and competition for key ports of call or destinations, limitations on the availability or feasibility of use of specific ports of call and/or constraints on the availability of shore excursions and other service providers at such ports or destinations could adversely affect our operations and financial results.
We may lose business to competitors throughout the vacation market.
We operate in the vacation market and cruising is one of many alternatives for people choosing a vacation. We, therefore, risk losing business not only to other cruise lines, but also to other vacation operators, which provide other leisure options, including hotels, resorts, internet-based alternative lodging sites and package holidays and tours.
We face significant competition from other cruise lines on the basis of cruise pricing, travel advisor preference and also in terms of the nature of ships, services and destinations that we offer to guests. Our revenues are sensitive to the actions of other cruise lines in many areas including pricing, scheduling, capacity and promotions, which can have a substantial adverse impact not only on our revenues, but also on overall industry revenues.
In the event that we do not effectively market or differentiate our cruise brands from our competitors or otherwise compete effectively with other vacation alternatives and new or existing cruise companies, our results of operations and financial position could be adversely affected.
If we are unable to appropriately manage our cost and capital allocation strategies with our goal of satisfying guest expectations, it may adversely impact our business success.
We strive to provide high quality products and deliver high quality services. There can be no assurance that we can successfully balance these goals with our cost management and capital allocation strategies. Our business also requires us to make capital allocation decisions across a broad scope of investment options with varying return profiles and time horizons for value realization. These include significant capital investment decisions such as ordering new ships, upgrading our existing fleet, enhancing our technology and/or data capabilities and expanding our portfolio of land-based assets, based on expected market preferences, competition and projected demand. There can be no assurance that our strategies will be successful, which could adversely impact our business, financial condition and results of operations. For example, our ownership and operation of older tonnage, in particular during the business disruption caused by COVID-19, has resulted in impaired asset values due to expected returns less than the carrying value of the assets.
Our attempts to expand our business into new markets and new ventures may not be successful.
We opportunistically seek to grow our business through, among other things, expansion into new destinations or source markets and establishment of new ventures complementary to our current offerings. These attempts to expand our business increase the complexity of our business, require significant levels of investment and can strain our management, personnel, operations and systems. In addition, we may be unable to execute our attempts to expand our business. There can be no assurance that these business expansion efforts will develop as anticipated or that we will succeed, and if we do not, we may be unable to recover our investment, which could adversely impact our business, financial condition and results of operations.
Risks associated with our development and operation of key land-based destination projects may adversely impact our business or results of operations.
We have invested, either directly or indirectly through joint ventures and partnerships, in a growing portfolio of key land-based projects including port and terminal facilities, private destinations and multi-brand destination projects. These investments can increase our exposure to certain key risks depending on the scope, location, and the ownership and management structure of these projects. These risks include susceptibility to weather events, exposure to local political/regulatory developments and policies, logistical challenges and human resource and labor risks and safety, environmental, and health risks, including challenges posed by the COVID-19 pandemic and its effects locally where we have these projects and relationships.
Our reliance on travel advisors to sell and market our cruises exposes us to certain risks which could adversely impact our business.
We rely on travel advisors to generate bookings for our ships. Accordingly, we must maintain competitive commission rates and incentive structures. If we fail to offer competitive compensation packages or fail to maintain our relationships, these agencies may be incentivized to sell cruises offered by our competitors, which could adversely impact our operating results. Our reliance on third-party sellers is particularly pronounced in certain markets. In addition, the travel advisor community is sensitive to economic conditions that impact discretionary income of consumers. Significant disruptions, such as those caused by the COVID-19 pandemic, or contractions in the industry could reduce the number of travel advisors available for us to market and sell our cruises, which could have an adverse impact on our financial condition and results of operations. Additionally, the strength of our recovery from suspended operations could be delayed if we are not aligned and partnered with key travel advisors.
Business activities that involve our co-investments with third parties may subject us to additional risks.
Partnerships, joint ventures and other business structures involving our co-investments with third parties generally include some form of shared control over the operations of the business and create additional risks, including the possibility that other investors in such ventures become bankrupt or otherwise lack the financial resources to meet their obligations or could have or develop business interests, policies or objectives that are inconsistent with ours. In addition to financial risks, our co-investment activities have also presented managerial and operational risks and expose us to reputational or legal concerns. These or other issues related to our co-investments with third parties could adversely impact our operations or liquidity. Further, due to the arrangements we have in place with our partners in these ventures, we are limited in our ability to control the strategy of these ventures, or their use of capital and other key factors to their results of operation, which could adversely affect our investments and impact our results of operations.
Past or pending business acquisitions or potential acquisitions that we may decide to pursue in the future carry inherent risks which could adversely impact our financial performance and condition.
The Company, from time to time, has engaged in acquisitions and may pursue acquisitions in the future, which are subject to, among other factors, the Company’s ability to identify attractive business opportunities and to negotiate favorable terms for such opportunities. Accordingly, the Company cannot make any assurances that potential acquisitions will be completed timely or at all, or that if completed, we would realize the anticipated benefits of such acquisitions. Acquisitions also carry inherent risks such as, among others: (i) the potential delay or failure of our efforts to successfully integrate business processes and realizing expected synergies; (ii) difficulty in aligning procedures, controls and/or policies; and (iii) future unknown liabilities and costs that may be associated with an acquisition. In addition, acquisitions may adversely impact our liquidity and/or debt levels, and the recognized value of goodwill and other intangible assets can be negatively affected by unforeseen events and/or circumstances, which may result in an impairment charge. Any of the foregoing events could adversely impact our financial condition and results of operations.
We rely on supply chain vendors and third-party service providers who are integral to the operations of our businesses. These vendors and service providers may be unable or unwilling to deliver on their commitments or may act in ways that could harm our business.
We rely on supply chain vendors to deliver key products to the operations of our businesses around the world. Any event impacting a vendor’s ability to deliver goods of the expected quality at the location and time needed could negatively impact our ability to deliver our cruise experience. Events impacting our supply chain could be caused by factors beyond the control of our suppliers or us, including inclement weather, natural disasters, new laws and regulations, labor actions, increased demand, problems in production or distribution, cybersecurity events, and/or disruptions in third-party logistics or transportation systems, including those caused by the COVID-19 pandemic. Any such interruptions to our supply chain could increase our costs and could limit the availability of products critical to our operations. In addition, increased regulation or stakeholder expectations regarding sourcing practices, or supplier conduct that does not meet such standards, could cause our operating costs to increase or result in publicity that negatively affects our reputation.
In order to achieve cost and operational efficiencies, we outsource to third-party vendors certain services that are integral to the operations of our global businesses, such as our onboard concessionaires, certain of our call center operations, guest port services, logistics distribution and operation of a large part of our information technology systems. We are subject to the risk that certain decisions are subject to the control of our third-party service providers and that these decisions may adversely affect our activities. A failure to adequately monitor a third-party service provider’s compliance with a service level agreement or regulatory or legal requirements could result in significant economic and reputational harm to us. There is also a risk the confidentiality, privacy and/or security of data held by third parties or communicated over third-party networks or platforms could become compromised.
The potential unavailability of insurance coverage, an inability to obtain insurance coverage at commercially reasonable rates or our failure to have coverage in sufficient amounts to cover our incurred losses may adversely affect our financial condition or results of operations.
We seek to maintain appropriate insurance coverage at commercially reasonable rates. We normally obtain insurance based on the cost of an asset rather than replacement value, and we also elect to self-insure, co-insure, or use deductibles in certain circumstances for certain risks such as loss of use of a ship or other business interruption. The limits of insurance coverage we purchase are based on the availability of the coverage, evaluation of our risk profile and cost of coverage. We do not carry business interruption insurance and accordingly we have no insurance coverage for loss of revenues or earnings from our ships or other operations. Accordingly, we are not protected against all risks and cannot be certain that our coverage will be adequate for liabilities actually incurred which could result in an unexpected decrease in our revenue and results of operations in the event of an incident
We are members of four Protection and Indemnity (“P&I”) clubs, which are part of a worldwide group of 12 P&I clubs, known as the International Group of P&I Clubs (the “IG”). P&I coverage provided by the clubs is on a mutual basis, and we are subject to additional premium calls in the event of a catastrophic loss incurred by any member of the 12 P&I clubs, whereby the reinsurance limits purchased by the IG are exhausted. We are also subject to additional premium calls based on investment and underwriting shortfalls experienced by our own individual insurers.
We cannot be certain that insurance and reinsurance coverage will be available to us and at commercially reasonable rates in the future or at all or, if available, that it will be sufficient to cover potential claims. Additionally, if we or other insureds sustain significant losses, the result may be higher insurance premiums, cancellation of coverage, or the inability to obtain coverage. Such events could adversely affect our financial condition or results of operations.
Disruptions in our shoreside or shipboard operations or our information systems may adversely affect our results of operations.
Our principal executive office and principal shoreside operations are located in Florida, and we have shoreside offices throughout the world. Actual or threatened natural disasters (e.g., hurricanes/typhoons, earthquakes, tornadoes, fires or floods),
municipal lockdowns, curfews, quarantines, or similar events in these locations may have a material impact on our business continuity, reputation and results of operations. In addition, substantial or repeated information system failures, computer viruses or cyber attacks impacting our shoreside or shipboard operations could adversely impact our business. We do not generally carry business interruption insurance for our shoreside or shipboard operations or our information systems. As such, any losses or damages incurred by us could have an adverse impact on our results of operations.
Provisions of our Articles of Incorporation, By-Laws and Liberian law could inhibit a change of control and may prevent efforts by our shareholders to change our management.
Certain provisions of our Articles of Incorporation and By-Laws and Liberian law may inhibit third parties from effectuating a change of control of the Company without approval from our board of directors which could result in the entrenchment of current management. These include provisions in our Articles of Incorporation that prevent third parties, other than A. Wilhelmsen AS and Cruise Associates and their permitted transferees, from acquiring beneficial ownership of more than 4.9% of our outstanding shares without the consent of our board of directors.
We may not be able to achieve our fiscal 2025 financial and climate-related performance goals.
In November 2022, we announced that we are targeting certain financial and climate-related performance goals for fiscal 2025. Our ability to achieve these goals is dependent on a number of factors, including the other risk factors described in this section. If we are not able to achieve these goals, the price of our common stock and reputation may be negatively affected.
Financial Risks
We may not be able to obtain sufficient financing or capital for our needs or may not be able to do so on terms that are acceptable or consistent with our expectations.
To fund our capital expenditures (including new ship orders), operations and scheduled debt payments, we have historically relied on a combination of cash flows provided by operations, drawdowns under available credit facilities, the incurrence of additional indebtedness and the sale of equity or debt securities in private or public securities markets. Any circumstance or event which leads to a decrease in consumer cruise spending, such as worsening global economic conditions or significant incidents impacting the cruise industry, such as the COVID-19 pandemic, negatively affects our operating cash flows. As result of the COVID-19 pandemic and the resulting suspension of our operations, we have experienced credit rating downgrades, which have reduced our ability to incur secured indebtedness by reducing the amount of indebtedness that we are permitted to secure, and may negatively impact our access to, and cost of, debt financing. Additionally, our ability to raise additional financing, whether or not secured, could be limited if our credit rating is further downgraded, and/or if we fail to comply with applicable covenants governing our outstanding indebtedness, and/or if overall financial market conditions worsen.
Our ability to access additional funding as and when needed, our ability to timely refinance and/or replace our outstanding debt securities and credit facilities on acceptable terms and our cost of funding will depend upon numerous factors including, but not limited to, the strength of the financial markets, global market conditions, including inflationary pressures, interest rate fluctuations, our recovery and financial performance, the recovery and performance of our industry in general and the size, scope and timing of our financial needs. In addition, even where financing commitments have been secured, significant disruptions in the capital and credit markets could cause our banking and other counterparties to breach their contractual obligations to us or could cause the conditions to the availability of such funding not to be satisfied. This could include failures of banks or other financial service companies to fund required borrowings under our loan agreements or to pay us amounts that may become due or return collateral that is refundable under our interest rate derivative instruments or other agreements. If any of the foregoing occurs for a prolonged period of time it will have a long-term negative impact on our cash flows and our ability to meet our financial obligations.
Our substantial debt requires a significant amount of cash to service and could adversely affect our financial condition.
We have a substantial amount of debt and significant debt service obligations. As of December 31, 2022, we had total debt of $23.4 billion. Our substantial debt has required us to dedicate a large portion of our cash flow from operations to service debt and fund repayments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate expenses.
Our ability to make future scheduled payments on our debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash. This will be affected by our ability to successfully implement our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic. If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets. We cannot assure that we will be able to generate sufficient cash through any of the foregoing. If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt.
Our substantial debt could also result in other negative consequences for us. For example, it could increase our vulnerability to adverse general economic or industry conditions; limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; place us at a competitive disadvantage compared to our competitors that have less debt; make us more vulnerable to downturns in our business, the economy or the industry in which we operate; limit our ability to raise additional debt or equity capital in the future to satisfy our requirements relating to working capital, capital expenditures, development projects, strategic initiatives or other purposes; restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities; limit or restrict our ability to obtain and maintain performance bonds to cover our financial responsibility requirements in various jurisdictions for non-performance of guest travel, casualty and personal injury; make it difficult for us to satisfy our obligations with respect to our debt; and increase our exposure to the risk of increased interest rates as certain of our borrowings are (and may in the future be) at a variable rate of interest.
Despite our leverage, we may incur more debt, which could adversely affect our business.
We may incur substantial additional debt in the future. Except for the restrictions under the indentures governing our Secured Notes, our Priority Guaranteed Notes, and certain of our other debt instruments, including our unsecured bank and export credit facilities, we are not restricted under the terms of our debt instruments from incurring additional debt. Although the indentures governing the Secured Notes, the Priority Guaranteed Notes, and certain of our other debt instruments, including our unsecured bank and export credit facilities, contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances the amount of debt that could be incurred in compliance with these restrictions could be substantial. If new debt is added to our existing debt levels, the related risks that we now face would increase. Additionally, there is no guarantee that financing will be available in the future or that such financing will be available with similar terms or terms that are commercially acceptable to us. As of December 31, 2022, we have commitments for approximately $7.1 billion of debt to finance the purchase of 7 ships on order by our Royal Caribbean International, Celebrity Cruises and Silversea Cruises brands, all of which are guaranteed by the export credit agencies in the countries in which the ships are being built. The ultimate size of each facility will depend on the final contract price (including change orders and owner’s supply) as well as fluctuations in the EUR/USD exchange rate. Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information regarding our "Secured Notes" and "Priority Guaranteed Notes".
We are subject to restrictive debt covenants that may limit our ability to finance our future operations and capital needs and to pursue business opportunities and activities. In addition, if we fail to comply with any of these restrictions, it could have a material adverse effect on us.
Certain of our debt instruments, including our indentures and our unsecured bank and export credit facilities, limit our flexibility in operating our business. For example, certain of our loan agreements and indentures restrict or limit our and our subsidiaries’ ability to, among other things, incur or guarantee additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments; make investments; consummate certain asset sales; engage in certain transactions with affiliates; grant or assume certain liens; and consolidate, merge or transfer all or substantially all of our assets. In addition, both our export credit facilities and our non-export credit facilities contain covenants that require us, among other things, to maintain a minimum liquidity, a specified minimum fixed charge coverage ratio, and limit our net debt-to-capital ratio. In addition, our ECA facilities also require us to maintain a minimum stockholders' equity. Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further discussion on our covenants and existing waivers.
All of these limitations are subject to significant exceptions and qualifications. Despite these exceptions and qualifications, we cannot assure you that the operating and financial restrictions and covenants in certain of our debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. Any future indebtedness may include similar or other restrictive terms and we may be required to further encumber our assets. In addition, our ability to comply with these covenants and restrictions may be affected by events beyond our control. These include prevailing economic, financial and industry conditions. If we breach any of these covenants or restrictions, we could be in default under such indebtedness and certain of our other debt instruments, and the relevant debt holders or lenders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing that debt. If the debt under certain of our debt instruments that we enter into were to be accelerated, our liquid assets may be insufficient to repay in full such indebtedness. Borrowings under other debt instruments that contain cross-default provisions also may be accelerated or become payable on demand. In these circumstances, our assets may not be sufficient to repay in full that indebtedness and our other indebtedness then outstanding.
In addition, our ability to maintain our credit facilities may also be impacted by changes in our ownership base. More specifically, we may be required to prepay our non-ECA and ECA facilities if any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of our board of directors is no longer comprised of individuals who were members of our board of directors on the first day of such period. Our debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade, which would require us to offer to repurchase our debt securities in the event of such change of control.
If we elect to settle conversions of our convertible notes in shares of our common stock or a combination of cash and shares of our common stock, conversions of our convertible notes will result in dilution for our existing shareholders. Furthermore, new equity or convertible debt issuances will also result in dilution for our existing shareholders.
We have an aggregate principal amount of $1.7 billion in convertible notes outstanding. If note holders elect to convert, the notes will be converted into our shares of common stock, cash, or a combination of common stock and cash, at our discretion. Prior to March 15, 2023, August 15, 2023, and May 15, 2025, our convertible notes issued in June 2020, October 2020, and August 2022, respectively, will be convertible at the option of holders during certain periods only upon satisfaction of certain conditions. Beyond those dates, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date. Conversions of our convertible notes into shares of our common stock or a combination of common stock and cash, will result in dilution to our shareholders. Additionally, if we raise additional funds through equity or convertible debt issuances, our shareholders could experience dilution of their ownership interest, and these equity or convertible debt securities could have rights, preferences, and privileges that are superior to that of holders of our common stock.
We did not declare quarterly dividends on our common stock in the quarter ended December 31, 2022 and do not expect to pay dividends on our common stock for the foreseeable future.
We have not declared a dividend since the first quarter of 2020. We expect that any income received from operations will be devoted to our future operations and recovery. We do not expect to pay cash dividends on our common stock for the foreseeable future. In addition, in the event we thereafter declare a dividend, we will need to repay our amounts deferred under the export credit facilities. Payment of dividends would, in any case, depend upon our profitability at the time, cash available for those dividends, and other factors as our board of directors may consider relevant.
Increased regulatory oversight, and the phasing out of LIBOR may adversely affect the value of a portion of our indebtedness.
The publication of certain LIBOR settings ceased after December 31, 2021, and uncertainty regarding alternative reference rates remains as many market participants await a wider adoption of replacement products prior to the cessation of the remaining USD LIBOR tenors (currently scheduled for June 30, 2023). When LIBOR ceases to exist, the level of interest payments on the portion of our indebtedness that bears interest at variable rates might be affected if we, the agent, and/or the lenders holding a majority of the outstanding loans or commitments under such indebtedness fail to amend such indebtedness to implement a replacement rate. Regardless, such replacement rate will give due consideration to any evolving or then-existing conventions for similar credit facilities, which may result in different than expected interest payments.
Compliance and Regulatory Risks
Changes in U.S. or other countries’ foreign travel policy have affected, and may continue to affect our results of operations.
Changes in U.S. and other countries' foreign policy have in the past and could in the future result in the imposition of travel restrictions or travel bans on persons to certain countries or result in the imposition of travel advisories, warnings, rules, regulations or legislation exposing us to penalties or claims of monetary damages. In addition, some countries have adopted restrictions against U.S. travelers, and we currently cannot predict when those restrictions will be eased. The timing and scope of these changes and regulations can be unpredictable, and they could cause us to cancel scheduled sailings, possibly on short notice, or could result in litigation against us. This, in turn, could decrease our revenue, increase our operating costs and otherwise impair our profitability.
Factors associated with climate change, including an increasing global regulatory focus, could adversely affect our business.
There is increasing global regulatory focus on climate change, greenhouse gas and other emissions. These regulatory efforts,both internationally and in the U.S., are still developing, including the international alignment of such efforts, and we cannot yet determine what the final regulatory programs or their impact will be on our business. However, such climate change-related regulatory activity in the future may adversely affect our business and financial results by requiring us to reduce our emissions, pay for our emissions, modify our itineraries and may increase our exposure, if any, to climate change-related litigation. Such activity may also impact us by increasing our operating costs, including fuel costs. For example, the European Union has proposed a series of significant carbon reforms under its Fit for 55 package designed to meet its 2030 emission goals, which would require us, among other things, to increase the use of low carbon fuel onboard our vessels as well as connectivity to shore power. The proposed legislation also includes updates to the European Union Emission Trading System which would impose requirements to purchase carbon emission allowances beginning in 2024. In addition, the U.S. and various state and foreign government or regulatory agencies have enacted, or may enact, environmental regulations or policies, such as requiring the use of low sulfur fuels (e.g., IMO Sulfur Limit) or the incoming carbon intensity indicator regulation, that have or could increase our direct cost to operate in certain markets, increase our cost of fuel, limit the supply of compliant fuel, cause us to incur significant expenses to purchase and/or develop new equipment and adversely impact the cruise vacation industry. If enacted, these regulations may individually or collectively have a material adverse effect on our business and results of operations due to increased costs associated with compliance and modified itineraries in the affected regions.
There has also been growing environmental scrutiny of the environmental impact of the cruise vacation industry, and some environmental groups are advocating for more stringent regulation of ship emissions at berth and at sea. This negative publicity of the cruise industry and any related measures may lead to changes in consumer preferences, such as methods or frequency of travel, which could adversely impact our operations and financial results and subject us to reputational impacts and costs.
Labor, health and safety, financial responsibility and other maritime regulations and measures could affect operations and increase operating costs.
We are subject to various international, national, state and local laws, regulations and treaties that govern, among other things, discharge from our ships, safety standards applicable to our ships, treatment of disabled persons, health and sanitary standards applicable to our guests, security standards on board our ships and at the ship/port interface areas, and financial responsibilities to our guests. These issues are, and we believe will continue to be, an area of focus by the relevant authorities throughout the world. This could result in the enactment of more stringent regulation of cruise ships that could subject us to increasing compliance costs in the future and may increase our exposure, if any, to environmental-related litigation.
A change in our tax status under the U.S. Internal Revenue Code, or other jurisdictions, may have adverse effects on our results of operations.
Royal Caribbean Cruises Ltd. and a number of our subsidiaries are foreign corporations that derive income from a U.S. trade or business and/or from sources within the U.S. In connection with the year end audit, each year, Faegre Drinker Biddle & Reath LLP, our U.S. tax counsel, delivers to us an opinion, based on certain representations and assumptions set forth in it, to the effect that this income, to the extent derived from or incidental to the international operation of a ship or ships, is excluded from gross income for U.S. federal income tax purposes pursuant to Section 883 of the Internal Revenue Code. We believe that most of our income (including that of our subsidiaries) is derived from or incidental to the international operation of ships.
Our ability to rely on Section 883 could be challenged or could change in the future. Provisions of the Internal Revenue Code, including Section 883, are subject to legislative change at any time. Moreover, changes could occur in the future with respect to the identity, residence or holdings of our direct or indirect shareholders, trading volume or trading frequency of our shares, or relevant foreign tax laws of Liberia or the Bahamas, such that they no longer qualify as equivalent exemption jurisdictions, that could affect our eligibility for the Section 883 exemption. Accordingly, there can be no assurance that we will continue to be exempt from U.S. income tax on U.S. source shipping income in the future. If we were not entitled to the benefit of Section 883, we and our subsidiaries would be subject to U.S. taxation on a portion of the income derived from or incidental to the international operation of our ships, which would reduce our net income.
Additionally, portions of our business are operated by companies that are within the United Kingdom tonnage tax regime. Further, some of our operations are conducted in jurisdictions where we rely on tax treaties to provide exemption from taxation. To the extent the United Kingdom tonnage tax laws change or we do not continue to meet the applicable qualification requirements or if tax treaties are changed or revoked, we may be required to pay higher income tax in these jurisdictions, adversely impacting our results of operations.
Numerous countries are considering implementation of the OECD’s 15% global minimum tax, which may materially impact us. In addition, as budgetary constraints may adversely impact fiscal policy in the jurisdictions in which we operate, we may be subject to changes in our existing tax treatment or other tax reform, as well as increased tax audits.
We are not a U.S. corporation and, as a result, our shareholders may be subject to the uncertainties of a foreign legal system in protecting their interests.
Our corporate affairs are governed by our Articles of Incorporation and By-Laws and by the Business Corporation Act of Liberia. The provisions of the Business Corporation Act of Liberia resemble provisions of the corporation laws of a number of states in the U.S. However, there are very few judicial cases in Liberia interpreting the Business Corporation Act of Liberia. While the Business Corporation Act of Liberia provides that it is to be applied and construed to make the laws of Liberia, with respect of the subject matter of the Business Corporation Act of Liberia, uniform with the laws of the State of Delaware and other states with substantially similar legislative provisions (and adopts their case law to the extent it is non-conflicting), there have been few Liberian court cases interpreting the Business Corporation Act of Liberia, and we cannot predict whether Liberian courts would reach the same conclusions as United States courts. We understand that legislation has been proposed but not yet adopted by the Liberian legislature which amends the provisions regarding the adoption of non-Liberian law to, among other things, provide for the adoption of the statutory and case law of Delaware and not also states with substantially similar legislative provisions, and potentially provide the courts of Liberia discretion in application of non-statutory corporation law of Delaware in cases when the laws of Liberia are silent. The right of shareholders to bring a derivative action in Liberian courts may be more limited than in U.S. jurisdictions. There may also be practical difficulties for shareholders attempting to bring suit in Liberia, and Liberian courts may or may not recognize and enforce foreign judgments. Thus, our shareholders may have more difficulty challenging actions taken by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction.
General Risk Factors
Conducting business globally results in increased costs and other risks.
We operate our business globally, which exposes us to a number of risks, including increased exposure to a wider range of regional and local economic conditions, volatile local political conditions, potential changes in duties and taxes, including changing and/or uncertain interpretations of existing tax laws and regulations, required compliance with additional laws and policies affecting cruising, vacation or maritime businesses or governing the operations of foreign-based companies, currency fluctuations, interest rate movements, difficulties in operating under local business environments, port quality and availability in certain regions, U.S. and global anti-bribery laws and regulations, imposition of trade barriers and restrictions on repatriation of earnings.
Our future growth strategies increasingly depend on the growth and sustained profitability of international markets. Factors that will be critical to our success in these markets include our ability to continue to raise awareness of our products and our ability to adapt our offerings to best suit rapidly evolving consumer demands. The execution of our planned growth strategies is dependent on meeting the governmental and regulatory measures and policies in each of these markets. Our ability to realize our future growth strategy is highly dependent on our ability to satisfy country-specific policies and requirements in order to return to service, as well as meet the needs of region-specific consumer preferences as services come back online. These factors may cause us to reevaluate some of our international business strategies.
Operating globally also exposes us to numerous and sometimes conflicting legal, regulatory and tax requirements. In many parts of the world, including countries in which we operate, practices in the local business communities might not conform to international business standards. We cannot guarantee consistent interpretation, application, and enforcement of newly issued rules and regulations, which could place limits on our operations or increase our costs, as well as negatively impact our future growth strategies in our key growth markets. We must adhere to policies designed to promote legal and regulatory compliance as well as applicable laws and regulations. However, we might not be successful in ensuring that our employees, agents, representatives and other third parties with whom we associate properly adhere to applicable laws and regulations. In addition, we may be exposed to the risk of penalties and other liabilities if we fail to comply with all applicable legal and regulatory requirements. Failure by us, our employees or any of these third parties to adhere to our policies or applicable laws or regulations could result in penalties, sanctions, damage to our reputation and related costs, which in turn could negatively affect our results of operations and cash flows.
As a global operator, our business also may be impacted by changes in U.S. policy or priorities in areas such as trade, immigration and/or environmental or labor regulations, among others. Depending on the nature and scope of any such changes, they could impact our domestic and international business operations. Any such changes, and any international response to them, could potentially introduce new barriers to passenger or crew travel and/or cross border transactions, impact our guest experience and/or increase our operating costs.
If we are unable to address these risks adequately, our financial position and results of operations could be adversely affected, including impairing the value of our ships and other assets.
The terms of our existing debt financing gives, and any future preferred equity or debt financing may give, holders of any preferred securities or debt securities rights that are senior to rights of our common shareholders.
The holders of our existing debt have rights, preferences and privileges senior to those of holders of our common stock in the event of liquidation. If we incur additional debt or raise equity through the issuance of preferred stock or convertible securities, the terms of the debt or the preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. If we raise funds through the issuance of additional equity, the ownership percentage of our existing shareholders would be diluted.
Fluctuations in foreign currency exchange rates, fuel prices and interest rates could affect our financial results.
We are exposed to market risk attributable to changes in foreign currency exchange rates, fuel prices and interest rates. Significant changes in any of the foregoing could have a material impact on our financial results, net of the impact of our hedging activities and natural offsets. Our operating results have been and will continue to be impacted, often significantly, by changes in each of these factors
A portion of our indebtedness bears interest at variable rates that are linked to changing market interest rates. As a result, an increase in market interest rates would increase our interest expense and our debt service obligations. As of December 31, 2022, we had approximately $6.0 billion of indebtedness that bears interest at variable rates, which is net of our interest rate swap agreements. This amount represented approximately 25.0% of our total indebtedness. As of December 31, 2022, a hypothetical 1% increase in prevailing interest rates would increase our forecasted 2023 interest expense by approximately $34.8 million. Additionally, the value of our earnings in foreign currencies is adversely impacted by a strong U.S. dollar.
Any further impairment of our goodwill, long-lived assets, equity investments and notes receivable could adversely affect our financial condition and operating results.
We evaluate goodwill for impairment on an annual basis, or more frequently when circumstances indicate that the carrying value of a reporting unit may not be recoverable. A challenging operating environment, conditions affecting consumer demand or spending, the deterioration of general macroeconomic conditions, expected ship deliveries, or other factors could result in a change to the future cash flows we expect to derive from our operations. Reductions of cash flows used in the valuation analyses may result in the recording of impairments, which could adversely affect our financial condition and operating results.
The loss of key personnel, our inability to recruit or retain qualified personnel, or disruptions among our shipboard personnel could adversely affect our results of operations.
Our success depends, in large part, on the skills and contributions of key executives and other employees and on our ability to recruit, develop and retain high quality personnel as well as having adequate succession plans and back-up operating plans for when critical executives are unable to serve. As demand for qualified personnel in the industry grows, we must continue to effectively recruit, train, motivate and retain our employees, both shoreside and on our ships, in order to effectively compete in our industry, maintain our current business and support our projected global growth.
We have in the past and may in the future experience difficulty recruiting and retaining qualified personnel primarily due to competitive labor markets. A prolonged shortage of qualified personnel and/or increased turnover may inhibit our ability to operate our business in an optimal manner, and may result in increased costs if we need to hire temporary personnel, and/or increased wages and/or benefits in order to attract and retain employees, all of which may negatively impact our results of operations.
As of December 31, 2022, approximately 88% of our shipboard employees were covered by collective bargaining agreements. A dispute under our collective bargaining agreements could result in a work stoppage of those employees covered by the agreements. We may not be able to satisfactorily renegotiate these collective bargaining agreements when they expire. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage on our ships. We may also be subject to or affected by work stoppages unrelated to our business or collective bargaining agreements. Any such work stoppages or potential work stoppages could have a material adverse effect on our financial results, as could a loss of key employees, our inability to recruit or retain qualified personnel or disruptions among our personnel.
If we are unable to keep pace with developments, design, and implementation in technology, our operations or competitive position could become impaired.
Our business continues to demand the use of sophisticated technology and systems. These technologies and systems require significant investment and must be proven, refined, updated, upgraded and/or replaced with more advanced systems in order to continue to meet our customers’ demands and expectations as well as to process our information effectively. If we are unable to do so in a timely manner or within reasonable cost parameters, if there are any disruptions, delays or deficiencies in design or if we are unable to appropriately and timely train our employees to operate any of these new systems, our business could suffer. We also may not achieve the benefits that we anticipate from any new technology or system, which could impair our operating results.
We may be unable to procure appropriate technology in a timely manner or at all or we may incur significant costs in doing so. A failure to adopt the appropriate technology, or a failure or obsolescence in the technology that we have adopted, could adversely affect our results of operations.
We are exposed to cyber security attacks and data breaches and the risks and costs associated with protecting our systems and maintaining data integrity and security.
We are subject to cyber security attacks. These cyber attacks can vary in scope and intent from attacks with the objective of compromising our systems, networks, and communications for economic gain or with the objective of disrupting, disabling or otherwise compromising our maritime and/or shoreside operations. The attacks can encompass a wide range of methods and intent, including phishing attacks, illegitimate requests for payment, theft of intellectual property, theft of confidential or non-public information, installation of malware, installation of ransomware and theft of personal or business information. The frequency and sophistication of, and methods used to conduct, these attacks, have increased over time.
A successful cyber security attack may target us directly, or it may be the result of a third party’s inadequate care, or resulting from vulnerabilities in licensed software. In either scenario, the Company may suffer damage to its systems and data that could interrupt our operations, adversely impact our brand reputation, and expose us to increased risks of governmental investigation, litigation, fines, and other liability, any of which could adversely affect our business. Furthermore, responding to such an attack and mitigating the risk of future attacks could result in additional operating and capital costs in technology, personnel, monitoring and other investments.
We are also subject to various risks associated with the collection, handling, storage, and transmission of sensitive information. In the regular course of business, we collect employee, customer, and other third-party data, including personally identifiable information and individual payment data, for various business purposes. Although we have policies and procedures in place to safeguard such sensitive information, this information has been and could be subject to cyber security attacks and the aforementioned risks. In addition, we are subject to federal, state, and international laws relating to the collection, use, retention, security and transfer of personally identifiable information and individual payment data. Those laws include, among others, the European Union General Data Protection Regulation and regulations of the New York State Department of Financial Services and similar state agencies that impose additional cyber security requirements as a result of our provision of certain insurance products. Complying with these and other applicable laws has caused, and may cause, us to incur substantial costs or require us to change our business practices, and our failure to do so may expose us to substantial fines, penalties, restrictions, litigation, or other expenses and adversely affect our business. Further, any changes to laws or regulations, including new restrictions or requirements applicable to our business, or an increase in enforcement of existing laws and regulations, could expose us to additional costs and liability and could limit our use and disclosure of such information.
While we continue to evolve our cyber security practices in line with our business’ reliance on technology and the changing external threat landscape, and we invest time, effort and financial resources to secure our systems, networks and communications, our security measures cannot provide absolute assurance that we will be successful in preventing or defending from all cyber security attacks impacting our operation. There can be no assurance that any breach or incident will not have a material impact on our operations and financial results.
Any breach, theft, loss, or fraudulent use of guest, employee, third-party or company data, could adversely impact our reputation and brand and our ability to retain or attract new customers, and expose us to risks of data loss, business disruption, governmental investigation, litigation and other liability, any of which could adversely affect our business. Significant capital investments and other expenditures could be required to remedy the problem and prevent future breaches, including costs associated with additional security technologies, personnel, experts and credit monitoring services for those whose data has been breached. Further, if we or our vendors experience significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be exposed to government enforcement actions and private litigation.
Litigation, enforcement actions, fines or penalties could adversely impact our financial condition or results of operations and/or damage our reputation.
Our business is subject to various U.S. and international laws and regulations that could lead to enforcement actions, fines, civil or criminal penalties or the assertion of litigation claims and damages. In addition, improper conduct by our employees, agents or joint venture partners could damage our reputation and/or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines. In certain circumstances it may not be economical to defend against such matters and/or our legal strategy may not ultimately result in us prevailing in a matter. Such events could lead to an adverse impact on our financial condition or results of operations. We cannot predict the quantum or outcome of any such proceedings and the impact that they will have on our financial results, but any such impact may be material. While some of these claims are covered by insurance, we cannot be certain that all of them will be, which could have an adverse impact on our financial condition or results of operations.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Information about our cruise ships, including their size, may be found within the Operating Strategies - Fleet upgrade and maintenance section and the Operations - Cruise Ships and Itineraries sections in Item 1. Business. Information regarding our cruise ships under construction, estimated expenditures and financing may be found within the Future Capital Commitments and Funding Needs and Sources sections of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our principal executive office and principal shoreside operations are located in leased office buildings at the Port of Miami, Florida. We also lease a number of other offices in the U.S. and throughout Europe, Asia, Mexico, South America and Australia to administer our brand operations globally.
We believe that our facilities are adequate for our current needs and that we are capable of obtaining additional facilities as necessary.
We also operate two private destinations which we utilize as ports-of-call on certain itineraries: (i) an island we own in the Bahamas that we call CocoCay; and (ii) Labadee, a secluded peninsula that we lease on the north coast of Haiti.
Item 3. Legal Proceedings
As previously reported, two lawsuits were filed against us in August 2019 in the U.S. District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation ("Havana Docks Action") alleges it holds an interest in the Havana Cruise Port Terminal, and the complaint filed by Javier Garcia-Bengochea (the "Port of Santiago Action") alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban government. The complaints further allege that we trafficked in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.
The Court dismissed the Port of Santiago Action with prejudice on the basis that the plaintiff acquired his interest in the Port of Santiago after the enactment of the Helms-Burton Act. In November 2022, the United States Court of Appeals for the 11th Circuit affirmed the Court's dismissal of the lawsuit.
In the Havana Docks Action, the Court entered final judgment in December 2022 in favor of the plaintiff and awarded damages and attorneys' fees to the plaintiff in the aggregate amount of approximately $112 million. We have appealed the judgment to the United States Court of Appeals for the 11th Circuit and the plaintiff has cross-appealed with regards to the interest calculation used for purposes of determining damages. We believe we have meritorious grounds for and intend to vigorously pursue our appeal. During the fourth quarter of 2022, we recorded a charge of approximately $130.0 million to Other (expense) income within in our consolidated statements of comprehensive loss related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.
In addition, we are routinely involved in claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.
Item 4. Mine Safety Disclosures
None.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed on the New York Stock Exchange ("NYSE") under the symbol "RCL."
Holders
As of February 20, 2023, there were approximately 1,243 record holders of our common stock. Since certain of our shares are held by brokers and other institutions on behalf of shareholders, the foregoing number is not representative of the number of beneficial owners.
Dividends
Holders of our common stock have an equal right, pro rata based on number of shares held, to share in our profits in the form of dividends when and if declared by our board of directors out of funds legally available, subject to any rights of holders of preferred stock if any. Holders of our common stock have no rights to any sinking fund.
There are no exchange control restrictions on remittances of dividends on our common stock by reason of our incorporation in Liberia because (1) we are and intend to maintain our status as a nonresident Liberian entity under the Liberia Revenue Code of 2000 as amended and the regulations thereunder, and (2) our ship-owning subsidiaries are not now engaged, and are not in the future expected to engage, in any business in Liberia, including voyages exclusively within the territorial waters of the Republic of Liberia. Under current Liberian law, no Liberian taxes or withholding will be imposed on payments to holders of our securities other than to a holder that is a resident Liberian entity or a resident individual or an individual or entity subject to taxation in Liberia as a result of having a permanent establishment within the meaning of the Liberia Revenue Code of 2000 as amended in Liberia.
The declaration of dividends shall at all times be subject to the final determination of our board of directors that a dividend is prudent at that time in consideration of the needs of the business. In the event we declare a dividend, we will need to repay the amounts deferred under our export credit facilities as part of the principal amortization deferrals agreed with them during 2020 and 2021. Accordingly, we have not declared a dividend since the first quarter of 2020. Refer to Note 10. Shareholders' Equity to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information on dividends declared.
Share Repurchases
There were no repurchases of common stock during the year ended December 31, 2022.
In the event we repurchase shares of our common stock, we will need to repay the amounts deferred under our export credit facilities as part of the principal amortization deferrals agreed with our lenders during 2020 and 2021.
Performance Graph
The following graph compares the total return, assuming reinvestment of dividends, on an investment in the Company, based on performance of the Company's common stock, with the total return of the Standard & Poor's 500 Composite Stock Index ("S&P 500") and the Dow Jones United States Travel and Leisure Index for a five year period by measuring the changes in common stock prices from December 31, 2017 to December 31, 2022.
| 12/17 | 12/18 | 12/19 | 12/20 | 12/21 | 12/22 | |
|---|---|---|---|---|---|---|
| Royal Caribbean Cruises Ltd. | 100.00 | 83.86 | 117.36 | 66.43 | 68.40 | 43.97 |
| S&P 500 | 100.00 | 95.62 | 125.72 | 148.85 | 191.58 | 156.89 |
| Dow Jones U.S. Travel & Leisure | 100.00 | 94.41 | 117.01 | 119.05 | 132.73 | 105.83 |
The stock performance graph assumes for comparison that the value of the Company's common stock and of each index was $100 on December 31, 2017 and that all dividends were reinvested. Past performance is not necessarily an indicator of future results.
Item 6. Reserved.
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Concerning Forward-Looking Statements
The discussion under this caption “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding our expectations for future periods, business and industry prospects or future results of operations or financial position, made in this Annual Report on Form 10-K are forward-looking. Words such as “anticipate,” “believe,” “considering,” “could,” “driving,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “will”, "would", and similar expressions are intended to further identify any of these forward-looking statements. Forward-looking statements reflect management's current expectations, but they are based on judgments and are inherently uncertain. Furthermore, they are subject to risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to, those discussed in this Annual Report on Form 10-K and, in particular, the risks discussed under the caption "Risk Factors” in Part I, Item 1A herein.
All forward-looking statements made in this Annual Report on Form 10-K speak only as of the date of this filing. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
The discussion and analysis of our financial condition and results of operations is organized to present the following:
•a review of our critical accounting policies and estimates and of our financial presentation, including discussion of certain operational and financial metrics we utilize to assist us in managing our business;
•a discussion of our results of operations for the year ended December 31, 2022 compared to the same period in 2021; and
•a discussion of our liquidity and capital resources, including our future capital and material cash requirements and potential funding sources.
A discussion of our results of operations, and sources and uses of cash for the year ended December 31, 2021 compared to the year ended December 31, 2020 is included in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year endedDecember 31, 2021, filed with the SEC on March 1, 2022 and is incorporated by reference into this Form 10-K.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). (Refer to Note 1. General and Note 2. Summary of Significant Accounting Policies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data). Certain of our accounting policies are deemed "critical," as they require management's highest degree of judgment, estimates and assumptions. We have discussed these accounting policies and estimates with the audit committee of our board of directors. We believe our most critical accounting policies and estimates are as follows:
Management's Plan and Liquidity
In the face of the global pandemic impact of COVID-19, we paused our guest cruise operations in March 2020 and began resuming guest cruise operations in 2021, with our full fleet in service by June 2022.
As part of our liquidity management, we rely on estimates of our future liquidity which include numerous assumptions that are subject to various risks and uncertainties. The principal assumptions used to estimate our future liquidity consist of:
•Expected timing of cash collections for cruise bookings;
•Expected sustained increase in revenue per available passenger cruise day;
•Expected increase in occupancy levels, reaching historical levels in the spring of 2023; and
•Inflationary increases to our operating costs, mostly impacting the expected cost of fuel and food as compared to 2019.
We will continue to pursue various opportunities to raise additional capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities. Actions to raise capital may include issuances of debt, convertible debt or equity in private or public transactions or entering into new or extended credit facilities.
Ship Accounting
Ships represent our most significant assets and are stated at cost less accumulated depreciation and amortization. Depreciation of ships is generally computed net of a 10%-15% projected residual value, using the straight-line method over the estimated useful life of the asset, which is generally 30-35 years. The 30-35 year useful life and 10%-15% residual value is the weighted-average of all major components of a ship. Our useful life and residual value estimates take into consideration the impact of anticipated technological changes, long-term cruise and vacation market conditions and historical useful lives of similarly-built ships. In addition, we take into consideration our estimates of the weighted-average useful lives of the ships' major component systems, such as hull, superstructure, main electric, engines and cabins. We employ a cost allocation methodology at the component level, in order to support the estimated weighted-average useful lives and residual values, as well as to determine the net cost basis of assets being replaced. Given the very large and complex nature of our ships, our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require considerable judgment and are inherently uncertain. We do not have cost segregation studies performed to specifically componentize our ship systems. However, we estimate the costs, useful lives and residual values of component systems based principally on general and technical information known about major ship component systems and their lives, as well as our knowledge of the cruise vacation industry. We do not identify and track depreciation by ship component systems, but instead utilize these estimates to determine the net cost basis of assets replaced or refurbished. Improvement costs that we believe add value to our ships are capitalized as additions to the ship and depreciated over the shorter of the improvements' estimated useful lives or that of the associated ship. The estimated cost and accumulated depreciation of replaced or refurbished ship components are written off and any resulting losses are recognized within Cruise operating expenses in our Consolidated Statements of Comprehensive Loss.
We periodically review estimated useful lives and residual values for ongoing reasonableness, considering long term views on our intended use of each class of ships and the planned level of improvements to maintain and enhance vessels within those classes. In the event a factor is identified that may trigger a change in the estimated useful lives and residual values of our ships, a review of the estimate is completed.
We use the deferral method to account for drydocking costs. Under the deferral method, drydocking costs incurred are deferred and charged to expense on a straight-line basis over the period to the next scheduled drydock, which we estimate to be a period of thirty to sixty months based on the vessel's age as required by Class. Deferred drydock costs consist of the costs to drydock the vessel and other costs incurred in connection with the drydock which are necessary to maintain the vessel's Class certification. Class certification is necessary in order for our cruise ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. The activities associated with those drydocking costs cannot be performed while the vessel is in service and, as such, are done during a drydock as a planned major maintenance activity. The
significant deferred drydock costs consist of hauling and wharfage services provided by the drydock facility, hull inspection and related activities (e.g., scraping, pressure cleaning, bottom painting), maintenance to steering propulsion, thruster equipment and ballast tanks, port services such as tugs, pilotage and line handling, and freight associated with these items. We perform a detailed analysis of the various activities performed for each drydock and only defer those costs that are directly related to planned major maintenance activities necessary to maintain Class. The costs deferred are related to activities not otherwise routinely periodically performed to maintain a vessel's designed and intended operating capability. Repairs and maintenance activities are charged to expense as incurred.
We use judgment when estimating the period between drydocks, which can result in adjustments to the estimated amortization of drydock costs. If the vessel is disposed of before the next drydock, the remaining balance in deferred drydock is written-off to the gain or loss on disposal of vessel in the period in which the sale takes place. We also use judgment when identifying costs incurred during a drydock which are necessary to maintain the vessel's Class certification as compared to those costs attributable to repairs and maintenance which are expensed as incurred.
We believe we have made reasonable estimates for ship accounting purposes. However, should certain factors or circumstances cause us to revise our estimates of ship useful lives or projected residual values, depreciation expense could be materially higher or lower. If circumstances cause us to change our assumptions in making determinations as to whether ship improvements should be capitalized, the amounts we expense each year as repairs and maintenance costs could increase, partially offset by a decrease in depreciation expense. If we had reduced our estimated average ship useful life by one year, depreciation expense for 2022 would have increased by approximately $85.0 million. If our ships were estimated to have no residual value, depreciation expense for 2022 would have increased by approximately $307.6 million. We have evaluated our estimated ship useful lives and projected residual values in light of our current environment and determined that there are no changes to these estimates.
Valuation of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets
We review goodwill and indefinite-lived intangible assets for impairment at the reporting unit level annually or, when events or circumstances dictate, more frequently. The impairment review for goodwill consists of a qualitative assessment of whether it is more-likely than-not that a reporting unit's fair value is less than its carrying value, and if necessary, a goodwill impairment test. Factors to consider when performing the qualitative assessment include general economic conditions, limitations on accessing capital, changes in forecasted operating results, changes in fuel prices and fluctuations in foreign exchange rates.
The goodwill impairment analysis consists of a comparison of the fair value of the reporting unit with its carrying value. We typically estimate the fair value of our reporting units using a discounted cash flow model, which may also include a combination of a market-based valuation approach. The estimation of fair value utilizing discounted expected future cash flows includes numerous uncertainties which require our significant judgment when making assumptions of expected revenues, operating costs, marketing, selling and administrative expenses, interest rates, ship additions and retirements as well as assumptions regarding the cruise vacation industry's competitive environment and general economic and business conditions, among other factors. The principal assumptions used in the discounted cash flow model for our 2022 impairment assessment consisted of:
•Forecasted revenues per available passenger cruise day;
•Occupancy rates from existing and expected ship deliveries;
•Vessel operating expenses;
•Terminal growth rate; and
•Weighted average cost of capital (i.e., discount rate).
The discounted cash flow model uses the most current projected operating results for the upcoming fiscal year as a base. We discount the projected cash flows using rates specific to the reporting unit based on its weighted-average cost of capital.
If the fair value of the reporting unit exceeds its carrying value, no write-down of goodwill is required. As amended by ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment, if the fair value of the reporting unit is less than the carrying value of its net assets, an impairment is recognized based on the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to such reporting unit. Refer to Note 4. Goodwill to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information on goodwill.
The impairment review for indefinite-life intangible assets can be performed using a qualitative or quantitative impairment assessment. The quantitative assessment consists of a comparison of the fair value of the asset with its carrying value. We estimate the fair value of these assets using a discounted cash flow model and various valuation methods depending on the nature of the intangible asset, such as the relief-from-royalty method, for trademarks and trade names. The principal assumptions used in the discounted cash flow model for our 2022 impairment assessment consisted of:
•Forecasted revenues per available passenger cruise day;
•Occupancy rates from existing and expected ship deliveries;
•Terminal growth rate;
•Royalty rate; and
•Weighted average cost of capital (i.e., discount rate).
If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying value, the indefinite-life intangible asset is not considered impaired. Other intangible assets assigned finite useful lives are amortized on a straight-line basis over their estimated useful lives. Refer to Note 5. Intangible Assets to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information on indefinite-life intangible assets.
We review our ships and other long-lived assets, including right-of-use assets for impairment whenever events or changes in circumstances indicate, based on recent and projected cash flow performance and remaining useful lives, that the carrying value of these assets may not be fully recoverable. We evaluate asset impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The lowest level for which we maintain identifiable cash flows that are independent of the cash flows of other assets and liabilities is at the ship level for our ships. If estimated undiscounted future cash flows are less than the carrying value of an asset, an impairment charge is recognized to the extent its carrying value exceeds fair value. Refer to Note 6. Property and Equipment to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information on determination of fair value for long-lived assets.
We estimate fair value based on quoted market prices in active markets, if available. If active markets are not available, we base fair value on independent appraisals, sales price negotiations and projected future cash flows discounted at a rate estimated by management to be commensurate with the business risk. Quoted market prices are often not available for individual reporting units and for indefinite-life intangible assets. Accordingly, we estimate the fair value of a reporting unit and an indefinite-life intangible asset using an expected present value technique.
Royal Caribbean International Reporting Unit
During the fourth quarter of 2022, we performed a qualitative assessment of the Royal Caribbean International reporting unit. Based on our qualitative assessment, we concluded that it was more-likely-than-not that the estimated fair value of the Royal Caribbean International reporting unit exceeded its carrying value and thus, we did not proceed to the two-step goodwill impairment test. No indicators of impairment exist primarily because the reporting unit's fair value has consistently exceeded its carrying value by a significant margin and forecasts of operating results expected to be generated by the reporting unit appear sufficient to support its carrying value. As of December 31, 2022, the carrying amount of goodwill attributable to our Royal Caribbean reporting unit was $296.4 million.
We did not perform interim impairment evaluations of Royal Caribbean International's goodwill during 2022 as no triggering events were identified.
Silversea Cruises Reporting Unit
During the fourth quarters of 2022 and 2021, we performed our annual impairment review of Silversea Cruises goodwill. We did not perform qualitative assessments but instead proceeded directly to the goodwill impairment tests. As of November 30, 2022, and November 30, 2021, the fair value of the Silversea Cruises reporting unit was determined using a discounted cash flow model in combination with a market-based valuation approach. As a result of the tests, we determined the fair value of the Silversea Cruises reporting unit exceeded its carrying value by approximately 26% and 35% as of November 30, 2022 and 2021, respectively, resulting in no impairment to Silversea Cruises' goodwill. The carrying value of goodwill attributable to our Silversea Cruises reporting unit was $508.6 million as of December 31, 2022 and 2021.
During the fourth quarters of 2022 and 2021, we performed our annual impairment reviews of the Silversea Cruises trade name. As a result of the quantitative tests, we determined that the fair value of the Silversea Cruises' trade name exceeded its carrying value by approximately 25% and 19%, as of November 30, 2022 and November 30, 2021, respectively, resulting in no impairment to Silversea Cruises' trade name.
As of December 31, 2022 and 2021, the carrying value of indefinite-life intangible assets was $321.5 million, which primarily relates to the Silversea Cruises trade name.
We did not perform interim impairment evaluations of Silversea Cruises's goodwill or trade names during 2022 and 2021, as no triggering events were identified.
Derivative Instruments
We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and the vast majority are designated as hedges. We also use non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments. Although some of our derivative financial instruments do not qualify for hedge accounting or are not accounted for under hedge accounting, we do not hold or issue derivative financial instruments for trading or other speculative purposes. We account for derivative financial instruments in accordance with authoritative guidance. Refer to Note 2. Summary of Significant Accounting Policies and Note 16. Fair Value Measurements and Derivative Instruments to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for more information on related authoritative guidance, the Company's hedging programs and derivative financial instruments.
On a regular basis, we enter into foreign currency forward contracts, interest rate swaps, fuel swaps and options with third-party institutions in over-the-counter markets. We estimate the fair value of our foreign currency forward contracts and interest rate swaps using expected future cash flows based on the instruments' contract terms and published forward prices for foreign currency exchange and interest rates. We value floors which are embedded within our interest rate swaps using standard option pricing models with inputs based on the options’ contract terms, such as exercise price and maturity, and readily available market data, such as forward interest rates and interest rate volatility. We apply present value techniques to convert the expected future cash flows to the current fair value of the instruments.
We estimate the fair value of our fuel swaps using expected future cash flows based on the swaps' contract terms and forward prices. We derive forward prices from published forward fuel curves which in turn are based on actual market transactions and published price quotes for similar assets. We apply present value techniques to convert the expected future cash flows to the current fair value of the instruments. We also corroborate our fair value estimates using valuations provided by our counterparties.
We adjust the valuation of our derivative financial instruments to incorporate credit risk.
We believe it is unlikely that materially different estimates for the fair value of our foreign currency forward contracts, interest rate swaps, fuel swaps and options would be derived from other appropriate valuation models using similar assumptions, inputs or conditions suggested by actual historical experience.
Contingencies—Litigation
On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any, which are recorded as assets when recoverability is probable. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that we have previously made.
Seasonality
Our revenues are seasonal based on demand for cruises. Demand has historically been strongest for cruises during the Northern Hemisphere's summer months and holidays. In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, our brands have historically focused on deployment to the Caribbean, Asia and Australia during that period. This seasonal trend was disrupted with the voluntary suspension of our global cruise operations effective March 2020 in response to the COVID-19 outbreak. We resumed our global cruise operations commencing in the second half of 2021, with our full fleet in service by June 2022. Since our full fleet is in service, we expect to return to seasonal trends
Financial Presentation
Description of Certain Line Items
Revenues
Our revenues are comprised of the following:
•Passenger ticket revenues, which consist of revenue recognized from the sale of passenger tickets and the sale of air transportation to and from our ships; and
•Onboard and other revenues, which consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours and fees for operating certain port facilities. Onboard and other revenues also include revenues we receive from independent third party concessionaires that pay us a percentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships, as well as revenues received for procurement and management related services we perform on behalf of our unconsolidated affiliates.
Cruise Operating Expenses
Our cruise operating expenses are comprised of the following:
•Commissions, transportation and other expenses, which consist of those costs directly associated with passenger ticket revenues, including travel advisor commissions, air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees;
•Onboard and other expenses, which consist of the direct costs associated with onboard and other revenues, including the costs of products sold onboard our ships, vacation protection insurance premiums, costs associated with pre- and post-cruise tours and related credit card fees, as well as the minimal costs associated with concession revenues, as the costs are mostly incurred by third-party concessionaires and costs incurred for the procurement and management related services we perform on behalf of our unconsolidated affiliates;
•Payroll and related expenses, which consist of costs for shipboard personnel (costs associated with our shoreside personnel are included in Marketing, selling and administrative expenses);
•Food expenses, which include food costs for both guests and crew;
•Fuel expenses, which include fuel and related delivery, storage and emission consumable costs and the financial impact of fuel swap agreements; and
•Other operating expenses, which consist primarily of operating costs such as repairs and maintenance, port costs that do not vary with passenger head counts, vessel related insurance, entertainment and gains and/or losses related to the sale of our ships, if any.
We do not allocate payroll and related expenses, food expenses, fuel expenses or other operating expenses to the expense categories attributable to passenger ticket revenues or onboard and other revenues since they are incurred to provide the total cruise vacation experience.
Selected Operational and Financial Metrics
We utilize a variety of operational and financial metrics which are defined below to evaluate our performance and financial condition. As discussed in more detail herein, certain of these metrics are non-GAAP financial measures. These non-GAAP financial measures are provided along with the related GAAP financial measures as we believe they provide useful information to investors as a supplement to our consolidated financial statements, which are prepared and presented in
accordance with GAAP. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
Adjusted EBITDA is a non-GAAP measure that represents EBITDA (as defined below) excluding certain items that we believe adjusting for is meaningful when assessing our profitability on a comparative basis. For the periods presented, these items included (i) other expenses, which includes our loss contingency in connection with the ongoing Havana Docks litigation recorded in 2022; (ii) impairment and credit losses; (iii) restructuring charges and other initiative expenses; (iv) equity investment asset impairments; (v) net insurance recoveries or costs related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas; (vi) Pullmantur reorganization settlement; (vii) the net gain recognized in 2021 in relation to the sale of the Azamara brand; (viii) the noncontrolling interest adjustment to exclude the impact of the contractual accretion requirements associated with the put option held by Heritage Cruise Holding Ltd. and (ix) transaction costs related to the 2018 Silversea Cruises acquisition. A reconciliation of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. to Adjusted EBITDA is provided below under Results of Operations.
Adjusted Loss per Share ("Adjusted EPS") is a non-GAAP measure that represents Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd. (as defined below) divided by weighted average shares outstanding or by diluted weighted average shares outstanding, as applicable. We believe that this non-GAAP measure is meaningful when assessing our performance on a comparative basis. A reconciliation of Loss per Share to Adjusted Loss per share is provided below under Results of Operations.
Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd. is a non-GAAP measure that represents net loss less net income attributable to noncontrolling interest, excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis. For the periods presented, these items included (i) loss on the extinguishment of debt; (ii) the amortization of non-cash debt discount on our convertible notes; (iii) the estimated cash refund expected to be paid to Pullmantur guests and other expenses incurred as part of the Pullmantur S.A. reorganization; (iv) impairment and credit losses; (v) equity investment asset impairments; (vi) net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas; (vii) restructuring charges and other initiative expenses; (viii) the amortization of the Silversea Cruises intangible assets resulting from the Silversea Cruises acquisition in 2018; for 2020, the change in the fair value in the Silversea Cruises contingent consideration;(ix) the noncontrolling interest adjustment to exclude the impact of the contractual accretion requirements associated with the put option held by Heritage Cruise Holding Ltd. (previously known as Silversea Cruises Group Ltd.) noncontrolling interest in Silversea Cruises, which noncontrolling interest we acquired on July 9, 2020; (x) the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand; (xi) currency translation losses recognized during the second quarter of 2020, in connection with the ships classified as assets held-for-sale that were previously chartered to Pullmantur; (xii) the net loss recognized in the fourth quarter of 2021 related to the elimination of the three-month reporting lag for Silversea Cruises; and (xiii) loss contingency recorded in connection with the ongoing Havana Docks litigation inclusive of related legal fees and costs. A reconciliation of Net Loss attributable to Royal Caribbean Cruises Ltd. to Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd. is provided below under Results of Operations.
Available Passenger Cruise Days ("APCD") is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period, which excludes canceled cruise days and cabins not available for sale. We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers that cause our cruise revenue and expenses to vary.
EBITDA is a non-GAAP measure that represents of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. excluding (i) interest income; (ii) interest expense, net of interest capitalized; (iii) depreciation and amortization expenses; and (iv) income tax benefit or expense. We believe that this non-GAAP measure is meaningful when assessing our operating performance on a comparative basis. A reconciliation of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. to EBITDA is provided below under Results of Operations.
Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.
Carbon Intensity is our measurement of carbon dioxide emissions per gross tonne nautical mile (well-to-wake).
Net Cruise Costs and Net Cruise Costs Excluding Fuel are non-GAAP measures that represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses and, in the case of Net Cruise Costs Excluding Fuel, fuel expenses (each of which is described above under the Description of Certain Line Items heading). In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most relevant indicators of our performance. A reconciliation of Gross Cruise
Costs to Net Cruise Costs and Net Cruise Costs Excluding Fuel is provided below under Results of Operations. For the 2022 period presented, Net Cruise Costs and Net Cruise Costs Excluding Fuel excludes restructuring and other initiative expenses.
Occupancy ("Load factor"), in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days (as defined below) by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.
Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.
Although discussed in prior periods, we did not disclose or reconcile in this report our Gross Yields and Net Yields, as defined in our Annual Report on Form 10-K for the year ended December 31, 2019. Historically, we have utilized these financial metrics to measure relevant rate comparisons to other periods. However, our 2022 and 2021 reduction in capacity and revenues, due to the impact of the COVID-19 pandemic on our operations, do not allow for a meaningful analysis and comparison of these metrics and as such these metrics have been excluded from this report. For Gross Cruise Costs, Net Cruise Costs, and Net Cruise Costs excluding Fuel we present amounts in constant currency compared to 2019, which is the last year of normalized operations.
Executive Overview
2022 was a transitional year filled with numerous accomplishments. We returned our entire fleet into operations, took delivery of Celebrity Beyond and Wonder of the Seas, and acquired Silver Endeavour. Additionally, we achieved positive EBITDA and operating cash flow for the year, controlled costs to minimize the impacts of inflation, and saw record shipboard revenues for the year.
Our 2022 Net Loss was $(2.2) billion, or $(8.45) per diluted share, compared to Net Income attributable to Royal Caribbean Cruises Ltd. of $1.9 billion, or $8.95 per diluted share in 2019, the most recent year of normalized operations. Adjusted Net Loss for 2022 was $(1.9) billion, or $(7.50) per diluted share, compared to Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. of $2.0 billion, or $9.54 per diluted share in 2019. 2022 adjusted EBITDA was $711.6 million, compared to adjusted EBITDA of $3.6 billion in 2019. We started 2022 by operating 51 ships and sailing at 57% load factor in the first quarter of 2022. We successfully completed the return of our entire fleet into operations during the second quarter and achieved 96% load factors in the third quarter with the Caribbean eclipsing triple digits at close to 105% during the third quarter. We finished the year sailing at almost 100% load factor in December 2022, with holiday sailings close to 110% during the fourth quarter.
Despite only partially operating for the first half of the year, total revenues were $8.8 billion in 2022, compared to $11.0 billion in 2019. Load factors for 2022 were 85%, and 96% for the second half of the year. Additionally, total revenue per passenger cruise day in 2022 was higher than record 2019 levels, driven by strong onboard revenue performance.
Cruise operating expenses increased from $6.1 billion in 2019 to $6.6 billion in 2022. Gross Cruise Costs per APCD increased 8.2% as-reported and 8.8% in Constant Currency, compared to 2019. Net Cruise Costs, excluding Fuel, per APCD increased 12.9% as-reported and 13.5% in Constant Currency, compared to 2019. Our cost-conscious mindset has helped to mitigate the effects of inflation, and we benefited from reduced costs related to health protocols as the year went on. For the year Net Cruise Costs included $5.97 per APCD of transitory costs related to health protocols, and one-time lagging costs related to fleet ramp up. 2022 also included Galveston terminal construction costs and increased costs associated with CocoCay, which were not present in 2019.
In 2023, we expect our capacity to increase by 14% compared to 2019, despite the reduction in capacity resulting from the divestiture of Azamara and the sale of older ships. Since 2019 we have welcomed 9 new ships across our five brands, and with the addition of Celebrity Ascent and Silver Nova in 2023 we expect a total of 11 new vessels operating by year end. These new ships, along with enhanced onboard offerings and continued investment in destinations, are expected to help drive increases in both Net Yields and Total revenues as our capacity expands. We also plan to continue investing in both more efficient newbuilds and retrofitting our existing fleet with technology to help reach our long-term goals to reduce carbon intensity. Lastly, we anticipate taking delivery of Icon of the Seas by the end of the year, to begin operating revenue sailings in 2024.
Results of Operations
In addition to the items discussed above under "Executive Overview," significant items for 2022 include:
•Our Net Loss attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd. for the year ended December 31, 2022 was $(2.2) billion and $(1.9) billion, or $(8.45) and $(7.50) per share on a diluted basis, respectively, reflecting our return to full operations, compared to Net Loss attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd. of $(5.3) billion and $(4.8) billion, or $(20.89) and $(19.19) per share on a diluted basis, respectively, for the year ended December 31, 2021.
•Total revenues, excluding the effect of changes in foreign currency rates, increased by $7.5 billion for the year ended December 31, 2022 as compared to the same period in 2021. The increase reflects our full return to operations by June 2022 compared to 2021 when the suspension of our global cruise operations was in effect for a substantial portion of our fleet. APCDs for the year ended December 31, 2022 was 41,197,650 compared to 11,767,441, in the same period in 2021.
•The effect of changes in foreign currency exchange rates related to our passenger ticket and onboard and other revenue transactions, denominated in currencies other than the United States dollar, resulted in a decrease in total revenues of $149.0 million for the year ended December 31, 2022 compared to the same period in 2021.
•Total cruise operating expenses, excluding the effect of changes in foreign currency rate, increased by $4.0 billion for the year ended December 31, 2022 compared to the same period in 2021, which reflects our return to operations in 2022 compared to 2021 when the suspension of our global cruise operations was in effect for the substantial portion of our fleet.
•The effect of changes in foreign currency exchange rates related to our cruise operating expenses, denominated in currencies other than the United States dollar, resulted in a decrease in total operating expenses of $79.5 million for the year ended December 31, 2022 compared to the same period in 2021.
•In January 2022 and April 2022, we took delivery of Wonder of the Seas and Celebrity Beyond, respectively. To finance the purchases, we borrowed $1.3 billion and €0.7 billion, or approximately $0.7 billion based on the exchange rate at December 31, 2022, respectively, under previously committed unsecured term loans. Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information. Wonder of the Seas and Celebrity Beyond entered service in the first and second quarters of 2022, respectively.
•In July 2022, we purchased the Silver Endeavour for our Silversea Cruises brand. To finance the purchase, we assumed $277 million of debt. Silver Endeavour entered service in the fourth quarter of 2022. Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information.
•During the year ended December 31, 2022, we executed and amended various financing arrangements, we refinanced $6.9 billion of 2022 and 2023 maturities, which resulted in a total loss on extinguishment of debt of $93.8 million. Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information on our 2022 financing activity.
•During the year ended December 31, 2022, we recorded a loss contingency of $130.0 million inclusive of related legal fees and costs in connection with the ongoing Havana Docks litigation. Refer to Note 17. Commitments and Contingencies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information.
We reported Net Loss attributable to Royal Caribbean Cruises Ltd., Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd., Loss per Share and Adjusted Loss per Share as shown in the following table (in thousands, except per share data):
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Net Loss attributable to Royal Caribbean Cruises Ltd. | $ | (2,155,962) | $ | (5,260,499) | $ | (5,797,462) |
| Loss on extinguishment of debt (1) | $ | 93,810 | $ | 138,759 | $ | 41,109 |
| Convertible debt amortization of debt discount (2) | — | 104,291 | 46,546 | |||
| Pullmantur reorganization settlement (3) | — | 10,242 | 21,637 | |||
| Impairment and credit losses (4) | 562 | 82,001 | 1,566,380 | |||
| Equity investment impairment (5) | — | 31,344 | 39,735 | |||
| Oasis of the Seas incident (6) | — | (6,584) | (1,938) | |||
| Restructuring charges and other initiatives expense (7) | 11,625 | 1,831 | 51,853 | |||
| Amortization of Silversea Cruises intangible assets and change in the fair value of contingent consideration related to Silversea Cruises acquisition (8) | 6,493 | 6,493 | (33,814) | |||
| Noncontrolling interest adjustment (9) | — | — | 72,331 | |||
| Net gain related to the sale of Azamara brand (10) | — | (3,371) | — | |||
| Currency translation adjustment losses (11) | — | — | 69,044 | |||
| Net loss related to the elimination of the Silversea Cruises reporting lag (12) | — | 62,604 | — | |||
| Litigation loss contingency (13) | 130,033 | — | — | |||
| Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd. | $ | (1,913,439) | $ | (4,832,889) | $ | (3,924,579) |
| Basic: | ||||||
| Loss per Share | $ | (8.45) | $ | (20.89) | $ | (27.05) |
| Adjusted Loss per Share | $ | (7.50) | $ | (19.19) | $ | (18.31) |
| Diluted: | ||||||
| Loss per Share | $ | (8.45) | $ | (20.89) | $ | (27.05) |
| Adjusted Loss per Share | $ | (7.50) | $ | (19.19) | $ | (18.31) |
| Weighted-Average Shares Outstanding: | ||||||
| Basic | 255,011 | 251,812 | 214,335 | |||
| Diluted | 255,011 | 251,812 | 214,335 |
(1) Represents net losses related to the early repayment of debt. For further information regarding the repayment transactions, refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data.
(2) Represents the amortization of non-cash debt discount on our convertible notes. For further information regarding the adoption of ASU 2020-06 as of January 1, 2022, which impacts the accounting of the non-cash debt discount on convertible notes, refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data.
(3) Represents estimated cash refunds expected to be paid to Pullmantur guests and other expenses incurred as part of the Pullmantur S.A. reorganization.
(4) Represents asset impairment and credit losses as a result of the impact of COVID-19, with 2022 and 2021 amounts net of the recovery of credit losses previously recognized.
(5) Represents equity investment asset impairment, primarily for our investments in TUI Cruises GmbH in 2021 and Grand Bahama Shipyard in 2020, as a result of the impact of COVID-19. These amounts are included in Equity investment income (loss) within our consolidated statements of comprehensive income (loss).
(6) In 2021 and 2020, amounts include net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas.
(7) Represents primarily restructuring charges incurred in relation to the reduction in our U.S. workforce and other initiatives expenses.
(8) In 2022 and 2021, represents the amortization of the Silversea Cruises intangible assets resulting from the 2018 Silversea Cruises acquisition. In 2020, represents the change in the fair value in the Silversea Cruises contingent consideration recorded within Other (expense) income, offset by the amortization of the Silversea Cruises intangible assets.
(9) Adjustment made to exclude the impact of the contractual accretion requirements associated with the put option held by Heritage Cruise Holding Ltd.'s (previously known as Silversea Cruises Group Ltd.) noncontrolling interest, which noncontrolling interest we acquired on July 9, 2020.
(10) Represents the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand.
(11) Represents currency translation losses recognized in connection with the ships sold in 2020 that were previously chartered to Pullmantur. Refer to Note 7. Other Assets to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information.
(12) Represents the net loss related to the elimination of the Silversea Cruises reporting lag.
(13) Represents our loss contingency recorded in connection with the ongoing Havana Docks litigation inclusive of related legal fees and costs.
The following table presents operating results as a percentage of total revenues for the last three years:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Passenger ticket revenues | 65.5 | % | 61.4 | % | 68.1 | % |
| Onboard and other revenues | 34.5 | % | 38.6 | % | 31.9 | % |
| Total revenues | 100.0 | % | 100.0 | % | 100.0 | % |
| Cruise operating expenses: | ||||||
| Commissions, transportation and other | 15.3 | % | 13.5 | % | 15.6 | % |
| Onboard and other | 6.7 | % | 7.6 | % | 7.1 | % |
| Payroll and related | 14.6 | % | 54.7 | % | 35.7 | % |
| Food | 7.4 | % | 10.7 | % | 7.3 | % |
| Fuel | 12.1 | % | 25.1 | % | 16.8 | % |
| Other operating | 18.6 | % | 61.7 | % | 42.7 | % |
| Total cruise operating expenses | 74.8 | % | 173.5 | % | 125.2 | % |
| Marketing, selling and administrative expenses | 17.9 | % | 89.4 | % | 54.3 | % |
| Depreciation and amortization expenses | 15.9 | % | 84.4 | % | 57.9 | % |
| Impairment and credit losses | — | % | 5.4 | % | 70.9 | % |
| Operating Loss | (8.6) | % | (252.6) | % | (208.3) | % |
| Other income (expense): | ||||||
| Interest income | 0.4 | % | 1.1 | % | 1.0 | % |
| Interest expense, net of interest capitalized | (15.4) | % | (84.3) | % | (38.2) | % |
| Equity investment income (loss) | 0.6 | % | (8.8) | % | (9.7) | % |
| Other (expense) income | (1.4) | % | 1.3 | % | (6.2) | % |
| (15.7) | % | (90.7) | % | (53.1) | % | |
| Net Loss | (24.4) | % | (343.3) | % | (261.5) | % |
| Less: Net Income attributable to noncontrolling interest | — | % | — | % | 1.0 | % |
| Net Loss attributable to Royal Caribbean Cruises Ltd. | (24.4) | % | (343.3) | % | (262.5) | % |
Selected statistical information is shown in the following table:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021(1)(3) | 2020(2) | ||||
| Passengers Carried | 5,536,335 | 1,030,403 | 1,295,144 | |||
| Passenger Cruise Days | 35,051,935 | 5,802,582 | 8,697,893 | |||
| APCD | 41,197,650 | 11,767,441 | 8,539,903 | |||
| Occupancy | 85.1 | % | 49.3 | % | 101.9 | % |
___________________________________________________________________
(1) Due to the elimination of the Silversea Cruises three-month reporting lag in October of 2021, we include Silversea Cruises' metrics from October 1, 2020 through June 30, 2021 and October 1 through December 31, 2021 in the year ended December 31, 2021. The year ended December 31, 2021 does not include July, August, and September 2021 statistics as Silversea Cruises' results of operations for those months are included within Other (expense) income in our consolidated statements of comprehensive loss for the year ended December 31, 2021. Refer to Note 1. General to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for more information on the three-month reporting lag.
(2) Due to the three-month reporting lag effective through September 30, 2021, we include Silversea Cruises' metrics from October 1, 2019 through September 30, 2020 in the year ended December 31, 2020.
(3) For the year ended December, 31, 2021, we include Azamara Cruises' metrics through March 19, 2021, the effective sale date of the brand. Refer to Note 1. General to our consolidated financial statements under Item 8. Financial Statements and Supplementary
Data for more information on the sale of the Azamara Cruises brand. For the year ended December 31, 2020, we include Azamara Cruises' metrics for the full year.
EBITDA and Adjusted EBITDA were calculated as follows (in thousands):
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Net Loss attributable to Royal Caribbean Cruises Ltd. | $ | (2,155,962) | $ | (5,260,499) | $ | (5,797,462) |
| Interest income | (35,857) | (16,773) | (21,036) | |||
| Interest expense, net of interest capitalized | 1,364,162 | 1,291,753 | 844,238 | |||
| Depreciation and amortization expenses | 1,406,689 | 1,292,878 | 1,279,254 | |||
| Income tax (benefit) expense (1) | 4,153 | (47,167) | (14,990) | |||
| EBITDA | 583,185 | (2,739,808) | (3,709,996) | |||
| Other expense (2) | 116,223 | 26,883 | 152,075 | |||
| Impairment and credit losses | 562 | 82,001 | 1,566,380 | |||
| Restructuring charges and other initiatives expense | 11,625 | 1,831 | 51,853 | |||
| Equity investment impairment (3) | — | 31,344 | 39,735 | |||
| Oasis of the Seas incident (4) | — | (6,584) | (1,938) | |||
| Pullmantur reorganization settlement (5) | — | 5,242 | 1,637 | |||
| Net gain related to the sale of the Azamara brand | — | (3,371) | — | |||
| Noncontrolling interest adjustment (6) | — | — | 72,331 | |||
| Adjusted EBITDA | $ | 711,595 | $ | (2,602,462) | $ | (1,827,923) |
(1) Included within Other (expense) income in our consolidated statements of comprehensive loss.
(2) Represents net non-operating income or expense. For 2022, primarily relates to our loss contingency recorded of approximately $130 million in connection with the ongoing Havana Docks litigation inclusive of related legal fees and costs, as well as amounts related to changes in fair value of fuel swaps for which cash flow hedge accounting was discounted. For 2021 and 2020, primarily relates to changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued. The amounts excludes income tax (benefit) expense, included in the EBITDA calculation above.
(3) Represents equity investment asset impairment, primarily for our investments in TUI Cruises GmbH in 2021 and Grand Bahama Shipyard in 2020, as a result of the impact of COVID-19. These amounts are included in Equity investment income (loss) within our consolidated statements of comprehensive income (loss).
(4) Represents net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas.
(5) Represents expenses other than estimated cash refunds incurred as part of the Pullmantur S.A. reorganization.
(6) Adjustment made to exclude the impact of the contractual accretion requirements associated with the put option held by Heritage Cruise Holding Ltd.'s (previously known as Silversea Cruises Group Ltd.) noncontrolling interest, which noncontrolling interest we acquired on July 9, 2020.
EBITDA and Adjusted EBITDA for 2019 were calculated as follows (in thousands, except APCD and per APCD data):
| Year Ended December 31, | ||
|---|---|---|
| 2019 | ||
| Net Income attributable to Royal Caribbean Cruises Ltd. | $ | 1,878,887 |
| Interest income | (26,945) | |
| Interest expense, net of interest capitalized | 408,513 | |
| Depreciation and amortization expenses | 1,245,942 | |
| Income tax expense (1) | 32,602 | |
| EBITDA | 3,538,999 | |
| Other income (2) | (8,089) | |
| Restructuring charges and other initiatives expense | 13,707 | |
| Oasis of the Seas incident, Grand Bahama's drydock write-off and other incidental expenses (3) | 35,239 | |
| Transaction and integration costs related to the 2018 Silversea acquisition | 2,048 | |
| Non-controlling interest adjustment (4) | 35,965 | |
| Adjusted EBITDA | $ | 3,617,869 |
(1) Included within Other income (expense) in our consolidated statements of comprehensive income (loss).
(2) Excludes income tax expense, included in the EBITDA calculation above.
(3) Amount includes incidental costs, net of insurance recoveries of $14.5 million related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas, which were reported primarily within Other operating expenses in our consolidated statements of comprehensive income (loss) for the year ended December 31, 2019; and $20.7 million regarding the Grand Bahama incident involving one of its drydocks, included in our equity investment income within our consolidated statements of comprehensive income (loss) for the year ended December 31, 2019.
(4) Adjustment made to exclude the impact of the contractual accretion requirements associated with the put option held by Heritage Cruise Holding Ltd.'s (previously known as Silversea Cruises Group Ltd.) noncontrolling interest, which noncontrolling interest we acquired on July 9, 2020.
Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs excluding Fuel were calculated as follows (in thousands, except APCD and costs per APCD):
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Total cruise operating expenses | $ | 6,614,336 | $ | 2,657,512 | 2,765,108 | |
| Marketing, selling and administrative expenses | 1,582,929 | 1,370,076 | 1,199,620 | |||
| Gross Cruise Costs | 8,197,265 | 4,027,588 | 3,964,728 | |||
| Less: | ||||||
| Commissions, transportation and other | 1,357,008 | 207,562 | 344,625 | |||
| Onboard and other | 596,554 | 116,946 | 157,213 | |||
| Net Cruise Costs including other costs | 6,243,703 | 3,703,080 | 3,462,890 | |||
| Less: | ||||||
| Restructuring charges and other initiatives expense (1) | 11,625 | 1,831 | 51,853 | |||
| Net Cruise Costs | 6,232,078 | 3,701,249 | 3,411,037 | |||
| Less: | ||||||
| Fuel | 1,072,567 | 385,322 | 371,015 | |||
| Net Cruise Costs excluding Fuel | $ | 5,159,511 | $ | 3,315,927 | $ | 3,040,022 |
| APCD | 41,197,650 | 11,767,441 | 8,539,903 | |||
| Gross Cruise Costs per APCD | $ | 198.97 | $ | 342.27 | $ | 464.26 |
| Net Cruise Costs per APCD | $ | 151.27 | $ | 314.53 | $ | 399.42 |
| Net Cruise Costs excluding Fuel per APCD | $ | 125.24 | $ | 281.79 | $ | 355.98 |
(1) Included within Marketing, selling and administrative expenses in our consolidated statements of comprehensive loss.
Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs excluding Fuel were calculated as follows (in thousands, except APCD and costs per APCD), on a Constant Currency basis:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2022 On a Constant Currency Basis | 2019 | ||||
| Total cruise operating expenses | 6,614,336 | $ | — | $ | 6,062,765 | |
| Marketing, selling and administrative expenses | 1,582,929 | — | 1,559,253 | |||
| Gross Cruise Costs | 8,197,265 | 8,247,096 | 7,622,018 | |||
| Less: | ||||||
| Commissions, transportation and other | 1,357,008 | — | 1,656,297 | |||
| Onboard and other | 596,554 | — | 639,782 | |||
| Net Cruise Costs including other costs | 6,243,703 | — | 5,325,939 | |||
| Less: | ||||||
| Restructuring charges and other initiatives expense (1) | 11,625 | — | 13,707 | |||
| Integration costs related to Silversea Cruises acquisition (1) | — | — | 862 | |||
| Transaction costs related to Silversea Cruises acquisition (1) | — | — | 1,186 | |||
| Costs, net of insurance recoveries, related to the Oasis of the Seas incident (2) | — | — | 14,530 | |||
| Net Cruise Costs | 6,232,078 | 6,262,111 | 5,295,654 | |||
| Less: | ||||||
| Fuel | 1,072,567 | — | 697,962 | |||
| Net Cruise Costs excluding Fuel | $ | 5,159,511 | $ | 5,189,542 | $ | 4,597,692 |
| APCD | 41,197,650 | 41,197,650 | 41,432,451 | |||
| Gross Cruise Costs per APCD | $ | 198.97 | $ | 200.18 | $ | 183.96 |
| Net Cruise Costs per APCD | $ | 151.27 | $ | 152.00 | $ | 127.81 |
| Net Cruise Costs excluding Fuel per APCD | $ | 125.24 | $ | 125.97 | $ | 110.97 |
(1) Included within Marketing, selling and administrative expenses in our consolidated statements of comprehensive loss.
(2) Included within Total cruise operating expenses in our consolidated statements of comprehensive loss.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
In this section, references to 2022 refer to the year ended December 31, 2022 and references to 2021 refer to the year ended December 31, 2021.
Revenues
Total revenues increased $7.3 billion, or 477.0%, to $8.8 billion in 2022 from $1.5 billion in 2021.
Passenger ticket revenues comprised 65.5% of our 2022 total revenues. Passenger ticket revenues increased by $4.9 billion, or 515.6% to $5.8 billion in 2022 from $0.9 billion in 2021 and was partially offset by unfavorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar of $129.8 million.
The remaining 34.5% of total revenues was comprised of Onboard and other revenues, which increased $2.5 billion, or 415.6% to $3.0 billion in 2022 from $591.0 million in 2021 and was partially offset by unfavorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar of $19.2 million.
The increase in total revenues was due to our return of operations, with our full fleet in service by June 2022, compared to 2021 when we began resuming guest cruise operations. Occupancy in 2022 was 85.1% compared to 49.3% in 2021.
Onboard and other revenues included concession revenues of $331.9 million in 2022 and $72.0 million in 2021.
Cruise Operating Expenses
Total Cruise operating expenses increased by $4.0 billion, or 148.9%, to $6.6 billion in 2022 from $2.7 billion in 2021.
The increase in Cruise operating expenses was driven by the return to operations in 2022, with the majority of our fleet in service compared to 2021, when the suspension of our global cruise operations was in effect. The 2022 operating expenses include the overhead costs associated with bringing our ships back to service and our crew back on board our ships. Additionally, inflationary pressures have impacted our operating costs, especially in fuel and food expense. Our cost of fuel (net of the financial impact of fuel swap agreements) for 2022 increased 43% per metric ton compared to 2021 mainly due to the increase in fuel price.
Marketing, Selling and Administrative Expenses
Marketing, selling and administrative expenses increased $0.2 billion, or 15.5% to $1.6 billion in 2022 from $1.4 billion in 2021. The increase was due to the ramp up of our global sales and marketing efforts starting in the second half of 2021 as we commenced our resumption of operations. Additionally, having our full fleet in service as of June 30, 2022 increased overall expenses compared to 2021.
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased $0.1 billion, or 8.8%, to $1.4 billion in 2022 compared to $1.3 billion. The increase was primarily due to the addition of Wonder of the Seas and Celebrity Beyond to our fleet in January 2022 and April 2022, respectively, and depreciation for Odyssey of the Seas and Silver Dawn, which were delivered in March 2021 and November 2021, respectively.
.Impairment and Credit Losses
Impairment and credit losses for 2022 was $0.6 million compared to $82.0 million in 2021. The decrease in impairment loss was primarily due to 2021 impairment charges of certain construction in progress projects that were reduced in scope or terminated as a result of COVID-19, which did not recur in 2022.
Other Income (Expense)
Interest expense, net of interest capitalized, increased $72.4 million, or 5.6%, to $1.4 billion in 2022 from $1.3 billion in 2021. The increase was primarily due to additional indebtedness associated with new ship deliveries.
Equity investment income for 2022 was $56.7 million compared to Equity investment Loss of $135.5 million in 2021. The increase in income was primarily due to income from TUI Cruises, one of our equity investments, in 2022 compared to losses in 2021.
Other (expense) income decreased $140.7 million, or 693.5%, to other expense of $120.4 million in 2022 from other income of $20.3 million in 2021. The decrease was primarily due to a loss contingency of $130.0 million recorded in connection with the ongoing Havana Docks litigation.
Other Comprehensive Income
Other comprehensive income in 2022 was $67.7 million compared to $28.5 million in 2021. The change was primarily due to Changes in defined benefits plan in 2022 of $48.9 million compared to $8.7 million in 2021.
Future Application of Accounting Standards
Refer to Note. 2 Summary of Significant Accounting Policies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information on Recent Accounting Pronouncements.
Liquidity and Capital Resources
Sources and Uses of Cash
Net cash provided by (used in) operating activities increased by $2.4 billion to cash provided of $0.5 billion for the year ended December 31, 2022, compared to cash used of $1.9 billion for the same period in 2021. Our full resumption of operations in 2022 generated an increase in guest ticket and onboard collections for the twelve months ended December 31, 2022, compared to a partial resumption of operations in 2021.
Net cash used in investing activities increased by $843.0 million to cash used of $3.0 billion for the year ended December 31, 2022, compared to cash used of $2.1 billion for the same period in 2021. The increase in cash used in investing activities was primarily attributable to an increase in capital expenditures of $480.4 million due to the increased cost associated with taking delivery of Wonder of the Seas and Celebrity Beyond in 2022 compared to taking delivery of Odyssey of the Seas and Silver Dawn in 2021, and an increase in cash paid on settlement of derivative financial instruments of $281.7 million in 2022 compared to 2021.
Net cash provided by financing activities was $1.7 billion in 2022 compared to cash provided of $3.0 billion in 2021. The decrease of $1.3 billion was primarily attributable to proceeds from common stock issuances of $1.6 billion during the twelve months ended December 31, 2021, compared to none during the same period in 2022, and offset by repayments of commercial paper notes of $414.6 million during the twelve months ended December 31, 2021, compared to none during the same period in 2022.
Future Capital Commitments
Capital Expenditures
Our future capital commitments consist primarily of new ship orders. As of December 31, 2022, we have one Oasis-class ship, and three ships of a new generation, known as our Icon-class, on order for our Royal Caribbean International brand with an aggregate capacity of approximately 22,500 berths. As of December 31, 2022, we have one Edge-class ship on order for our Celebrity Cruises brand, with a capacity of approximately 3,250 berths. Additionally, as of December 31, 2022, we have two ships on order for our Silversea Cruises brand with an aggregate capacity of approximately 1,460 berths. Refer to Item 1. Business-Operations for further information on our ships on order. We have committed financing arrangements in place covering 80% of the cost of the ship for the seven ships on order for our Global Brands, all of which include sovereign financing guarantees. Additionally, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship for delivery in 2025, which is contingent upon completion of conditions precedent and financing.
As of December 31, 2022, the aggregate cost of our ships on order, excluding any ships on order by our Partner Brands, was approximately $9.8 billion, of which we had deposited $832 million. Approximately 52.3% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at December 31, 2022. Refer to Note 16. Fair Value Measurements and Derivative Instruments and Note 17. Commitments and Contingencies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data.
We have been, and may continue to be, negatively impacted on our cash flows, liquidity and financial position by the COVID-19 pandemic. In order to preserve liquidity, we deferred a significant portion of our planned 2020, 2021 and 2022 capital expenditures. As of December 31, 2022, we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately $4.1 billion for 2023. This amount does not include any ships on order by our Partner Brands.
Material Cash Requirements
As of December 31, 2022, our material cash requirements were as follows (in thousands):
| Payments due by period | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | ||||||||
| Operating Activities: | ||||||||||||||
| Interest on debt(1) | $ | 1,345,729 | $ | 1,187,749 | $ | 1,036,011 | $ | 780,404 | $ | 648,639 | $ | 1,106,447 | $ | 6,104,979 |
| Investing Activities: | ||||||||||||||
| Ship purchase obligations(2) | 2,705,127 | 1,846,333 | 1,287,368 | 1,218,073 | — | — | 7,056,901 | |||||||
| Total | $ | 4,050,856 | $ | 3,034,082 | $ | 2,323,379 | $ | 1,998,477 | $ | 648,639 | $ | 1,106,447 | $ | 13,161,880 |
___________________________________________________________________
.
(1) Long-term debt obligations mature at various dates through fiscal year 2037 and bear interest at fixed and variable rates. Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements, using the applicable rate at December 31, 2022. Debt denominated in other currencies is calculated based on the applicable exchange rate at December 31, 2022.
(2) Amounts are based on contractual installment and delivery dates for our ships on order. Included in these figures are $5.7 billion in final contractual installments, which have committed financing covering 80% of the cost of the ships on order for our Global Brands, almost all of which include sovereign financing guarantees. Amounts do not include potential obligations which remain subject to cancellation at our sole discretion or any agreements entered for ships on order that remain contingent upon completion of conditions precedent.
Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for maturities related to debt.
Refer to Note 9. Leases to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for maturities related to lease liabilities.
Refer to Funding Needs and Sources below for discussion on the planned funding of the above material contractual obligations.
As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships or the purchase of existing ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.
Off-Balance Sheet Arrangements.
Refer to Note 7. Other Assets to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for ownership restrictions related to TUI Cruises.
Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for export credit agency guarantees.
Refer to Note 17. Commitments and Contingencies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for other agreements.
As of December 31, 2022, other than the items described above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.
Funding Needs and Sources
Historically, we relied on a combination of cash flows provided by operations, draw-downs under our available credit facilities, the incurrence of additional debt and/or the refinancing of our existing debt and the issuance of additional shares of equity securities to fund our obligations. COVID-19 resulted in our voluntary suspension of global cruise operations from March 2020 up to our full fleet returning to service during the second quarter of 2022. The suspension of operations strained our sources of cash flow and liquidity, causing us to take actions resulting in reductions in our operating expenses, reductions in our capital expenses and new financings and other liquidity actions.
The Company continually identifies and evaluates actions to maintain adequate liquidity. These include, and are not limited to: further reductions in capital expenditures, operating expenses and administrative costs and additional financings. Additionally, we will continue to pursue various opportunities to raise additional capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities. Actions to raise capital may include issuances of debt, convertible debt or equity in private or public transactions or entering into new or extended credit facilities.
We have significant contractual obligations of which our debt service obligations and the capital expenditures associated with our ship purchases represent our largest funding needs. As of December 31, 2022, we had approximately $7.6 billion of committed financing for our ships on order.
As of December 31, 2022, our obligations due through December 31, 2023 primarily consisted of $2.1 billion related to debt maturities, $1.3 billion related to interest on debt and $2.7 billion related to progress payments on our ship orders and, based on expected delivery date, the final installments payable due upon the delivery of Silver Nova, Icon of the Seas, and Celebrity Ascent.
As of December 31, 2022, we had liquidity of $2.9 billion, including cash and cash equivalents of $1.9 billion, $0.3 billion of undrawn revolving credit facility capacity, and a $0.7 billion commitment for a 364-day term loan facility which was terminated in February 2023 in connection with our completion of the $700 million 7.25% Priority Guaranteed Notes offering. Our revolving credit facilities were partially utilized through a combination of amounts drawn and letters of credit issued under the facilities as of December 31, 2022, which were subsequently amended in January 2023, as described in Note 8. Debt to our consolidated financial statements. We have agreed with certain of our lenders not to pay dividends or engage in stock repurchases unless we repay the remaining principal payments that were deferred under our export credit facilities in 2020 and 2021. Refer to Note 10. Shareholders' Equity to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information.
If any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of our board of directors is no longer comprised of individuals who were members of our board of directors on the first day of such period, we may be obligated to prepay indebtedness outstanding under our credit facilities, which we may be unable to replace on similar terms. Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.
Based on our assumptions and estimates and our financial condition, we believe that we have sufficient financial resources to fund our obligations for at least the next twelve months from the issuance of these financial statements. However, there is no assurance that our assumptions and estimates are accurate as there is inherent uncertainty in our ability to predict future liquidity requirements. Refer to Note 1. General, Management’s Plan and Liquidity, to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information.
Debt Covenants
Our export credit facilities, our non-export credit facilities, and certain of our credit card processing agreements contain covenants that require us, among other things, to maintain a fixed charge coverage ratio, limit our net debt-to-capital ratio, and maintain minimum liquidity, and under certain facilities, to maintain a minimum level of stockholders' equity. The fixed charge coverage ratio is calculated by dividing net cash from operations for the past four quarters by the sum of dividend payments plus scheduled principal debt payments in excess of any new financings for the past four quarters. Our minimum stockholders' equity and maximum net debt-to-capital calculations exclude the impact of Accumulated other comprehensive loss on Total stockholders' equity. In 2021 and 2022, the financial covenant levels were modified for 2023 and 2024. As of December 31, 2022, we were in compliance with our financial covenants and we estimate that we will be in compliance for at least the next twelve months.
Any further covenant waivers may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections as may be agreed with our lenders. There can be no assurance that we would be able to obtain additional waivers in a timely manner, or on acceptable terms. If we require additional waivers and are not able to obtain them or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contracts. Refer to Note 8. Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information regarding debt covenants.
Dividends
The declaration of dividends shall at all times be subject to the final determination of our board of directors that a dividend is prudent at that time in consideration of the needs of the business. In the event we declare a dividend or engage in share repurchases, we will need to repay the amounts deferred under our export credit facilities. Accordingly, we have not declared a dividend since the first quarter of 2020.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Instruments and Other
General
We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We try to mitigate these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged. Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, our objective is not to hold or issue derivative financial instruments for trading or other speculative purposes. Refer to Note 16. Fair Value Measurements and Derivative Instruments to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates to our long-term debt obligations including future interest payments. At December 31, 2022, approximately 75.0% of our long-term debt was effectively fixed as compared to 65.7% as of December 31, 2021. We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.
Market risk associated with our fixed-rate debt is the potential increase in fair value resulting from a decrease in interest rates. We use interest rate swap agreements that effectively convert a portion of our fixed-rate debt to a floating-rate basis to manage this risk. During the quarter ended September 30, 2022, we redeemed our 5.25% senior unsecured notes due 2022 in full and terminated the related interest rate swap agreements, which resulted in the dedesignation of the fair value hedges and recognition of an immaterial loss representing the fair value hedge carrying amount adjustment on these notes. At December 31, 2022, there were no interest rate swap agreements for fixed-rate debt instruments.
The estimated fair value of our long-term fixed-rate debt at December 31, 2022 was $14.8 billion, using quoted market prices, where available, or using the present value of expected future cash flows which incorporates risk profile. The fair value of our fixed to floating interest rate swap agreements was estimated to be an asset of $7.7 million as of December 31, 2021, based on the present value of expected future cash flows. A hypothetical one percentage point decrease in interest rates at December 31, 2022 would decrease the fair value of our hedged and unhedged long-term fixed-rate debt by approximately $369.4 million.
Market risk associated with our long-term floating-rate debt is the potential increase in interest expense from an increase in interest rates. We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage this risk. A hypothetical one percentage point increase in interest rates would increase our forecasted 2023 interest expense by approximately $34.8 million, assuming no change in foreign currency exchange rates.
At December 31, 2022, we maintained interest rate swap agreements on the following floating-rate debt instruments:
| Debt Instrument | Swap Notional as of December 31, 2022 (In thousands) | Maturity | Debt Floating Rate | All-in Swap Fixed Rate | ||
|---|---|---|---|---|---|---|
| Celebrity Reflection term loan | $ | 109,083 | October 2024 | LIBOR plus | 0.40% | 2.85% |
| Quantum of the Seas term loan | 245,000 | October 2026 | LIBOR plus | 1.30% | 3.74% | |
| Anthem of the Seas term loan | 271,875 | April 2027 | LIBOR plus | 1.30% | 3.86% | |
| Ovation of the Seas term loan | 380,417 | April 2028 | LIBOR plus | 1.00% | 3.16% | |
| Harmony of the Seas term loan (1) | 338,990 | May 2028 | EURIBOR plus | 1.15% | 2.26% | |
| Odyssey of the Seas term loan(2) | 383,333 | October 2032 | LIBOR plus | 0.96% | 3.21% | |
| Odyssey of the Seas term loan (2) | 191,667 | October 2032 | LIBOR plus | 0.96% | 2.84% | |
| $ | 1,920,365 |
___________________________________________________________________
(1) Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include EURIBOR zero-floors matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of December 31, 2022.
(2) Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor. The effective dates of the $383.3 million and $191.7 million interest rate swap agreements are October 2020 and October 2022, respectively. The unsecured term loan for the financing of Odyssey of the Seas was drawn on March 2021.
These interest rate swap agreements are accounted for as cash flow hedges.
The fair value of our floating to fixed interest rate swap agreements was estimated to be an asset of $123.3 million as of December 31, 2022 based on the present value of expected future cash flows. These interest rate swap agreements are accounted for as cash flow hedges.
Foreign Currency Exchange Rate Risk
Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in Euros, our foreign currency denominated debt and our international business operations. On a regular basis, we enter into foreign currency forward contracts and, from time to time, we utilize cross-currency swap agreements and collar options to manage portions of the exposure to movements in foreign currency exchange rates.
The estimated fair value, as of December 31, 2022, of our Euro-denominated forward contracts associated with our ship construction contracts was a liability of $40.7 million, based on the present value of expected future cash flows. As of December 31, 2022, the aggregate cost of our ships on order, not including ships on order by our Partner Brands, was approximately $9.8 billion, of which we had deposited $0.8 billion as of such date. Approximately 52.3% of the aggregate cost of the ships under construction was exposed to fluctuations in the Euro exchange rate at December 31, 2022 and 2021, respectively. A hypothetical 10% strengthening of the Euro as of December 31, 2022, assuming no changes in comparative interest rates, would result in a $511.7 million increase in the United States dollar cost of the foreign currency denominated ship construction contracts exposed to fluctuations in the Euro exchange rate. Our foreign currency forward contract agreements are accounted for as cash flow or net investment hedges depending on the designation of the related hedge.
Our international business operations subject us to foreign currency exchange risk. We transact business in many different foreign currencies and maintain investments in foreign operations which may expose us to financial market risk resulting from fluctuations in foreign currency exchange rates. Movements in foreign currency exchange rates may affect the value of our earnings in foreign currencies and cash flows. We manage most of this exposure on a consolidated basis, which allows us to take advantage of any natural offsets. Therefore, weakness in one particular currency might be offset by strengths in other currencies over time. The extent to which one currency is effective as a natural offset of another currency fluctuates over time. In addition, some foreign currency exposures have little to no mitigating natural offsets available.
We consider our investments in our foreign operations to be denominated in relatively stable currencies and of a long-term nature. We address the exposure of our investments in foreign operations by denominating a portion of our debt in our subsidiaries' and investments' functional currencies and designating it as a hedge of these subsidiaries and investments. We had designated debt as a hedge of our net investments primarily in TUI Cruises of approximately €433.0 million, or approximately $461.9 million, through December 31, 2022. As of December 31, 2021, we had designated debt as a hedge of our net investments primarily in TUI Cruises of approximately €97.0 million, or approximately $110.3 million.
We have included net gains of approximately $63.5 million and $47.7 million of foreign-currency transaction remeasurement and changes in the fair value of derivatives in the foreign currency translation adjustment component of Accumulated other comprehensive loss at December 31, 2022 and 2021, respectively.
On a regular basis, we enter into foreign currency forward contracts and, from time to time, we utilize cross-currency swap agreements and collar options to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries. During 2022, we maintained an average of approximately $1.1 billion of these foreign currency forward contracts. These instruments are not designated as hedging instruments. For the years ended December 31, 2022, 2021 and 2020 changes in the fair value of the foreign currency forward contracts resulted in losses of approximately $(101.8) million, $(30.9) million and $(19.0) million, respectively, which offset gains (losses) arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same years of $93.0 million, $24.3 million and $(1.5) million, respectively. These changes were recognized in earnings within Other income (expense) in our consolidated statements of comprehensive income (loss).
Fuel Price Risk
Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships. Fuel cost, net of the financial impact of fuel swap agreements, as a percentage of our total revenues, was approximately 12.1% in 2022, 25.1% in 2021 and 16.8% in 2020. We use fuel swap agreements to mitigate the financial impact of fluctuations in fuel prices.
As of December 31, 2022, we had fuel swap agreements to pay fixed prices for fuel with an aggregate notional amount of approximately $498.1 million, maturing through 2023. These fuel swap agreements are generally accounted for as cash flow hedges. The fuel swap agreements designated as hedges of projected fuel purchases represented 50% of our projected 2023 fuel requirements. The estimated fair value of our fuel swap agreements at December 31, 2022 was estimated to be a liability of $6.1 million. We estimate that a hypothetical 10% increase in our weighted-average fuel price from that experienced during the year ended December 31, 2022 would increase our forecasted 2023 fuel cost by approximately $61.0 million, net of the impact of fuel swap agreements.
Item 8. Financial Statements and Supplementary Data
Our Consolidated Financial Statements are included beginning on page F-1 of this report.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this Annual Report on Form 10-K. Based upon such evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that those controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission's (the "SEC").
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022.
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, as stated in its report, which is included herein on page F-2.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Items 10, 11, 12, 13 and 14. Directors, Executive Officers and Corporate Governance; Executive Compensation; Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; Certain Relationships and Related Transactions, and Director Independence; and Principal Accountant Fees and Services.
Except for information concerning executive officers (called for by Item 401(b) of Regulation S-K), which is included in Part I of this Annual Report on Form 10-K, the information required by Items 10, 11, 12, 13 and 14 is incorporated herein by reference to certain sections of the Royal Caribbean Cruises Ltd. Definitive Proxy Statement relating to our 2023 Annual Meeting of Shareholders (the "Proxy Statement") to be filed with the Securities and Exchange Commission no later than 120 days after the close of the fiscal year. Please refer to the following sections in the Proxy Statement for more information: "Corporate Governance"; "Proposal 1—Election of Directors"; "Certain Relationships and Related Person Transactions"; "Delinquent Section 16(a) Reports"; "Executive Compensation"; "Security Ownership of Certain Beneficial Owners and Management"; and "Proposal 3—Ratification of Principal Independent Registered Public Accounting Firm." Copies of the Proxy Statement will become available when filed through our Investor Relations website at www.rclcorporate.com (please see "Financial Reports" under "Financial Information"); by contacting our Investor Relations department at 1050 Caribbean Way, Miami, Florida 33132—telephone (305) 982-2625; or by visiting the SEC's website at www.sec.gov.
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our executive officers, and our directors. A copy of the Code of Business Conduct and Ethics is posted in the corporate governance section of our website at www.rclcorporate.com and is available in print, without charge, to shareholders upon written request to our Corporate Secretary at Royal Caribbean Cruises, Ltd., 1050 Caribbean Way, Miami, Florida 33132. Any amendments to the code or any waivers from any provisions of the code granted to executive officers or directors will be promptly disclosed to investors by posting on our website at www.rclcorporate.com. None of the websites referenced in this Annual Report on Form 10-K or the information contained therein is incorporated herein by reference.
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
Our Consolidated Financial Statements have been prepared in accordance with Item 8. Financial Statements and Supplementary Data and are included beginning on page F-1 of this report.
(1)Financial Statement Schedules
None.
(1)Exhibits
All values are in US Dollars.
* Filed herewith
** Furnished herewith
† Management contract or compensatory plan or arrangement.
Interactive Data File
| 101 | The following financial statements from Royal Caribbean Cruises Ltd.'s Annual Report on Form 10-K for the year ended December 31, 2022 formatted in iXBRL (Inline eXtensible Business Reporting Language) are as follows: | |
|---|---|---|
| (i) | the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020; | |
| (ii) | the Consolidated Balance Sheets at December 31, 2022, and 2021; | |
| (iii) | the Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; | |
| (iv) | the Consolidated Statements of Shareholders' Equity for the years ended December 31, 2022, 2021 and 2020; and | |
| (v) | the Notes to the Consolidated Financial Statements, tagged in summary and detail. | |
| 104 | Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101 |
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ROYAL CARIBBEAN CRUISES LTD.<br><br>(Registrant) | |
|---|---|
| By: | /s/ NAFTALI HOLTZ |
| Naftali Holtz<br><br>Chief Financial Officer<br><br>(Principal Financial Officer and duly authorized signatory) |
February 23, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 23, 2023.
| /s/ JASON T. LIBERTY | |
|---|---|
| Jason T. Liberty<br><br>Director and Chief Executive Officer<br><br>(Principal Executive Officer) | |
| /s/ NAFTALI HOLTZ | |
| Naftali Holtz<br><br>Chief Financial Officer<br><br>(Principal Financial Officer) | |
| /s/ HENRY L. PUJOL | |
| Henry L. Pujol<br><br>Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) | |
| * | |
| Richard D. Fain<br><br>Chairman of the Board | |
| * | |
| John F. Brock<br><br>Director | |
| * | |
| Stephen R. Howe Jr.<br><br>Director | |
| * | |
| William L. Kimsey<br><br>Director | |
| * | |
| Maritza G. Montiel<br><br>Director | |
| * | |
| Ann S. Moore<br><br>Director | |
| * | |
| Eyal M. Ofer<br><br>Director | |
| * | |
| Vagn O. Sørensen<br><br>Director | |
| * | |
| Donald Thompson<br><br>Director | |
| * | |
| Arne Alexander Wilhelmsen<br><br>Director | |
| * | |
| Amy C. McPherson<br><br>Director | |
| * | |
| Michael O. Leavitt<br><br>Director | |
| *By: | /s/ NAFTALI HOLTZ |
| --- | --- |
| Naftali Holtz, as Attorney-in-Fact |
ROYAL CARIBBEAN CRUISES LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
|---|---|
| Report of Independent Registered Public Accounting Firm (PCAOB ID No.238) | F-2 |
| Consolidated Statements of ComprehensiveLoss | F-5 |
| Consolidated Balance Sheets | F-6 |
| Consolidated Statements of Cash Flows | F-7 |
| Consolidated Statements of Shareholders' Equity | F-9 |
| Notes to the Consolidated Financial Statements | F-10 |
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Royal Caribbean Cruises Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Royal Caribbean Cruises Ltd. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of comprehensive loss, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Notes 2 and 1 to the consolidated financial statements, effective January 1, 2022, the Company changed the manner in which it accounts for convertible notes and effective October 1, 2021, the Company changed the manner in which it accounts for the consolidation of Silversea Cruises.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Emphasis of Matter
As discussed in Note 1 to the consolidated financial statements, the resulting effects of the COVID-19 pandemic are having a material negative impact on the Company's operating cash flows and liquidity. Management's evaluation of these events and conditions and management's plan to mitigate these matters are also described in Note 1.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
F-2
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Liquidity – Impact of COVID-19
As described in Note 1 to the consolidated financial statements, management believes the resulting effects of the COVID-19 pandemic are having a material negative impact on the Company’s operating cash flows and liquidity. Management has taken measures to manage liquidity, including the issuance of debt and shares of common stock, the amendment of credit agreements to defer payments, and the modification of covenant requirements and waivers. The principal assumptions used in management’s estimate of future liquidity consisted of (i) the expected timing of cash collections for cruise bookings; (ii) the expected sustained increase in revenue per available passenger cruise day; (iii) the expected increase in occupancy levels to reach historical levels; and (iv) the inflationary increases to the Company’s operating costs, mostly impacting the expected cost of fuel and food. Based on management’s actions, as well as the Company’s present financial condition and the assumptions on liquidity, management believes they have sufficient liquidity to fund their obligations for at least the next twelve months from the issuance of the financial statements.
The principal considerations for our determination that performing procedures relating to the impact of COVID 19 on the Company’s liquidity is a critical audit matter are the significant judgment by management when developing the estimate of future liquidity; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s estimate of future liquidity and assumptions related to (i) the expected timing of cash collections for cruise bookings; (ii) the expected sustained increase in revenue per available passenger cruise day; (iii) the expected increase in occupancy levels to reach historical levels, and (iv) the inflationary increases to the Company’s operating costs, mostly impacting the expected cost of fuel and food.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of future liquidity. These procedures also included, among others, (i) testing management’s process for estimating future liquidity for the twelve months after the date the financial statements are issued; (ii) testing the completeness and accuracy of underlying data used in the estimate; (iii) evaluating the reasonableness of the significant assumptions used by management related to the expected timing of cash collections for cruise bookings, the expected sustained increase in revenue per available passenger cruise day, the expected increase in occupancy levels to reach historical levels, and the inflationary increases to the Company’s operating costs, mostly impacting the expected cost of fuel and food; and (iv) evaluating management’s estimate of future liquidity and their disclosure in the consolidated financial statements regarding having sufficient liquidity to satisfy the Company’s obligations for at least the next twelve months from the issuance of the financial statements. Evaluating management’s assumptions related to the expected timing of cash collections for cruise bookings, the expected sustained increase in revenue per available passenger cruise day, the expected increase in occupancy levels to reach historical levels, and the inflationary increases to the Company’s operating costs, mostly impacting the expected cost of fuel and food involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Company; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
Impairment Assessments – Silversea Cruises Reporting Unit Goodwill and Trade Name
As described in Notes 2, 4 and 5 to the consolidated financial statements, as of December 31, 2022 the Company’s consolidated goodwill balance was $809 million and the indefinite-life intangible assets balance was $321 million, and the goodwill and trade name associated with the Silversea Cruises reporting unit and trade name was $509 million and $319 million,
F-3
respectively. Management reviews goodwill and indefinite-life intangible assets for impairment at the reporting unit level and asset level, respectively, annually or, when events or circumstances dictate, more frequently. The quantitative impairment assessment consists of a comparison of the fair value of the reporting unit or asset with its carrying value. Fair value is estimated by management using a discounted cash flow model in combination with a market-based valuation approach for reporting units and a relief-from-royalty method for trade names. Management’s principal assumptions for the Silversea Cruises reporting unit and trade name were forecasted revenues per available passenger cruise day, occupancy rates from existing and expected ship deliveries, vessel operating expenses, terminal growth rate, royalty rate, and weighted average cost of capital (i.e., discount rate).
The principal considerations for our determination that performing procedures relating to the impairment assessments of the Silversea Cruises reporting unit goodwill and trade name is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenues per available passenger cruise day, occupancy rates from existing and expected ship deliveries, terminal growth rates, and discount rates for the goodwill and trade name impairment assessments, vessel operating expenses for the goodwill impairment assessment and the royalty rate for the trade name impairment assessment; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill and trade name impairment assessments, including controls over the valuation of the Silversea Cruises reporting unit and trade name. These procedures also included, among others, (i) testing management’s process for developing the fair value estimates; (ii) evaluating the appropriateness of the discounted future cash flow model and relief-from-royalty method; (iii) testing the completeness and accuracy of underlying data used in the fair value estimates; and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenues per available passenger cruise day, occupancy rates from existing and expected ship deliveries, terminal growth rates, and discount rates for the goodwill and trade name impairment assessments, vessel operating expenses for the goodwill impairment assessment and the royalty rate for the trade name impairment assessment. Evaluating management’s assumptions related to forecasted revenues per available passenger cruise day, occupancy rates from existing and expected ship deliveries, vessel operating expenses and terminal growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit and the Silversea Cruises brand; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of (i) the Company’s discounted cash flow model and relief-from-royalty method, and (ii) the discount rate and royalty rate assumptions.
/s/ PricewaterhouseCoopers LLP
Hallandale Beach, Florida
February 23, 2023
We have served as the Company’s auditor since at least 1989, which includes periods before the Company became subject to SEC reporting requirements. We have not been able to determine the specific year we began serving as auditor of the Company.
F-4
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, except per share data)
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Passenger ticket revenues | $ | 5,793,492 | $ | 941,175 | $ | 1,504,569 |
| Onboard and other revenues | 3,047,048 | 590,958 | 704,236 | |||
| Total revenues | 8,840,540 | 1,532,133 | 2,208,805 | |||
| Cruise operating expenses: | ||||||
| Commissions, transportation and other | 1,357,008 | 207,562 | 344,625 | |||
| Onboard and other | 596,554 | 116,946 | 157,213 | |||
| Payroll and related | 1,287,801 | 838,088 | 788,273 | |||
| Food | 653,139 | 164,389 | 161,750 | |||
| Fuel | 1,072,567 | 385,322 | 371,015 | |||
| Other operating | 1,647,267 | 945,205 | 942,232 | |||
| Total cruise operating expenses | 6,614,336 | 2,657,512 | 2,765,108 | |||
| Marketing, selling and administrative expenses | 1,582,929 | 1,370,076 | 1,199,620 | |||
| Depreciation and amortization expenses | 1,406,689 | 1,292,878 | 1,279,254 | |||
| Impairment and credit losses | 562 | 82,001 | 1,566,380 | |||
| Operating Loss | (763,976) | (3,870,334) | (4,601,557) | |||
| Other income (expense): | ||||||
| Interest income | 35,857 | 16,773 | 21,036 | |||
| Interest expense, net of interest capitalized | (1,364,162) | (1,291,753) | (844,238) | |||
| Equity investment income (loss) | 56,695 | (135,469) | (213,286) | |||
| Other (expense) income (1) | (120,376) | 20,284 | (137,085) | |||
| (1,391,986) | (1,390,165) | (1,173,573) | ||||
| Net Loss | (2,155,962) | (5,260,499) | (5,775,130) | |||
| Less: Net Income attributable to noncontrolling interest | — | — | 22,332 | |||
| Net Loss attributable to Royal Caribbean Cruises Ltd. | $ | (2,155,962) | $ | (5,260,499) | $ | (5,797,462) |
| Loss per Share: | ||||||
| Basic | $ | (8.45) | $ | (20.89) | $ | (27.05) |
| Diluted | $ | (8.45) | $ | (20.89) | $ | (27.05) |
| Comprehensive Loss | ||||||
| Net Loss | $ | (2,155,962) | $ | (5,260,499) | $ | (5,775,130) |
| Other comprehensive income (loss): | ||||||
| Foreign currency translation adjustments | 10,295 | 15,703 | 40,346 | |||
| Change in defined benefit plans | 48,914 | 8,707 | (19,984) | |||
| Gain on cash flow derivative hedges | 8,462 | 4,046 | 38,010 | |||
| Total other comprehensive income | 67,671 | 28,456 | 58,372 | |||
| Comprehensive Loss | $ | (2,088,291) | $ | (5,232,043) | $ | (5,716,758) |
| Less: Comprehensive Income attributable to noncontrolling interest | — | — | 22,332 | |||
| Comprehensive Loss attributable to Royal Caribbean Cruises Ltd. | $ | (2,088,291) | $ | (5,232,043) | $ | (5,739,090) |
____________________________________________________________
(1) Including a $62.6 million net loss related to the 2021 elimination of the Silversea Cruises reporting lag for the year ended December 31, 2021.
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
| As of December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in thousands, except share data) | ||||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 1,935,005 | $ | 2,701,770 |
| Trade and other receivables, net of allowances of $11,612 and $13,411 at December 31, 2022 and December 31, 2021, respectively | 531,066 | 408,067 | ||
| Inventories | 224,016 | 150,224 | ||
| Prepaid expenses and other assets | 455,836 | 286,026 | ||
| Derivative financial instruments | 59,083 | 54,184 | ||
| Total current assets | 3,205,006 | 3,600,271 | ||
| Property and equipment, net | 27,546,445 | 25,907,949 | ||
| Operating lease right-of-use assets | 537,559 | 542,128 | ||
| Goodwill | 809,277 | 809,383 | ||
| Other assets, net of allowances of $71,614 and $86,781 at December 31, 2022 and December 31, 2021, respectively | 1,678,074 | 1,398,624 | ||
| Total assets | $ | 33,776,361 | $ | 32,258,355 |
| Liabilities and shareholders' equity | ||||
| Current liabilities | ||||
| Current portion of long-term debt | $ | 2,087,711 | $ | 2,243,131 |
| Current portion of operating lease liabilities | 79,760 | 68,922 | ||
| Accounts payable | 646,727 | 545,978 | ||
| Accrued interest | 388,828 | 251,974 | ||
| Accrued expenses and other liabilities | 1,071,129 | 887,575 | ||
| Derivative financial instruments | 131,312 | 127,236 | ||
| Customer deposits | 4,167,997 | 3,160,867 | ||
| Total current liabilities | 8,573,464 | 7,285,683 | ||
| Long-term debt | 21,303,480 | 18,847,209 | ||
| Long-term operating lease liabilities | 523,006 | 534,726 | ||
| Other long-term liabilities | 507,599 | 505,181 | ||
| Total liabilities | 30,907,549 | 27,172,799 | ||
| Commitments and Contingencies (Note 17) | ||||
| Shareholders' equity | ||||
| Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding) | — | — | ||
| Common stock ($0.01 par value; 500,000,000 shares authorized; 283,257,102 and 282,703,246 shares issued, December 31, 2022 and December 31, 2021, respectively) | 2,832 | 2,827 | ||
| Paid-in capital | 7,284,852 | 7,557,297 | ||
| (Accumulated deficit) retained earnings | (1,707,429) | 302,276 | ||
| Accumulated other comprehensive loss | (643,214) | (710,885) | ||
| Treasury stock (28,018,385 and 27,882,987 common shares at cost, December 31, 2022 and December 31, 2021, respectively) | (2,068,229) | (2,065,959) | ||
| Total shareholders' equity | 2,868,812 | 5,085,556 | ||
| Total liabilities and shareholders’ equity | $ | 33,776,361 | $ | 32,258,355 |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| (in thousands) | ||||||
| Operating Activities | ||||||
| Net Loss | $ | (2,155,962) | $ | (5,260,499) | $ | (5,775,130) |
| Adjustments: | ||||||
| Depreciation and amortization | 1,406,689 | 1,292,878 | 1,279,254 | |||
| Impairment and credit losses | 562 | 82,001 | 1,566,380 | |||
| Net deferred income tax benefit | (21,576) | (42,979) | (8,791) | |||
| Loss (gain) on derivative instruments not designated as hedges | 99,985 | (1,492) | 49,316 | |||
| Share-based compensation expense | 36,116 | 63,638 | 39,779 | |||
| Equity investment (income) loss | (56,695) | 135,469 | 213,286 | |||
| Amortization of debt issuance costs | 148,790 | 125,116 | 89,442 | |||
| Amortization of debt discounts and premiums | 13,978 | 123,439 | 66,776 | |||
| Loss on extinguishment of debt | 93,810 | 138,759 | 41,109 | |||
| Currency translation adjustment losses | — | — | 69,044 | |||
| Change in fair value of contingent consideration | — | — | (45,126) | |||
| Changes in operating assets and liabilities: | ||||||
| (Increase) decrease in trade and other receivables, net | (234,348) | (181,707) | 121,055 | |||
| (Increase) decrease in inventories | (73,792) | (34,527) | 27,077 | |||
| (Increase) decrease in prepaid expenses and other assets | (153,196) | (152,071) | 295,876 | |||
| Increase (decrease) in accounts payable | 74,657 | 188,518 | (133,815) | |||
| Increase (decrease) in accrued interest | 136,855 | (694) | 182,578 | |||
| Increase (decrease) in accrued expenses and other liabilities | 215,981 | 235,446 | (180,479) | |||
| Increase (decrease) in customer deposits | 1,007,129 | 1,426,647 | (1,643,560) | |||
| Other, net | (57,126) | (15,757) | 14,276 | |||
| Net cash provided by (used in) operating activities | 481,857 | (1,877,815) | (3,731,653) | |||
| Investing Activities | ||||||
| Purchases of property and equipment | (2,710,063) | (2,229,704) | (1,965,131) | |||
| Cash received on settlement of derivative financial instruments | 52,550 | 44,492 | 15,874 | |||
| Cash paid on settlement of derivative financial instruments | (355,909) | (74,249) | (161,335) | |||
| Investments in and loans to unconsolidated affiliates | — | (70,228) | (100,609) | |||
| Cash received on loans to unconsolidated affiliates | 18,650 | 31,334 | 21,086 | |||
| Proceeds from the sale of property and equipment and other assets | 421 | 176,039 | 27,796 | |||
| Other, net | 6,585 | (22,423) | (16,247) | |||
| Net cash used in investing activities | (2,987,766) | (2,144,739) | (2,178,566) |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| (in thousands) | ||||||
| Financing Activities | ||||||
| Debt proceeds | 9,787,166 | 4,467,789 | 13,547,189 | |||
| Debt issuance costs | (251,888) | (201,698) | (374,715) | |||
| Repayments of debt | (7,728,568) | (2,296,990) | (3,845,133) | |||
| Premium on repayment of debt | (49,367) | (135,372) | — | |||
| Proceeds from issuance of commercial paper notes | — | — | 6,765,816 | |||
| Repayments of commercial paper notes | — | (414,570) | (7,837,635) | |||
| Dividends paid | — | — | (326,421) | |||
| Proceeds from common stock issuances | — | 1,621,860 | 1,431,375 | |||
| Other, net | (16,370) | (442) | (10,688) | |||
| Net cash provided by financing activities | 1,740,973 | 3,040,577 | 9,349,788 | |||
| Effect of exchange rate changes on cash | (1,829) | (727) | 1,167 | |||
| Net (decrease) increase in cash and cash equivalents | (766,765) | (982,704) | 3,440,736 | |||
| Cash and cash equivalents at beginning of year | 2,701,770 | 3,684,474 | 243,738 | |||
| Cash and cash equivalents at end of year | $ | 1,935,005 | $ | 2,701,770 | $ | 3,684,474 |
| Supplemental Disclosures | ||||||
| Cash paid during the year for: | ||||||
| Interest, net of amount capitalized | $ | 959,907 | $ | 834,245 | $ | 418,164 |
| Non-Cash Investing Activities | ||||||
| Notes receivable issued upon sale of property and equipment and other assets | $ | — | $ | 16,000 | $ | 53,419 |
| Purchases of property and equipment included in accounts payable and accrued expenses and other liabilities | $ | 33,853 | $ | 14,097 | $ | 16,189 |
| Acquisition of property and equipment from assumed debt | $ | 277,000 | $ | — | $ | — |
| Non-Cash Financing Activities | ||||||
| Purchase of Silversea Cruises non-controlling interest | $ | — | $ | — | $ | 592,313 |
| Termination of Silversea Cruises contingent consideration obligation | $ | — | $ | — | $ | 16,564 |
| Common stock issuances pending cash settlement and included in trade receivables | $ | — | $ | — | $ | 121,352 |
| Debt related to acquisition of property and equipment | $ | 277,000 | $ | — | $ | — |
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
| Common Stock | Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Shareholders' Equity | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | ||||||||||||
| Balances at January 1, 2020 | $ | 2,365 | $ | 3,493,959 | $ | 11,523,326 | $ | (797,713) | $ | (2,058,091) | $ | 12,163,846 |
| Activity related to employee stock plans | 9 | 29,750 | — | — | — | 29,759 | ||||||
| Common stock issuance | 226 | 1,552,500 | — | — | — | 1,552,726 | ||||||
| Equity component of convertible notes, net of issuance costs | — | 307,640 | — | — | — | 307,640 | ||||||
| Acquisition of Silversea non-controlling interest | 52 | 608,825 | — | — | — | 608,877 | ||||||
| Common stock dividends, $0.78 per share | — | — | (163,089) | — | — | (163,089) | ||||||
| Changes related to cash flow derivative hedges | — | — | — | 38,010 | — | 38,010 | ||||||
| Change in defined benefit plans | — | — | — | (19,984) | — | (19,984) | ||||||
| Foreign currency translation adjustments | — | — | — | 40,346 | — | 40,346 | ||||||
| Purchases of treasury stock | — | 5,900 | — | — | (5,900) | — | ||||||
| Net Loss attributable to Royal Caribbean Cruises Ltd. | — | — | (5,797,462) | — | — | (5,797,462) | ||||||
| Balances at December 31, 2020 | $ | 2,652 | $ | 5,998,574 | $ | 5,562,775 | $ | (739,341) | $ | (2,063,991) | $ | 8,760,669 |
| Activity related to employee stock plans | 5 | 62,991 | — | — | — | 62,996 | ||||||
| Common stock issuance | 170 | 1,495,732 | — | — | — | 1,495,902 | ||||||
| Changes related to cash flow derivative hedges | — | — | — | 4,046 | — | 4,046 | ||||||
| Change in defined benefit plans | — | — | — | 8,707 | — | 8,707 | ||||||
| Foreign currency translation adjustments | — | — | — | 15,703 | — | 15,703 | ||||||
| Purchases of treasury stock | — | — | — | — | (1,968) | (1,968) | ||||||
| Net Loss attributable to Royal Caribbean Cruises Ltd. | — | — | (5,260,499) | — | — | (5,260,499) | ||||||
| Balances at December 31, 2021 | $ | 2,827 | $ | 7,557,297 | $ | 302,276 | $ | (710,885) | $ | (2,065,959) | $ | 5,085,556 |
| Activity related to employee stock plans | 5 | 35,195 | 37 | — | — | 35,237 | ||||||
| Cumulative effect of adoption of Accounting Standards Update 2020-06 | — | (307,640) | 146,220 | — | — | (161,420) | ||||||
| Changes related to cash flow derivative hedges | — | — | — | 8,462 | — | 8,462 | ||||||
| Change in defined benefit plans | — | — | — | 48,914 | — | 48,914 | ||||||
| Foreign currency translation adjustments | — | — | — | 10,295 | — | 10,295 | ||||||
| Purchases of treasury stock | — | — | — | — | (2,270) | (2,270) | ||||||
| Net Loss attributable to Royal Caribbean Cruises Ltd. | — | — | (2,155,962) | — | — | (2,155,962) | ||||||
| Balances at December 31, 2022 | $ | 2,832 | $ | 7,284,852 | $ | (1,707,429) | $ | (643,214) | $ | (2,068,229) | $ | 2,868,812 |
The accompanying notes are an integral part of these consolidated financial statements.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. General
Description of Business
We are a global cruise company. We own and operate three global cruise brands: Royal Caribbean International, Celebrity Cruises and Silversea Cruises (collectively, our "Global Brands"). We also own a 50% joint venture interest in TUI Cruises GmbH ("TUIC"), which operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands"). We account for our investments in our Partner Brands under the equity method of accounting. Together, our Global Brands and our Partner Brands operated a combined 64 ships as of December 31, 2022. Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations in over 120 countries on all seven continents.
Management's Plan and Liquidity
As a result of the global pandemic impact of COVID-19, we paused our guest cruise operations in March 2020 and began resuming guest cruise operations in 2021, with our full fleet in service by June 2022.
As part of our liquidity management, we rely on estimates of our future liquidity which include numerous assumptions that are subject to various risks and uncertainties. The principal assumptions used to estimate our future liquidity consist of:
•Expected timing of cash collections for cruise bookings;
•Expected sustained increase in revenue per available passenger cruise day;
•Expected increase in occupancy levels, reaching historical levels in late spring of 2023; and
•Inflationary increases to our operating costs, mostly impacting the expected cost of fuel and food as compared to 2019.
The resulting effects of the COVID-19 pandemic are having a material negative impact on our operating cash flows and liquidity. We believe we have made reasonable estimates and judgments of the impact of these events to our consolidated financial statements; however, there can be no assurance the estimates and assumptions of our future liquidity requirements will be realized, and actual results could vary materially. We have taken proactive measures to manage our liquidity, including issuing debt and shares of our common stock, amending credit agreements to defer payments (see Note 8. Debt ), obtaining relevant modification of covenant requirements and waivers (see Note 8. Debt ), and during the pause, reducing operating expenses and capital expenditures.
As of December 31, 2022, we had liquidity of $2.9 billion, including $0.3 billion of undrawn revolving credit facility capacity, $1.9 billion in cash and cash equivalents and a $0.7 billion commitment for a 364-day term loan facility which was terminated in February 2023 upon issuance of our $700 million aggregate principal amount of 7.25% Priority Guaranteed Notes. Our revolving credit facilities were utilized through a combination of amounts drawn and letters of credit issued under the facilities as of December 31, 2022, which were subsequently amended in January 2023, as described in Note 8. Debt to our consolidated financial statements.
Based on our actions, as well as our present financial condition and the aforementioned assumptions on liquidity, we believe that we have sufficient liquidity to fund our obligations for at least the next twelve months from the issuance of the financial statements. As of December 31, 2022, we were in compliance with our financial covenants and we estimate we will be in compliance for the next twelve months. Refer to Note 8. Debt for further information regarding refinancing transactions, and the applicable financial covenants.
We will continue to pursue various opportunities to raise additional capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities. Actions to raise capital may include issuances of debt, convertible debt or equity in private or public transactions or entering into new or extended credit facilities.
The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Basis for Preparation of Consolidated Financial Statements
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Estimates are required for the preparation of financial statements in accordance with these principles. Actual results could differ from these estimates. Refer to Note 2. Summary of Significant Accounting Policies for a discussion of our significant accounting policies.
All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50%, and variable interest entities where we are determined to be the primary beneficiary. Refer to Note 7. Other Assets for further information regarding our variable interest entities. For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.
Effective March 19, 2021, we sold our wholly-owned brand, Azamara Cruises ("Azamara"), including its three-ship fleet and associated intellectual property, to Sycamore Partners for $201 million, before closing adjustments. The March 2021 sale of Azamara did not represent a strategic shift that will have a major effect on our operations and financial results, as we continue to provide similar itineraries to and source passengers from the markets served by the Azamara business. Therefore, the sale of Azamara did not meet the criteria for discontinued operations reporting. Effective March 19, 2021, we no longer consolidate Azamara's balance sheet nor recognize its results of operations in our consolidated financial statements. We recognized an immaterial gain on the sale during the quarter ended March 31, 2021 and have agreed to provide certain transition services to Azamara for a period of time for a fee.
On July 9, 2020, we acquired the remaining 33.3% interest in Silversea Cruises that we did not already own from Heritage Cruise Holding Ltd. Prior to October 1, 2021, we consolidated the operating results of Silversea Cruises on a three-month reporting lag to allow for more timely preparation of our consolidated financial statements. Effective October 1, 2021, we eliminated the three-month reporting lag to reflect Silversea Cruises' financial position, results of operations and cash flows concurrently and consistently with the fiscal calendar of the Company ("elimination of the Silversea reporting lag"). The elimination of the Silversea reporting lag represents a change in accounting principle, which we believe to be preferable, because it provides more current information to the users of our financial statements. A change in accounting principle requires retrospective application, if material. The impact of the elimination of the reporting lag was immaterial to prior periods and is immaterial for our fiscal year ended December 31, 2021. As a result, we have accounted for this change in accounting principle in our consolidated results for the year ended December 31, 2021. Accordingly, the results of Silversea Cruises from October 1, 2020 to December 31, 2021 are included in our consolidated statement of comprehensive loss for the year ended December 31, 2021. To effect the change, we have reflected the third quarter 2021 operating results for Silversea Cruises, which were a net loss of $62.6 million within Other income (expense) in our consolidated statement of comprehensive loss for the year ended December 31, 2021.
Note 2. Summary of Significant Accounting Policies
Revenues and Expenses
Deposits received on sales of passenger cruises are initially recorded as customer deposit liabilities on our balance sheet. Customer deposits are subsequently recognized as passenger ticket revenues, together with revenues from onboard and other goods and services and all associated cruise operating expenses of a voyage. For further information on revenue recognition, refer to Note 3. Revenue.
Cash and Cash Equivalents
Cash and cash equivalents include cash and marketable securities with original maturities of less than 90 days.
Inventories
Inventories consist of provisions, supplies and fuel carried at the lower of cost (weighted-average) or net realizable value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Improvement costs that we believe add value to our ships are capitalized as additions to the ship, the useful lives of the improvements are estimated and
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
depreciated over the shorter of the improvements' estimated useful lives or that of the associated ship, and the replaced assets are disposed of on a net cost basis. In addition, we capitalize interest on borrowings during the active construction period of capital projects. Capitalized interest is added to the cost of the assets and depreciated over the estimated useful lives of the assets. The estimated cost and accumulated depreciation of replaced or refurbished ship components are written off and any resulting losses are recognized in Cruise operating expenses. Liquidated damages received from shipyards as a result of the late delivery of a new ship are recorded as reductions to the cost basis of the ship.
Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the asset. The useful lives of our ships are generally 30-35 years, net of a 10%-15% projected residual value. The 30-35-year useful life and 10%-15% residual value are based on the weighted-average of all major components of a ship. Our useful life and residual value estimates take into consideration the impact of anticipated technological changes, long-term cruise and vacation market conditions and historical useful lives of similarly-built ships. In addition, we take into consideration our estimates of the weighted-average useful lives of the ships' major component systems, such as hull, superstructure, main electric, engines and cabins. We employ a cost allocation methodology at the component level, in order to support the estimated weighted-average useful lives and residual values, as well as to determine the net cost basis of assets being replaced. Given the very large and complex nature of our ships, our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require considerable judgment and are inherently uncertain. Depreciation for assets under finance leases is computed using the shorter of the lease term or related asset life, unless the asset is a finance lease due to title transferring or a purchase option that is reasonably certain of being exercised, in which case the asset is depreciated over the related asset life.
Depreciation of property and equipment is computed utilizing the following useful lives:
| Years | |
|---|---|
| Ships | generally, 30-35 |
| Ship improvements | 3-25 |
| Buildings and improvements | 10-40 |
| Computer hardware and software | 3-10 |
| Transportation equipment and other | 3-30 |
| Leasehold improvements | Shorter of remaining lease term or useful life 3-30 |
We periodically review estimated useful lives and residual values for ongoing reasonableness, considering long term views on our intended use of each class of ships and the planned level of improvements to maintain and enhance vessels within those classes. In the event a factor is identified that may trigger a change in the estimated useful lives and residual values of our ships, a review of the estimate is completed.
We review long-lived assets, including right-of-use assets for impairment whenever events or changes in circumstances indicate, based on estimated undiscounted future cash flows, that the carrying value of these assets may not be fully recoverable. For purposes of recognition and measurement of an impairment loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The lowest level for which we maintain identifiable cash flows that are independent of the cash flows of other assets and liabilities is at the ship level for our ships. If estimated future cash flows are less than the carrying value of an asset, an impairment charge is recognized to the extent its carrying value exceeds fair value. Refer to Note 6. Property and Equipment for further information on determination of fair value for long-lived assets.
We use the deferral method to account for drydocking costs. Under the deferral method, drydocking costs incurred are deferred and charged to expense on a straight-line basis over the period to the next scheduled drydock, which we estimate to be a period of thirty to sixty months based on the vessel's age as required by Class. Deferred drydock costs consist of the costs to drydock the vessel and other costs incurred in connection with the drydock which are necessary to maintain the vessel's Class certification. Class certification is necessary in order for our cruise ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. The activities associated with those drydocking costs cannot be performed while the vessel is in service and, as such, are done during a drydock as a planned major maintenance activity. The significant deferred drydock costs consist of hauling and wharfage services provided by the drydock facility, hull inspection and related activities (e.g., scraping, pressure cleaning, bottom painting), maintenance to steering propulsion, thruster equipment and ballast tanks, port services such as tugs, pilotage and line handling, and freight associated with these items. We perform a detailed analysis of the various activities performed for each drydock and only defer those costs that are directly related to planned major maintenance activities necessary to maintain Class. The costs deferred are related to activities not otherwise
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
routinely periodically performed to maintain a vessel's designed and intended operating capability. Repairs and maintenance activities are charged to expense as incurred.
Goodwill
Goodwill represents the excess of cost over the fair value of net tangible and identifiable intangible assets acquired. We review goodwill for impairment at the reporting unit level annually or, when events or circumstances dictate, more frequently. We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is influenced by a number of factors, including the carrying value of the reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, macroeconomic conditions, market conditions and our operating performance.
If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we calculate the estimated fair value of the reporting unit using an income approach, which may also include a combination of a market-based valuation approach. The estimation of fair value utilizing discounted expected future cash flows includes numerous uncertainties which require our significant judgment when making assumptions of expected revenues, operating costs, interest rates, ship additions and retirements as well as regarding the cruise vacation industry's competitive environment and general economic and business conditions. The principal assumptions used in the discounted cash flow model for our 2022 impairment assessment consisted of: (i) forecasted revenues per available passenger cruise day, (ii) occupancy rates from existing and expected ship deliveries, (iii) vessel operating expenses, (iv) terminal growth rate, and (v) weighted average cost of capital (i.e., discount rate). The discounted cash flow model uses the most current projected operating results for the upcoming fiscal year as a base. We discount the projected cash flows using rates specific to the reporting unit based on its weighted-average cost of capital. If the fair value of the reporting unit exceeds its carrying value, no write-down of goodwill is required. If the fair value of the reporting unit is less than the carrying value of its net assets, an impairment is recognized based on the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to such reporting unit.
Intangible Assets
In connection with our acquisitions, we have acquired certain intangible assets to which value has been assigned based on our estimates. Intangible assets that are deemed to have an indefinite life are not amortized, but are subject to an annual impairment test, or when events or circumstances dictate, more frequently. The impairment review for indefinite-life intangible assets can be performed using a qualitative or quantitative impairment assessment. The quantitative assessment consists of a comparison of the fair value of the asset with its carrying value. We estimate the fair value of these assets using a discounted cash flow model and various valuation methods depending on the nature of the intangible asset, such as the relief-from-royalty method for trademarks and trade names. The principal assumptions used in the discounted cash flows model for our 2022 impairment assessment consisted of: (i) forecasted revenues per available passenger cruise day, (ii) occupancy rates from existing and expected ship deliveries, (iii) terminal growth rate; (iv) royalty rate; and (v) weighted average cost of capital (i.e., discount rate). If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying value, the indefinite-life intangible asset is not considered impaired.
Other intangible assets assigned finite useful lives are amortized on a straight-line basis over their estimated useful lives.
Contingencies — Litigation
On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any, which are recorded as assets when recoverability is probable. We accrue a liability, including legal costs, when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that we have previously made.
Advertising Costs
Advertising costs are expensed as incurred except those costs which result in tangible assets, such as brochures, which are treated as prepaid expenses and charged to expense as consumed. Advertising costs consist of media and online advertising as well as brochure, production and direct mail costs.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Media advertising was $380.2 million, $303.2 million and $138.1 million, and brochure, production and direct mail costs were $129.4 million, $88.9 million and $69.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Derivative Instruments
We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and the vast majority are designated as hedges. We also use non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments. Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, our objective is not to hold or issue derivative financial instruments for trading or other speculative purposes.
At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a firm commitment or a recognized asset or liability is designated as a fair value hedge. A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.
Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments. Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of Accumulated other comprehensive loss until the underlying hedged transactions are recognized in earnings. The foreign currency transaction gain or loss of our non-derivative financial instruments and the changes in the fair value of derivatives designated as hedges of our net investment in foreign operations and investments are recognized as a component of Accumulated other comprehensive loss along with the associated foreign currency translation adjustment of the foreign operation or investment. In certain hedges of our net investment in foreign operations and investments, we exclude forward points from the assessment of hedge effectiveness and amortize the related amounts directly into earnings.
On an ongoing basis, we assess whether derivatives used in hedging transactions are "highly effective" in offsetting changes in the fair value or cash flow of hedged items. For our net investment hedges, we use the dollar offset method to measure effectiveness. For all other hedging programs, we use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship. The methodology for assessing hedge effectiveness is applied on a consistent basis for each one of our hedging programs (i.e., interest rate, foreign currency ship construction, foreign currency net investment and fuel). For our regression analyses, we use an observation period of up to three years, utilizing market data relevant to the hedge horizon of each hedge relationship. High effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the changes in the fair values of the derivative instrument and the hedged item. If it is determined that a derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective is recognized in earnings.
Cash flows from derivative instruments that are designated as fair value or cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified within investing activities. Cash flows from derivative instruments not designated as hedging instruments are classified as investing activities.
We consider the classification of the underlying hedged item’s cash flows in determining the classification for the designated derivative instrument’s cash flows. We classify derivative instrument cash flows from hedges of benchmark interest rate or hedges of fuel expense as operating activities due to the nature of the hedged item. Likewise, we classify derivative instrument cash flows from hedges of foreign currency risk on our newbuild ship payments as investing activities.
Foreign Currency Translations and Transactions
We translate assets and liabilities of our foreign subsidiaries whose functional currency is the local currency, at exchange rates in effect at the balance sheet date. We translate revenues and expenses at weighted-average exchange rates for the period. Equity is translated at historical rates and the resulting foreign currency translation adjustments are included as a component of Accumulated other comprehensive loss, which is reflected as a separate component of Shareholders' equity. Exchange gains or losses arising from the remeasurement of monetary assets and liabilities denominated in a currency other than the functional currency of the entity involved are immediately included in our earnings, except for certain liabilities that have been designated to act as a hedge of a net investment in a foreign operation or investment. Exchange gains (losses) were $93.0 million, $24.3 million and $(1.5) million for the years ended December 31, 2022, 2021 and 2020, respectively, and were recorded within
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other income (expense). The majority of our transactions are settled in United States dollars. Gains or losses resulting from transactions denominated in other currencies are recognized in income at each balance sheet date.
Concentrations of Credit Risk
We monitor our credit risk associated with financial and other institutions with which we conduct significant business and, to minimize these risks, we select counterparties with credit risks acceptable to us and we seek to limit our exposure to an individual counterparty. Credit risk, including but not limited to counterparty nonperformance under derivative instruments, our credit facilities and new ship progress payment guarantees, is not considered significant, as we primarily conduct business with large, well-established financial institutions, insurance companies and export credit agencies, many of which we have long-term relationships with and which have credit risks acceptable to us or where the credit risk is spread out among a large number of counterparties. As of December 31, 2022 and December 31, 2021, we had counterparty credit risk exposure under our derivative instruments of $103.3 million and $1.9 million, respectively, which was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks. We do not anticipate nonperformance by any of our significant counterparties. In addition, we have established guidelines we follow regarding credit ratings and instrument maturities to maintain safety and liquidity. We do not normally require collateral or other security to support credit relationships; however, in certain circumstances this option is available to us.
Loss Per Share
Basic loss per share is computed by dividing Net Loss attributable to Royal Caribbean Cruises Ltd. by the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities.
Stock-Based Employee Compensation
We measure and recognize compensation expense at the estimated fair value of employee stock awards. Compensation expense for awards and the related tax effects are recognized as they vest. We use the estimated amount of expected forfeitures to calculate compensation costs for all outstanding awards.
Segment Reporting
We believe our brands possess the versatility to enter multiple cruise market segments within the cruise vacation industry. Although each of these brands has its own marketing style as well as ships and crews of various sizes, the nature of the products sold and services delivered by these brands share a common base (i.e., the sale and provision of cruise vacations). Our brands also have similar itineraries as well as similar cost and revenue components. In addition, our brands source passengers from similar markets around the world and operate in similar economic environments with a significant degree of commercial overlap. As a result, our brands have been aggregated as a single reportable segment based on the similarity of their economic characteristics, types of consumers, regulatory environment, maintenance requirements, supporting systems and processes as well as products and services provided. Our Chief Executive Officer has been identified as the chief operating decision-maker and all significant operating decisions including the allocation of resources are based upon the analyses of the Company as one segment.
Adoption of Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to the current guidance on contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. Subsequently, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which presents amendments to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance in both ASUs was effective upon issuance. In December 2022, the FASB deferred the date for which this guidance can be applied from December 31, 2022 to December 31, 2024. We adopted the new guidance during 2022. The impact to our consolidated financial statements, if any, will be dependent on the timing and terms of any future contract modifications related to a change in reference rate.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06"), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under Accounting Standards Codification ("ASC") 815, Derivatives and Hedging ("ASC 815") or for convertible debt issued at a substantial premium. The ASU removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, permitting more contracts to qualify for it. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The guidance also decreases interest expense due to the reversal of the remaining non-cash convertible debt discount. On January 1, 2022 we adopted this pronouncement using the modified retrospective approach to recognize our convertible notes as single liability instruments given they do not qualify as derivatives under ASC 815, nor were they issued at a substantial premium. Accordingly, as of January 1, 2022, we recorded a $161.4 million increase to debt, primarily as a result of the reversal of the remaining non-cash convertible debt discount, as well as a reduction of $307.6 million to additional paid in capital, which resulted in a cumulative effect on adoption of approximately $146.2 million to increase retained earnings.
Recent Accounting Pronouncements
In September 2022, the FASB issued ASU No. 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50) - Disclosure of Supplier Finance Program Obligations. This ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. This ASU is expected to improve financial reporting by requiring new disclosures about the programs, thereby allowing financial statement users to better consider the effect of the programs on an entity’s working capital, liquidity, and cash flows. This ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information which is effective for fiscal years beginning after December 15, 2023. We are currently evaluating the impact of the new guidance on our consolidated financial statement disclosures, although we do not expect the impact to be material.
Reclassifications
For the year ended December 31, 2022, we no longer separately presented Dividends received from unconsolidated affiliates in our consolidated statements of cash flows. As a result, certain immaterial amounts presented in prior periods were reclassified to Other, net within Operating Activities to conform to the current year presentation.
Note 3. Revenue
Revenue Recognition
Revenues are measured based on consideration specified in our contracts with customers and are recognized as the related performance obligations are satisfied.
The majority of our revenues are derived from passenger cruise contracts which are reported within Passenger ticket revenues in our consolidated statements of comprehensive loss. Our performance obligation under these contracts is to provide a cruise vacation in exchange for the ticket price. We satisfy this performance obligation and recognize revenue over the duration of each cruise, which generally ranges from two to 19 nights.
Passenger ticket revenues include charges to our guests for port costs that vary with passenger head counts. These types of port costs, along with port costs that do not vary by passenger head counts, are included in our operating expenses. The amounts of port costs charged to our guests and included within Passenger ticket revenues on a gross basis were $638.8 million, $104.8 million and $125.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Our total revenues also include Onboard and other revenues, which consist primarily of revenues from the sale of goods and services onboard our ships that are not included in passenger ticket prices. We receive payment before or concurrently with the transfer of these goods and services to cruise passengers and recognize revenue over the duration of the related cruise.
As a practical expedient, we have omitted disclosures on our remaining performance obligations as the duration of our contracts with customers is less than a year.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Disaggregated Revenues
The following table disaggregates our total revenues by geographic regions where we provide cruise itineraries (in thousands):
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Revenues by itinerary | ||||||
| North America(1) | $ | 5,716,169 | $ | 1,039,783 | $ | 1,342,429 |
| Asia/Pacific | 372,237 | 128,348 | 411,865 | |||
| Europe | 1,754,205 | 180,256 | 18,604 | |||
| Other Regions(2) | 539,680 | 77,985 | 241,590 | |||
| Total revenues by itinerary | 8,382,291 | 1,426,372 | 2,014,488 | |||
| Other revenues(3) | 458,249 | 105,761 | 194,317 | |||
| Total revenues | $ | 8,840,540 | $ | 1,532,133 | $ | 2,208,805 |
(1) Includes the United States, Canada, Mexico and the Caribbean.
(2) Includes seasonality impacted itineraries primarily in South and Latin American countries.
(3) Includes revenues primarily related to cancellation fees, vacation protection insurance and pre- and post-cruise tours and fees for operating certain port facilities. Amounts also include revenues related to procurement and management related services we perform on behalf of our unconsolidated affiliates. Refer to Note 7. Other Assets for more information on our unconsolidated affiliates.
Passenger ticket revenues are attributed to geographic areas based on where the reservation originates. For the years ended December 31, 2022, 2021 and 2020, our guests were sourced from the following areas:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Passenger ticket revenues: | ||||||
| United States | 75 | % | 76 | % | 67 | % |
| All other countries (1) | 25 | % | 24 | % | 33 | % |
(1) No other individual country's revenue exceeded 10% for the years ended December 31, 2022, 2021 and 2020.
Customer Deposits and Contract Liabilities
Our payment terms generally require an upfront deposit to confirm a reservation, with the balance due prior to the cruise. Deposits received on sales of passenger cruises are initially recorded as Customer deposits in our consolidated balance sheets and subsequently recognized as passenger ticket revenues or onboard revenues during the duration of the cruise. ASC 606, Revenues from Contracts with Customers, defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. We do not consider customer deposits to be a contract liability until the customer no longer retains the unilateral right, resulting from the passage of time, to cancel such customer's reservation and receive a full refund. Customer deposits presented in our consolidated balance sheets include contract liabilities of $1.8 billion and $0.8 billion as of December 31, 2022 and December 31, 2021, respectively.
We have provided flexibility to guests with bookings on sailings cancelled due to COVID-19 by allowing guests to receive future cruise credits (“FCC”). As of December 31, 2022, our customer deposit balance includes approximately $0.5 billion of unredeemed FCCs. Given the uncertainty of travel demand caused by COVID-19 and lack of comparable historical experience of FCC redemptions, we are unable to estimate the number of FCCs that will not be used in future periods and get recognized as breakage. We will update our breakage analysis as future information is received.
Contract Receivables and Contract Assets
Although we generally require full payment from our customers prior to their cruise, we grant credit terms to a relatively small portion of our revenue sourced in select markets outside of the United States. As a result, we have outstanding receivables from passenger cruise contracts in those markets. We also have receivables from credit card merchants for cruise ticket purchases and goods and services sold to guests during cruises that are collected before, during or shortly after the cruise
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
voyage. In addition, we have receivables due from concessionaires onboard our vessels. These receivables are included within Trade and other receivables, net in our consolidated balance sheets.
Our credit card processors agreements require us, under certain circumstances, to maintain a reserve that can be satisfied by posting collateral. One of our processors currently holds a portion of our customer deposits in reserve until the sailings takes place or the funds are refunded to the customer. As of December 31, 2022, the cash reserve held by the processor was approximately $133.0 million and was reported within Trade and other receivables, net.
We have contract assets that are conditional rights to consideration for satisfying the construction services performance obligations under a service concession arrangement. As of December 31, 2022 and 2021, our contract assets were $167.9 million and $52.9 million, respectively, and were included within Other assets in our consolidated balance sheets. Given the short duration of our cruises and our collection terms, we do not have any other significant contract assets.
Assets Recognized from the Costs to Obtain a Contract with a Customer
Prepaid travel advisor commissions are an incremental cost of obtaining contracts with customers that we recognize as an asset and include within Prepaid expenses and other assets in our consolidated balance sheets. Prepaid travel advisor commissions were $98.4 million and $75.4 million as of December 31, 2022 and 2021, respectively. Substantially all of our prepaid travel advisor commissions at December 31, 2021 were expensed and reported primarily within Commissions, transportation and other in our consolidated statements of comprehensive loss during the year ended December 31, 2022.
Note 4. Goodwill
As of November 30, 2022, we performed our annual goodwill impairment review and determined there was no impairment for goodwill for the Silversea Cruises and Royal Caribbean International reporting units.
In respect to the Silversea Cruises reporting unit, we determined the fair value of the Silversea Cruises reporting unit exceeded its carrying value by approximately 26%, as of November 30, 2022. We did not perform interim impairment evaluations during the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022 as no triggering events were identified. We used a discounted cash flow model in combination with a market-based valuation approach for the Silversea reporting unit. This requires the use of assumptions that are subject to risk and uncertainties. The principal assumptions used in the discounted cash flow analyses that support our Silversea Cruises reporting unit goodwill impairment assessment consisted of:
•Forecasted revenues per available passenger cruise day;
•Occupancy rates from existing and expected ship deliveries;
•Vessel operating expenses;
•Terminal growth rate; and
•Weighted average cost of capital (i.e., discount rate)
We determined the Silversea Cruises reporting unit carrying value exceeded its fair value as of March 31, 2020. Accordingly, we recognized a goodwill impairment loss of $576.2 million during the quarter ended March 31, 2020. As of November 30, 2021, we performed our annual goodwill impairment review and determined no incremental impairment losses existed.
For the Royal Caribbean International reporting unit, we performed a qualitative assessment to determine whether it was more-likely-than not that our Royal Caribbean International reporting unit's fair value was less than its carrying amount. The qualitative analysis included assessing the impact of certain factors such as general economic conditions, limitations on accessing capital, changes in forecasted operating results, changes in fuel prices and fluctuations in foreign exchange rates. Based on our qualitative assessment, we concluded that it was more-likely-than-not that the estimated fair value of the Royal Caribbean International reporting unit exceeded its carrying value. We did not perform interim impairment evaluations during the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022 as no triggering events were identified.
The carrying value of goodwill attributable to our Royal Caribbean International, Celebrity Cruises and Silversea Cruises reporting units and the changes in such balances during the years ended December 31, 2022 and 2021 were as follows (in thousands):
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| Royal Caribbean International | Celebrity Cruises | Silversea Cruises | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Balance at December 31, 2020 | $ | 296,576 | $ | 4,326 | $ | 508,578 | $ | 809,480 |
| Foreign currency translation adjustment | (97) | — | — | (97) | ||||
| Balance at December 31, 2021 | 296,479 | 4,326 | 508,578 | 809,383 | ||||
| Foreign currency translation adjustment | (106) | — | — | (106) | ||||
| Balance at December 31, 2022 | $ | 296,373 | $ | 4,326 | $ | 508,578 | $ | 809,277 |
Note 5. Intangible Assets
Intangible assets consist of finite and indefinite life assets and are reported within Other assets in our consolidated balance sheets.
As of November 30, 2022, we performed our annual trade name impairment review and determined no incremental impairment losses existed at the date of this annual assessment. We determined the fair value of the Silversea Cruises trade name exceeded its carrying value by approximately 25% at the date of this annual assessment. We did not perform interim impairment evaluations during the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022 as no triggering events were identified.
The determination of our trade name fair values using a discounted cash flow model and various valuation methods depending on the nature of the intangible asset, such as the relief-from-royalty method, requires the use of assumptions that are subject to risk and uncertainties. The principal assumptions used in the discounted cash flow analyses that support the Silversea Cruises trade name impairment assessment consisted of:
•Forecasted revenues per available passenger cruise day;
•Occupancy rates from existing and expected ship deliveries;
•Terminal growth rate;
•Royalty rate; and
•Weighted average cost of capital (i.e., discount rate).
We determined the Silversea Cruises trade name carrying value exceeded its fair value as of March 31, 2020. Accordingly, we recognized an impairment charge of $30.8 million for the quarter ended March 31, 2020. As of November 30, 2021, we performed our annual trade name impairment review and determined no incremental impairment losses existed.
The following is a summary of our intangible assets as of December 31, 2022 (in thousands, except weighted average amortization period):
| As of December 31, 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Remaining Weighted Average Amortization Period (Years) | Gross Carrying Value | Accumulated Amortization | Accumulated Impairment Losses | Net Carrying Value | |||||
| Finite-life intangible assets: | |||||||||
| Customer relationships | 10.6 | $ | 97,400 | $ | 28,679 | $ | — | $ | 68,721 |
| Galapagos operating license | 21.6 | 47,669 | 11,487 | — | 36,182 | ||||
| Other finite-life intangible assets | 0 | 11,560 | 11,560 | — | — | ||||
| Total finite-life intangible assets | 156,629 | 51,726 | — | 104,903 | |||||
| Indefinite-life intangible assets (1) | 352,275 | — | 30,800 | 321,475 | |||||
| Total intangible assets, net | $ | 508,904 | $ | 51,726 | $ | 30,800 | $ | 426,378 |
(1) Primarily relates to the Silversea Cruises trade name representing approximately $318.7 million.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of our intangible assets as of December 31, 2021 (in thousands, except weighted average amortization period):
| As of December 31, 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Remaining Weighted Average Amortization Period (Years) | Gross Carrying Value | Accumulated Amortization | Accumulated Impairment Losses | Net Carrying Value | |||||
| Finite-life intangible assets: | |||||||||
| Customer relationships | 11.6 | $ | 97,400 | $ | 22,186 | $ | — | $ | 75,214 |
| Galapagos operating license | 22.6 | 47,669 | 9,802 | — | 37,867 | ||||
| Other finite-life intangible assets | 0 | 11,560 | 11,560 | — | — | ||||
| Total finite-life intangible assets | 156,629 | 43,548 | — | 113,081 | |||||
| Indefinite-life intangible assets (1) | 352,275 | — | 30,800 | 321,475 | |||||
| Total intangible assets, net | $ | 508,904 | $ | 43,548 | $ | 30,800 | $ | 434,556 |
(1) Primarily relates to the Silversea Cruises trade name representing approximately $318.7 million.
The estimated future amortization for finite-life intangible assets for each of the next five years is as follows (in thousands):
| Year | ||
|---|---|---|
| 2023 | $ | 8,179 |
| 2024 | $ | 8,179 |
| 2025 | $ | 8,179 |
| 2026 | $ | 8,179 |
| 2027 | $ | 8,179 |
Note 6. Property and Equipment
Property and equipment consists of the following (in thousands):
| As of December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Ships | $ | 34,343,826 | $ | 31,357,703 |
| Ship improvements | 2,367,289 | 2,152,457 | ||
| Ships under construction | 1,060,736 | 1,180,486 | ||
| Land, buildings and improvements, including leasehold improvements and port facilities | 771,739 | 746,785 | ||
| Computer hardware and software, transportation equipment and other | 1,531,837 | 1,650,249 | ||
| Total property and equipment | 40,075,427 | 37,087,680 | ||
| Less—accumulated depreciation and amortization(1) | (12,528,982) | (11,179,731) | ||
| $ | 27,546,445 | $ | 25,907,949 |
(1)Amount includes accumulated depreciation and amortization for assets in service.
Ships under construction include progress payments for the construction of new ships as well as planning, design, capitalized interest and other associated costs. We capitalized interest costs of $64.1 million, $58.8 million, and $59.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In January of 2022 and April 2022, we took delivery of Wonder of the Seas and Celebrity Beyond, respectively. Refer to Note 8. Debt for further information on the financings for Wonder of the Seas and Celebrity Beyond. In our consolidated statement of cash flows for the year ended December 31, 2022, the acceptance of the ships and satisfaction of our obligations under the shipbuilding contract were classified as outflows and constructive disbursements within Investing Activities while the amounts novated and effectively advanced from our lenders under our previously committed financing arrangements were classified as inflows and constructive receipts within Financing Activities.
In July 2022, we purchased the Silver Endeavour for our Silversea Cruises brand for $277 million, including transaction fees. The ship entered service during the fourth quarter of 2022. For information regarding the financing of the ship, refer to Note 8. Debt.
During 2021, we took delivery of Odyssey of the Seas and Silver Dawn. The November 2021 delivery and related financing for the Silver Dawn was reported in our consolidated financial statements as of and for the year ended December 31, 2021, as a result of the elimination of the Silversea Cruises three month reporting lag. Refer to Note 9. Leases for for further information on the Silver Dawn finance lease.
Long-lived Assets impairments
We review our long-lived assets for impairment whenever events or circumstances indicate potential impairment losses exist. No triggering events were identified during the years ended December 31, 2022 and 2021.
During 2020, a number of vessels were found to have net carrying values in excess of their estimated undiscounted future cash flows and, as such, were subject to fair value assessments. Fair value was determined based on our intended use of the identified vessels and, as such, we used a combination of discounted cash flows, replacement cost, scrap and residual value techniques to estimate fair value. Differences between the estimated fair values and the net carrying values were recorded as an impairment charge within the period the loss was identified. Consequently, we recorded $635.5 million of impairment losses during the year ended 2020. Included in this 2020 amount are $171.3 million impairment losses recorded for the three ships that we chartered to Pullmantur Holdings, prior to its filing for reorganization. Refer to Note 7. Other Assets for further information regarding Pullmantur's reorganization. During the quarter ended September 30, 2020, we sold the ships previously chartered to Pullmantur Holdings to third parties for amounts approximating their carrying values and no further impairment was recorded. Also included in the $635.5 million impairment loss for the year ended December 31, 2020, is a $166.8 million impairment charge for the three Azamara ships included in the sale of the Azamara brand, effective March 19, 2021.
Our principal assumptions used in our undiscounted cash flows consisted of:
•Changes in market conditions and port or other restrictions;
•Forecasted revenues net of our most significant variable costs, which are commissions, transportation and other expenses, and onboard and other expenses;
•Occupancy rates; and
•Intended use of the vessel for the remaining useful life.
We believe we have made reasonable estimates and judgements as part of our assessments. A change in principal assumptions may result in a need to perform additional impairment reviews.
During the years ended December 31, 2022, 2021, and 2020 we also determined that certain construction in progress projects would be reduced in scope or would no longer be completed as a result of our capital cost containment measures in response to the COVID-19 impact on our liquidity. We recorded property and equipment impairment charges of $10.2 million and $55.2 million, and $91.5 million, during the years ended December 31, 2022, 2021, and 2020, respectively, which primarily related to construction in progress assets.
These impairment charges were reported within Impairment and Credit Losses in our consolidated statements of comprehensive loss.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7. Other Assets
A Variable Interest Entity ("VIE") is an entity in which the equity investors have not provided enough equity to finance the entity's activities or the equity investors (1) cannot directly or indirectly make decisions about the entity's activities through their voting rights or similar rights; (2) do not have the obligation to absorb the expected losses of the entity; (3) do not have the right to receive the expected residual returns of the entity; or (4) have voting rights that are not proportionate to their economic interests and the entity's activities involve or are conducted on behalf of an investor with a disproportionately small voting interest. We hold equity interests in ventures related to our cruise operations. We account for the majority of these investments as either an equity method investment, or a controlled subsidiary.
We have determined that TUI Cruises GmbH ("TUIC"), our 50%-owned joint venture, which operates the brands TUI Cruises and Hapag-Lloyd Cruises, is a VIE. We have determined that we are not the primary beneficiary of TUIC. We believe that the power to direct the activities that most significantly impact TUIC’s economic performance is shared between ourselves and TUI AG, our joint venture partner. All the significant operating and financial decisions of TUIC require the consent of both parties, which we believe creates shared power over TUIC. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.
On June 30, 2020, TUIC acquired Hapag-Lloyd Cruises, a luxury and expedition brand for German-speaking guests, from TUI AG for approximately €1.2 billion, or approximately $1.3 billion as of the purchase date. Hapag-Lloyd Cruises operates two luxury liners and two smaller expedition ships. We and TUI AG each made an equity contribution of €75.0 million, or approximately $84.2 million to TUIC to fund a portion of the purchase price, the remainder of which was financed by third-party financing.
As of December 31, 2022, the net book value of our investment in TUIC was $466.0 million, primarily consisting of $361.5 million in equity and a loan of €87.2 million, or approximately $93.0 million, based on the exchange rate at December 31, 2022. As of December 31, 2021, the net book value of our investment in TUIC was $444.4 million, primarily consisting of $322.4 million in equity and a loan of €103.0 million, or approximately $117.2 million, based on the exchange rate at December 31, 2021. The loan, which was made in connection with the sale of Splendour of the Seas in April 2016, accrues interest at a rate of 6.25% per annum and is payable over 10 years. This loan is 50% guaranteed by TUI AG and is secured by a first priority mortgage on the ship. The majority of these amounts were included within Other assets in our consolidated balance sheets. During the quarter ended March 31, 2021, we and TUI AG each contributed €59.5 million, or approximately $69.9 million based on the exchange rate at March 31, 2021, of additional equity through a combination of cash contributions and conversion of existing receivables. In June 2021, Hapag-Lloyd Cruises received delivery of the Hanseatic Spirit, a 230 berth luxury expedition cruise vessel.
TUIC has various ship construction and financing agreements which include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUIC below 37.55% through May 2033. Our investment amount and outstanding term loan are substantially our maximum exposure to loss in connection with our investment in TUIC.
We have determined that Pullmantur Holdings, in which we have a 49% noncontrolling interest and Springwater Capital LLC has a 51% interest, is a VIE for which we are not the primary beneficiary as we do not have the power to direct the activities that most significantly impact the entity's economic performance. In 2020, Pullmantur Holdings and certain of its subsidiaries filed for reorganization under the terms of the Spanish insolvency laws due to the negative impact of the COVID-19 pandemic on the companies, and on July 15, 2021, Pullmantur Holdings and certain of its subsidiaries filed for liquidation. We suspended the equity method of accounting for Pullmantur Holdings during the second quarter of 2020 as we do not intend to fund the entity's future losses and lost our ability to exert significant influence over the entity's activities as a result of the reorganization and liquidation process.
In connection with the reorganization, we terminated the agreements chartering three of our ships to Pullmantur Holdings and sold the ships to third parties during the quarter ended September 30, 2020 for amounts approximating their carrying values. Refer to Note 6. Property and Equipment for further discussion on the impact of the ships' sale on our consolidated financial statements. In addition, we recognized a loss of $69.0 million within Other expense income in our consolidated statements of comprehensive (loss), during the quarter ended June 30, 2020 representing deferred currency translation adjustment losses, net of hedging, as we no longer had significant involvement in the Pullmantur operation.
During the quarter ended June 30, 2020, we entered into an agreement with Springwater Capital LLC to settle the guarantees previously issued by them and for costs that we incurred as a result of Pullmantur S.A.'s reorganization. As part of this settlement, we agreed to provide Pullmantur guests the option to apply their paid deposits toward a Royal Caribbean International or Celebrity Cruises sailing, or request a cash refund. The estimated total cash refunds expected to be paid to
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pullmantur guests and other expenses incurred as part of the liquidation were approximately $10.2 million and $21.6 million for the years ended December 31, 2021 and 2020, respectively. These amount were recorded in Other operating and in Other (expense) income in our consolidated statements of comprehensive loss for the years ended December 31, 2021 and 2020.
We have determined that Grand Bahama Shipyard Ltd. ("Grand Bahama"), a ship repair and maintenance facility in which we have a 40% noncontrolling interest, is a VIE. This facility serves cruise and cargo ships, oil and gas tankers and offshore units. We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks and certain emergency repairs as may be required. We have determined that we are not the primary beneficiary of this facility, as we do not have the power to direct the activities that most significantly impact the facility's economic performance. Accordingly, we do not consolidate this entity.
In December 2022, we announced a new partnership with iCON Infrastructure Partners VI, L.P. ("iCON"), a fund, to develop strategic cruise port infrastructure. The proposed partnership will own, develop, and manage cruise terminal facilities and infrastructure in key ports of call, including PortMiami, and several development projects in Italy, Spain, and the U.S. Virgin Islands. We expect to close on the transaction in the first half of 2023. Upon closing, PortMiami is expected to be considered a VIE for which we will be the primary beneficiary and will remain consolidated.
For further information on the measurements used to estimate the fair value of our equity investments, refer to Note 16. Fair Value Measurements and Derivative Instruments.
The following tables set forth information regarding our investments accounted for under the equity method of accounting, including the entities discussed above (in thousands):
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Share of equity income (loss) from investments | $ | 56,695 | $ | (135,469) | $ | (213,286) |
| Dividends received (1) | $ | 1,493 | $ | — | $ | 2,215 |
(1) Represents dividends received from our investments accounted for under the equity method of accounting for the years ended December 31, 2022, 2021 and 2020, respectively. The amounts included in the table above are net of tax withholdings.
| As of December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Total notes receivable due from equity investments | $ | 101,392 | $ | 130,587 |
| Less-current portion (1) | 18,406 | 21,508 | ||
| Long-term portion (2) | $ | 82,986 | $ | 109,079 |
___________________________________________________________________
(1) Included within Trade and other receivables, net in our consolidated balance sheets.
(2) Included within Other assets in our consolidated balance sheets.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Summarized financial information for our affiliates accounted for under the equity method of accounting was as follows (in thousands):
| As of December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||||||
| Current assets | $ | 658,243 | $ | 736,263 | ||||||||
| Non-current assets | 4,838,287 | 5,241,302 | ||||||||||
| Total assets | $ | 5,496,530 | $ | 5,977,565 | ||||||||
| Current liabilities | $ | 1,144,783 | $ | 1,225,032 | ||||||||
| Non- current liabilities | 3,381,366 | 3,860,646 | ||||||||||
| Total liabilities | $ | 4,526,149 | $ | 5,085,678 | Year ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||
| 2022 | 2021 | 2020 | ||||||||||
| Total revenues | $ | 1,539,110 | $ | 679,137 | $ | 619,795 | ||||||
| Total expenses | (1,416,325) | (897,308) | (939,481) | |||||||||
| Net income (loss) | $ | 122,785 | $ | (218,171) | $ | (319,686) |
Credit Losses
We reviewed our receivables for credit losses in connection with the preparation of our financial statements for the year ended December 31, 2022. In evaluating the allowance, management considered factors such as historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. Our credit loss allowance ending balances as of December 31, 2022 and 2021, primarily relate to credit losses recognized on notes receivable for the previous sale of our property and equipment of $81.6 million.
The following table summarizes our credit loss allowance related to receivables (in thousands):
| Credit Loss Allowance | ||
|---|---|---|
| Balance at January 1, 2021 | $ | 85,447 |
| Credit loss (recovery), net | 43,822 | |
| Write-offs | (29,077) | |
| Balance at December 31, 2021 | 100,192 | |
| Credit loss (recovery), net | (9,658) | |
| Write-offs | (7,307) | |
| Balance at December 31, 2022 | $ | 83,227 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Debt
Debt consists of the following (in thousands):
| As of December 31, | ||||||
|---|---|---|---|---|---|---|
| Interest Rate(1) | Maturities Through | 2022 | 2021 | |||
| Fixed rate debt: | ||||||
| Unsecured senior notes | 3.70% - 11.63% | 2026 - 2029 | $ | 7,199,331 | $ | 5,604,498 |
| Secured senior notes | 8.25% - 11.50% | 2025 - 2029 | 2,370,855 | 2,354,037 | ||
| Unsecured term loans | 1.28% - 5.89% | 2027 - 2034 | 4,561,129 | 2,860,567 | ||
| Convertible notes | 2.88% - 6.00% | 2023 - 2025 | 1,725,000 | 1,558,780 | ||
| Total fixed rate debt | 15,856,315 | 12,377,882 | ||||
| Variable rate debt: | ||||||
| Unsecured revolving credit facilities(2) | 5.72% -6.12% | 2024 | 2,744,105 | 2,899,342 | ||
| USD unsecured term loans | 5.54% - 9.27% | 2023 - 2037 | 4,335,973 | 5,018,740 | ||
| Euro unsecured term loans | 6.29% -6.92% | 2023 - 2028 | 534,589 | 685,633 | ||
| Total variable rate debt | 7,614,667 | 8,603,715 | ||||
| Finance lease liabilities | 351,332 | 472,275 | ||||
| Total debt (3) | 23,822,314 | 21,453,872 | ||||
| Less: unamortized debt issuance costs | (431,123) | (363,532) | ||||
| Total debt, net of unamortized debt issuance costs | 23,391,191 | 21,090,340 | ||||
| Less—current portion | (2,087,711) | (2,243,131) | ||||
| Long-term portion | $ | 21,303,480 | $ | 18,847,209 |
(1)Interest rates based on outstanding loan balance as of December 31, 2022 and, for variable rate debt, includes either LIBOR, EURIBOR or Term SOFR plus the applicable margin.
(2)Total capacity of $3.0 billion, with $0.3 billion of undrawn capacity as of December 31, 2022. Includes $1.9 billion facility and $1.1 billion facility, which are due April 2024 as of December 31, 2022. Our $1.9 billion facility accrues interest at LIBOR plus a maximum interest rate margin of 1.30%, which interest rate was 5.72%, as of December 31, 2022 and is subject to a facility fee of a maximum of 0.20%. Our $1.1 billion facility accrues interest at LIBOR plus a maximum interest rate margin of 1.70%, which interest was 6.12% as of December 31, 2022 and is subject to a facility fee of a maximum of 0.30%.
(3)At December 31, 2022 and 2021, the weighted average interest rate for total debt was 6.23% and 5.47%, respectively.
Unsecured revolving credit facilities
As of December 31, 2022, we had aggregate borrowing capacity of $3.0 billion under our two unsecured revolving credit facilities due April 2024, which were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities. As of December 31, 2022, $0.3 billion remained undrawn under the facilities. In January 2023, we amended and extended the majority of our two unsecured revolving credit facilities. The amendment has extended the maturities of $2.3 billion of the $3.0 billion aggregate revolving capacity by one year to April 2025, with the remainder maturing in April 2024.
2023 Debt financing transactions
In February 2023, we issued $700 million aggregate principal amount of 7.25% senior guaranteed notes due January 2030 ("7.25% Priority Guaranteed Notes" and together with the 9.25% Priority Guaranteed Notes, the "Priority Guaranteed Notes"). Upon closing, we terminated our commitment for the $700 million 364-day term loan facility. In addition, the remaining $350 million backstop committed financing was also terminated upon closing.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2022 Debt financing transactions
In January 2022, we issued $1.0 billion of senior notes (the "January 2022 Unsecured Notes") due in 2027 for net proceeds of approximately $990.0 million. Interest accrues at a fixed rate of 5.375% per annum and is payable semi-annually in arrears. The proceeds from the January 2022 Unsecured Notes were used to repay principal payments on debt maturing in 2022 (including to pay fees and expenses in connection with such repayments).
In January 2022, we took delivery of Wonder of the Seas. To finance the delivery, we borrowed a total of $1.3 billion under a credit agreement novated to us upon delivery of the ship in January 2022, resulting in an unsecured term loan which is 100% guaranteed by Bpifrance Assurance Export ("BpiFAE"), the official export credit agency ("ECA") of France. The unsecured loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 3.18% per annum.
In April 2022, we took delivery of Celebrity Beyond. To finance the delivery, we borrowed a total of €0.7 billion or approximately $0.7 billion based on the exchange rate at December 31, 2022, under a credit agreement novated to us upon delivery of the ship in April 2022, resulting in an unsecured term loan which is 100% guaranteed by BpiFAE. The unsecured loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 1.28% per annum.
In July 2022, we purchased Silver Endeavour for our Silversea Cruises brand. To finance the purchase, we assumed $277 million of debt, which is 95% guaranteed by Euler Hermes Aktiengesellschaft (“Hermes”), the official export credit agency of Germany. The loan amortizes semi-annually over 13 years starting in July 2024 and bears interest at a floating rate equal to SOFR plus a margin of 1.25%. The loan will mature in July 2037.
In August 2022, we issued $1.15 billion of convertible senior notes which accrue interest at 6.00% and mature in August 2025 (the "2025 Convertible Notes"). Upon conversion election, we may deliver shares of our common stock, cash, or a combination of common stock and cash, at our election. The initial conversion rate per $1,000 principal amount of the convertible notes is 19.9577 shares of our common stock, which is equivalent to an initial conversion price of approximately $50.11 per share, subject to adjustment in certain circumstances. Prior to May 15, 2025, the convertible notes will be convertible at the option of holders during certain periods, and only under certain circumstances set forth in the 2025 Convertible Notes Indenture.
On or after May 15, 2025, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date. We received gross proceeds from the offering of $1.15 billion, which we used to repurchase $800 million aggregate principal amount of our 4.25% convertible senior notes due June 15, 2023 and $350 million aggregate principal amount of our 2.875% convertible senior notes due November 15, 2023 (the "Existing Convertible Notes") in privately negotiated transactions. The $1.15 billion repayment resulted in a total loss on the extinguishment of debt of $12.8 million, which was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive loss for the year ended December 31, 2022.
In August 2022, we issued $1.25 billion of senior unsecured notes which accrue interest at 11.625% and mature in August 2027. The net proceeds of the offering of $1.23 billion were used to repay debt that matured in 2022, including the $650 million 5.25% unsecured senior notes due November 2022, which resulted in an immaterial loss on extinguishment of debt.
In September 2022, we amended our $0.6 billion unsecured term loan due October 2023. The amendments, among other things, extend the maturity date of advances under the facilities held by consenting lenders by 12 months to October 2024. Consenting lenders received a prepayment equal to 10% of their respective outstanding advances. Following this amendment, the aggregate outstanding principal balance of advances under the unsecured term loan is $501.6 million, with $30.0 million maturing in October 2023 and $471.6 million maturing in October 2024.
In October 2022, we issued $1.0 billion aggregate principal amount of 9.250% senior guaranteed notes due 2029 (the "9.25% Priority Guaranteed Notes") and $1.0 billion aggregate principal amount of 8.250% senior secured notes due 2029 (the "8.25% Secured Notes" and together with the 11.5% Secured Notes, the "Secured Notes"), both callable in April 2025. We used the combined net proceeds, of the respective offerings, together with cash on hand, to fund the redemption, including call premiums, fees and expenses, of our outstanding 9.125% senior priority guaranteed notes due 2023 and 10.875% senior secured notes due 2023, which resulted in a total loss on extinguishment of debt of $77.4 million, which was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive loss for the year ended December 31, 2022.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2021 Debt financing transactions
In March 2021, we took delivery of Odyssey of the Seas. To finance the purchase, we borrowed $994.1 million under a previously committed unsecured term loan which is 95% guaranteed by Euler Hermes Aktiengesellschaft (“Hermes”), the official export credit agency of Germany. The loan amortizes semi-annually over 12 years and bears interest at a floating rate equal to LIBOR plus a margin of 0.96%. Prior to delivery during the first quarter of 2021, we amended the credit agreement to (i) increase the maximum loan amount under the facility to make available to us a maximum amount equal to the US dollar equivalent of 80% of the vessel purchase price plus 100% of the premium payable to Hermes and (ii) defer the payment of all principal payments due between April 2021 and April 2022, which amounts will be repayable semi-annually over a five year period starting in April 2022.
In March 2021, we issued $1.50 billion of senior unsecured notes that mature in 2028, for net proceeds of $1.48 billion. Interest on the senior notes accrues at 5.5% per annum and is payable semi-annually. We used the proceeds from the notes to repay principal payments on debt maturing or required to be paid in 2021 and 2022, and the remaining for general corporate purposes.
In June 2021, we issued $650.0 million of senior unsecured notes due in 2026 (the "June Unsecured Notes") for net proceeds of approximately $640.6 million. Interest accrues on the June Unsecured Notes at a fixed rate of 4.25% per annum and is payable semi-annually in arrears. We fully repaid the Silversea Cruises 7.25% senior secured notes due in 2025 (the "Silversea Notes"), in the amount of $619.8 million, with a portion of the proceeds from the June Unsecured Notes. We also funded call premiums, fees and expenses in connection with the redemption of the Silversea Notes with proceeds from the June Unsecured Notes. Additionally, during the second quarter of 2021, we repaid in full a $130 million term loan.
In August 2021, we issued $1.0 billion of senior notes due in 2026 (the "August Unsecured Notes") for net proceeds of approximately $986.0 million. Interest accrues on the August Unsecured Notes at a fixed rate of 5.50% per annum and is payable semi-annually in arrears. We used the proceeds of the August Unsecured Notes to replenish our capital as a result of the redemption of a portion of the 11.50% senior secured notes due 2025 (the "11.5% Secured Notes"), in the amount of $928.0 million plus accrued interest and premiums. As of December 31, 2022, approximately $1.4 billion of the 11.5% Secured Notes remains outstanding. The repayment of the 11.5% Secured Notes resulted in a total loss on the extinguishment of debt of $141.9 million, which was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive loss for the year ended December 31, 2021.
Export credit agency guarantees
Except for the term loans we incurred to acquire Celebrity Flora and Silver Moon, all of our unsecured ship financing term loans are guaranteed by the export credit agency in the respective country in which the ship is constructed. For the majority of the loans as of December 31, 2022, we pay to the applicable export credit agency, depending on the financing agreement, an upfront fee of 2.35% to 5.48% of the maximum loan amount in consideration for these guarantees. We amortize the fees that are paid upfront over the life of the loan. We classify these fees within Amortization of debt issuance costs in our consolidated statements of cash flows. Prior to the loan being drawn, we present these fees within Other assets in our consolidated balance sheets. Once the loan is drawn, such fees are classified as a discount to the related loan, or contra-liability account, within Current portion of long-term debt or long-term debt.
Debt covenants
Our export credit facilities and our non-export credit facilities have an outstanding principal amount of approximately $12.1 billion as of December 31, 2022. These facilities, as well as certain of our credit card processing agreements, contain covenants that require us, among other things, to maintain a fixed charge coverage ratio, limit our net debt-to-capital ratio, maintain minimum liquidity, and under certain facilities, to maintain a minimum stockholders' equity. In July 2022, we amended our non-export-credit facilities and export credit facilities, and certain credit card processing agreements. Among other things, the amendments modified the levels at which our net debt to capitalization covenant will be tested during the period commencing immediately following the end of the waiver period (through the September 30, 2022 for non export and through December 31, 2022 for export facilities) and continuing through the end of 2025 and the amount of minimum stockholders' equity required to be maintained through 2025. The amendments continued to impose a monthly-tested minimum liquidity covenant of $350.0 million, which in the case of the non-export credit facilities terminated at the end of the waiver period (with the exception of the Revolver which was amended in January 2023 to include the minimum liquidity through April 2025) and in the case of the export credit facilities terminates either in July 2025, or when we pay off all deferred amounts, whichever is earlier. In addition, the amendments to the non-export credit facilities continued to place restrictions on paying cash dividends and effectuating share repurchases through the end of the third quarter of 2022, while the export credit facility amendments require us to prepay any deferred amounts
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
if we elect to pay dividends or complete share repurchases. As of December 31, 2022, we were in compliance with our debt covenants and we estimate we will be in compliance for the next twelve months.
The net carrying value of the convertible notes was as follows:
| (in thousands) | As of December 31, 2022 | As of December 31, 2021 | ||
|---|---|---|---|---|
| Principal | $ | 1,725,000 | $ | 1,725,000 |
| Less: Unamortized debt issuance costs | 24,110 | 188,764 | ||
| $ | 1,700,890 | $ | 1,536,236 |
The interest expense recognized related to the convertible notes was as follows:
| (in thousands) | As of December 31, 2022 | As of December 31, 2021 | ||
|---|---|---|---|---|
| Contractual interest expense | $ | 75,519 | $ | 65,406 |
| Amortization of debt issuance costs | 16,145 | 118,566 | ||
| $ | 91,664 | $ | 183,972 |
Following is a schedule of annual maturities on our total debt including finance leases, as of December 31, 2022 for each of the next five years (in thousands):
| Year | As of December 31, 2022 (1) | |
|---|---|---|
| 2023 | $ | 2,090,457 |
| 2024 (2) | 4,662,837 | |
| 2025 | 3,663,440 | |
| 2026 | 2,754,876 | |
| 2027 | 3,493,703 | |
| Thereafter | 7,157,001 | |
| $ | 23,822,314 |
(1) Debt denominated in other currencies is calculated based on the applicable exchange rate at December 31, 2022.
(2) In January 2023, we amended and extended $2.3 billion of our two unsecured revolving credit facilities by one year from April 2024 to April 2025.
Note 9. Leases
Operating leases
Our operating leases primarily relate to preferred berthing arrangements, real estate and shipboard equipment and are included within Operating lease right-of-use assets and Long-term operating lease liabilities, with the current portion of the liability included within Current portion of operating lease liabilities in our consolidated balance sheets as of December 31, 2022 and 2021. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Our operating leases include Silver Explorer, operated by Silversea Cruises. The operating lease for Silver Explorer will expire in 2023.
For some of our real estate leases and berthing agreements, we do have the option to extend our current lease term. For those lease agreements with renewal options, the renewal periods for real estate leases range from one to 10 years and the renewal periods for berthing agreements range from one to 20 years. Generally, we do not include renewal options as a component of our present value calculation for berthing agreements. However, for certain real estate leases, we include them.
In June of 2021, we exercised our option under our operating lease with SMBC Leasing and Finance, Inc (the "Lessor") to purchase Terminal A at PortMiami in July 2021 for the pre-agreed purchase price of $220.0 million. Upon purchase of the terminal
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
in July 2021, the underlying asset was recorded as a leasehold improvement within Property and equipment, net. Our July 2021 purchase of PortMiami eliminated the residual value guarantee and a requirement under the lease to post $181.1 million of cash collateral.
Additionally, we remeasured the ground lease related to the Terminal A lease based on a reassessed lease term resulting from our purchase option exercise. We determined that the ground lease should remain as an operating lease with adjustments to the operating lease liability and the related right-of-use asset in our Consolidated Balance Sheet.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. We estimate our incremental borrowing rates based on LIBOR and U.S. Treasury note rates corresponding to lease terms increased by the Company’s credit risk spread and reduced by the estimated impact of collateral. In addition, we have lease agreements with lease and non-lease components, which are generally accounted for separately. However, for berthing agreements, we account for the lease and non-lease components as a single lease component.
Finance Leases
Our finance leases primarily relate to buildings and surrounding land located at our Miami headquarters, and our Silver Dawn and Silver Whisper ships. Finance leases are included within Property, and Equipment, net, and Long-term debt with the current portion of the liability included within Current portion of long-term debt in our consolidated balance sheets as of December 31, 2022 and 2021.
The Company's master lease agreement (“Master Lease”) with Miami-Dade County related to the buildings and surrounding land located at our Miami headquarters, has been classified as a finance lease in accordance with ASC 842, Leases. In January 2022, we executed a modification to the Master Lease to extend the expiration of the lease from 2072 to 2074. Subsequently, in December 2022 we amended the lease to further extend its expiration from 2074 to 2076 after coming to an agreement with Miami-Dade County on the financing plans for the continued development of the buildings and surrounding land at our Miami headquarters. The Master Lease continues to include the two five-year options to extend the lease. We continue to consider the probability of exercising the two five-year options as reasonably certain. The modifications of the Master Lease did not change the classification of the lease. The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $55.5 million and $127.0 million as of December 31, 2022 and December 31, 2021, respectively.
Silversea Cruises operates Silver Dawn under a sale-leaseback agreement with a bargain purchase option at the end of the 15 year lease term. Due to the bargain purchase option at the end of the lease term in 2036 whereby Silversea Cruises is reasonably certain of obtaining ownership of the ship, Silver Dawn is accounted for as a finance lease. The lease includes other purchase options beginning in year three, none of which are reasonably certain of being exercised at this time. The total aggregate amount of finance lease liabilities recorded for this ship was $264.8 million and $283.7 million as of December 31, 2022 and December 31, 2021, respectively. The lease payments on the Silver Dawn are subject to adjustments based on the LIBOR rate.
Silversea Cruises operates Silver Whisper under a finance lease. The finance lease for Silver Whisper will expire in 2023, subject to an option to purchase the ship, which we expect to exercise. The total aggregate amount of finance lease liabilities recorded for this ship was $8.9 million and $24.1 million at December 31, 2022 and December 31, 2021, respectively. The lease payments on the Silver Whisper are subject to adjustments based on the LIBOR rate.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Supplemental balance sheet information for leases was as follows (in thousands):
| As of December 31, 2022 | As of December 31, 2021 | |||
|---|---|---|---|---|
| Lease assets: | ||||
| Finance lease right-of-use assets, net: | ||||
| Property and equipment, gross | $ | 668,801 | $ | 737,444 |
| Accumulated depreciation | (123,567) | (94,729) | ||
| Property and equipment, net | 545,234 | 642,715 | ||
| Operating lease right-of-use assets | 537,559 | 542,128 | ||
| Total lease assets | $ | 1,082,793 | $ | 1,184,843 |
| Lease liabilities: | ||||
| Finance lease liabilities: | ||||
| Current portion of debt | $ | 34,154 | $ | 51,470 |
| Long-term debt | 317,178 | 420,805 | ||
| Total finance lease liabilities | 351,332 | 472,275 | ||
| Operating lease liabilities: | ||||
| Current portion of operating lease liabilities | 79,760 | 68,922 | ||
| Long-term operating lease liabilities | 523,006 | 534,726 | ||
| Total operating lease liabilities | 602,766 | 603,648 | ||
| Total lease liabilities | $ | 954,098 | $ | 1,075,923 |
The components of lease costs were as follows (in thousands):
| Consolidated Statement of Comprehensive Income (Loss) Classification | Year ended December 31, 2022 | Year ended December 31, 2021 | Year ended December 31, 2020 | ||||
|---|---|---|---|---|---|---|---|
| Lease costs: | |||||||
| Operating lease costs | Commission, transportation and other | $ | 127,315 | $ | 18,860 | $ | 38,349 |
| Operating lease costs | Other operating expenses | 22,085 | 23,261 | 30,955 | |||
| Operating lease costs | Marketing, selling and administrative expenses | 18,646 | 18,027 | 21,971 | |||
| Finance lease costs: | |||||||
| Amortization of right-of-use-assets | Depreciation and amortization expenses | 24,428 | 16,814 | 6,901 | |||
| Interest on lease liabilities | Interest expense, net of interest capitalized | 21,550 | 2,593 | 4,429 | |||
| Total lease costs | $ | 214,024 | $ | 79,555 | $ | 102,605 |
In addition, certain of our berth agreements include variable lease costs based on the number of passengers berthed. During the twelve months ended December 31, 2022, we had $66.2 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive loss. During the twelve months ended December 31, 2021, we had no variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive loss.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Weighted average of the remaining lease terms and weighted average discount rates are as follows:
| As of December 31, 2022 | As of December 31, 2021 | |||
|---|---|---|---|---|
| Weighted average of the remaining lease term | ||||
| Operating leases | 17.69 | 18.18 | ||
| Finance leases | 19.26 | 23.96 | ||
| Weighted average discount rate | ||||
| Operating leases | 6.92 | % | 6.52 | % |
| Finance leases | 6.43 | % | 5.54 | % |
Supplemental cash flow information related to leases is as follows (in thousands):
| Year ended December 31, 2022 | Year ended December 31, 2021 | Year ended December 31, 2020 | ||||
|---|---|---|---|---|---|---|
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||
| Operating cash flows from operating leases | $ | 126,797 | $ | 42,759 | $ | 89,179 |
| Operating cash flows from finance leases | $ | 21,550 | $ | 2,593 | $ | 4,429 |
| Financing cash flows from finance leases | $ | 48,199 | $ | 23,522 | $ | 19,778 |
As of December 31, 2022, maturities related to lease liabilities were as follows (in thousands):
| Years | Operating Leases | Finance Leases | ||
|---|---|---|---|---|
| 2023 | $ | 115,636 | $ | 53,617 |
| 2024 | 101,801 | 44,465 | ||
| 2025 | 96,290 | 43,974 | ||
| 2026 | 90,178 | 38,412 | ||
| 2027 | 70,424 | 37,358 | ||
| Thereafter | 789,158 | 706,070 | ||
| Total lease payments | 1,263,487 | 923,896 | ||
| Less: Interest | (660,721) | (572,564) | ||
| Present value of lease liabilities | $ | 602,766 | $ | 351,332 |
Right-of-use assets impairments
During the year ended December 31, 2020, we identified that the undiscounted cash flows for certain right-of-use assets were less than their carrying values due to the negative impact of COVID-19. We evaluated these assets pursuant to our long-lived asset impairment test, resulting in an impairment charge of $65.9 million to write down these assets to their estimated fair values during the year ended December 31, 2020. For the years ended December 31, 2022 and December 31, 2021, there were no impairments to right-of-use assets.
Note 10. Shareholders' Equity
On January 1, 2022, we adopted ASU 2020-06 using the modified retrospective approach to recognize our convertible notes as single liability instruments. As a result of the adoption of this pronouncement, the cumulative effect to Shareholders' equity was
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
a reduction of $161.4 million. For further information regarding the entry recorded and the adoption of ASU 2020-06, refer to Note 2. Summary of Significant Accounting Policies.
Common Stock Issued
During March 2021, we issued 16.9 million shares of common stock, par value $0.01 per share, at a price of $91.00 per share. We received net proceeds of $1.5 billion from the sale of our common stock, after deducting the estimated offering expenses payable by us.
Dividends Declared
We did not declare any dividends during the years ended December 31, 2022 and December 31, 2021. During this period, we were restricted under certain of our credit facilities from paying dividends while waivers to the financial covenants within such facilities were in effect. While the waivers have now expired, in the event we declare a dividend, we will need to repay the principal amounts deferred under our export credit facilities.
Note 11. Stock-Based Employee Compensation
We currently have awards outstanding under one stock-based compensation plan, our 2008 Equity Plan, which provides for awards to our officers, directors and key employees. The 2008 Equity Plan, as amended, provides for the issuance of up to 10,083,570 shares of our common stock pursuant to grants of (i) incentive and non-qualified stock options, (ii) stock appreciation rights, (iii) stock awards (including time-based and/or performance-based stock awards) and (iv) restricted stock units (including time-based and performance-based restricted stock units). During any calendar year, no one individual (other than non-employee members of our board of directors) may be granted awards of more than 500,000 shares and no non-employee member of our board of directors may be granted awards with a value, measured as of the grant date, which together with cash compensation paid to such director for such calendar year, would exceed $750,000. Options and restricted stock units outstanding as of December 31, 2022, generally vest in equal installments over four years from the date of grant. In addition, performance shares and performance share units generally vest in three years. With certain limited exceptions, awards are forfeited if the recipient ceases to be an employee before the shares vest. We have not issued stock options since 2016, and all stock options have been exercised as of December 31, 2021. Stock option expense for the years ended December 31, 2022, 2021 and 2020, are not material.
Our officers receive their long-term incentive awards through a combination of performance share units and restricted stock units. Each performance share unit award is expressed as a target number of performance share units based upon the fair market value of our common stock on the date the award is issued. The actual number of shares underlying each award (not to exceed 200% of the target number of performance share units) will be determined based upon the Company's achievement of a specified performance target range. In 2022, we issued a target number of 209,020 performance share units, which will vest approximately three years following the award issue date. The performance payout of these grants will be based on return on the Company's invested capital ("ROIC"), earnings per share ("EPS"), leverage and certain Environmental, Social, and Governance metrics ("ESG") for the year ended December 31, 2024, as may be adjusted by the Talent and Compensation Committee of our board of directors in early 2025 for events that are outside of management's control.
Our senior officers meeting certain minimum age and service criteria receive their long-term incentive awards through a combination of restricted stock awards and restricted stock units. The restricted stock awards are subject to both performance and time-based vesting criteria while the restricted stock units are subject only to time-based vesting criteria. Each restricted stock award is issued in an amount equal to 200% of the target number of shares underlying the award based upon the fair market value of our common stock on the date the award is issued. Declared dividends accrue (but do not get paid) on the restricted stock awards during the vesting period, with the accrued amounts to be paid out following vesting only on the number of shares underlying the award which actually vest based on satisfaction of the performance criteria. The actual number of shares that vest (not to exceed 200% of the shares) will be determined based upon the Company's achievement of a specified performance target range.
In 2022, we issued 171,240 restricted stock awards, representing 200% of the target number of shares underlying the award, all of which are considered issued and outstanding from the date of issuance; however, grantees will only retain those shares earned as the result of the Company achieving the performance goals during the measurement period. The performance payout of the 2022 awards will be based on the Company's ROIC, EPS, leverage and certain ESG metrics for the year ended December 31, 2024, as may be adjusted by the Talent and Compensation Committee of our board of directors in early 2025 for events that are outside of management's control.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We also provide an Employee Stock Purchase Plan ("ESPP") to facilitate the purchase by employees of up to 2,800,000 shares of common stock in the aggregate. Offerings to employees are made on a quarterly basis. Subject to certain limitations, the purchase price for each share of common stock is equal to 85% of the average of the market prices of the common stock as reported on the New York Stock Exchange on the first business day of the purchase period and the last business day of each month of the purchase period. During the years ended December 31, 2022, 2021 and 2020, 171,279, 136,480 and 184,936 shares of our common stock were purchased under the ESPP at a weighted-average price of $44.01, $70.95 and $48.08, respectively.
Total compensation expense recognized for employee stock-based compensation for the years ended December 31, 2022, 2021 and 2020 was as follows (in thousands):
| Employee Stock-Based Compensation | ||||||
|---|---|---|---|---|---|---|
| Classification of expense | 2022 | 2021 | 2020 | |||
| Marketing, selling and administrative expenses | $ | 36,116 | $ | 63,638 | $ | 39,780 |
| Total compensation expense | $ | 36,116 | $ | 63,638 | $ | 39,780 |
Restricted stock units are converted into shares of common stock upon vesting or, if applicable, are settled on a one-for-one basis. The cost of these awards is determined using the fair value of our common stock on the date of the grant, and compensation expense is recognized over the vesting period. Restricted stock activity is summarized in the following table:
| Restricted Stock Units Activity | Number of<br>Awards | Weighted-<br>Average<br>Grant Date<br>Fair Value | |
|---|---|---|---|
| Non-vested share units as of January 1, 2022 | 995,038 | $ | 88.19 |
| Granted | 570,432 | 72.21 | |
| Vested | (464,492) | 86.29 | |
| Canceled | (117,905) | 81.78 | |
| Non-vested share units as of December 31, 2022 | 983,073 | $ | 80.58 |
The weighted-average estimated fair value of restricted stock units granted during the years ended December 31, 2021 and 2020 was $85.08 and $78.51, respectively. The total fair value of shares released on the vesting of restricted stock units during the years ended December 31, 2022, 2021 and 2020 was $29.7 million, $36.1 million, and $31.2 million, respectively. As of December 31, 2022, we had $38.2 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock unit grants, which will be recognized over the weighted-average period of 1.13 years.
Performance share units are converted into shares of common stock upon vesting on a one-for-one basis. We estimate the fair value of each performance share when the grant is authorized and the related service period has commenced. We remeasure the fair value of our performance shares in each subsequent reporting period until the grant date has occurred, which is the date when the performance conditions are satisfied. We recognize compensation cost over the vesting period based on the probability of the service and performance conditions being achieved adjusted for each subsequent fair value measurement until the grant date. If the specified service and performance conditions are not met, compensation expense will not be recognized and any previously recognized compensation expense will be reversed. Performance share units activity is summarized in the following table:
| Performance Share Units Activity | Number of<br>Awards | Weighted-<br>Average<br>Grant Date<br>Fair Value | |
|---|---|---|---|
| Non-vested share units as of January 1, 2022 | 466,352 | $ | 92.45 |
| Granted | 209,020 | 79.80 | |
| Vested | (64,614) | 110.01 | |
| Canceled | (57,711) | 89.42 | |
| Non-vested share units as of December 31, 2022 | 553,047 | $ | 85.93 |
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The weighted-average estimated fair value of performance share units granted during the years ended December 31, 2021 and 2020 was $84.83 and $95.81 respectively. The total fair value of shares released on the vesting of performance share units during the years ended December 31, 2022, 2021 and 2020 was $5.2 million, $5.6 million and $24.6 million, respectively. As of December 31, 2022, we had $8.6 million of total unrecognized compensation expense, net of estimated forfeitures, related to performance share unit grants, which will be recognized over the weighted-average period of 1.22 years.
We estimate the fair value of each restricted stock award when the grant is authorized and the related service period has commenced. We remeasure the fair value of these restricted stock awards in each subsequent reporting period until the grant date has occurred, which is the date when the performance conditions are satisfied. We recognize compensation cost over the vesting period based on the probability of the service and performance conditions being achieved adjusted for each subsequent fair value measurement until the grant date. If the specified service and performance conditions are not met, compensation expense will not be recognized, any previously recognized compensation expense will be reversed, and any unearned shares will be returned to the Company. Restricted stock awards activity is summarized in the following table:
| Restricted Stock Awards Activity | Number of<br>Awards | Weighted-<br>Average<br>Grant Date<br>Fair Value | |
|---|---|---|---|
| Non-vested share units as of January 1, 2022 | 797,212 | $ | 101.25 |
| Granted | 171,240 | 79.80 | |
| Vested | (87,521) | 118.08 | |
| Canceled | (106,965) | 118.08 | |
| Non-vested share units as of December 31, 2022 | 773,966 | $ | 92.28 |
The weighted-average estimated fair value of restricted stock awards granted during the years ended December 31, 2021 and 2020 was $84.83 and $110.21, respectively. As of December 31, 2022, we had $0.86 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock award grants, which will be recognized over the weighted-average period of 1.06 years.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12. Loss Per Share
A reconciliation between basic and diluted loss per share is as follows (in thousands, except per share data):
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Net Loss attributable to Royal Caribbean Cruises Ltd. for basic and diluted loss per share | $ | (2,155,962) | $ | (5,260,499) | $ | (5,797,462) |
| Weighted-average common shares outstanding | 255,011 | 251,812 | 214,335 | |||
| Diluted weighted-average shares outstanding | 255,011 | 251,812 | 214,335 | |||
| Basic loss per share | $ | (8.45) | $ | (20.89) | $ | (27.05) |
| Diluted loss per share | $ | (8.45) | $ | (20.89) | $ | (27.05) |
Basic loss per share is computed by dividing Net loss attributable to Royal Caribbean Cruises Ltd. by the weighted-average number of common stock outstanding during each period. Diluted loss per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities. If we have a net loss for the period, all potential common shares will be considered antidilutive, resulting in the same basic and diluted net loss per share amounts for those periods. There were approximately 31,027,815, 504,250 and 282,118 antidilutive shares for the years ended December 31, 2022, 2021 and 2020, respectively.
Effective January 1, 2022, ASU 2020-06 eliminated the treasury stock method and instead required the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share when instruments may be settled in cash or shares. Under the if-converted method, shares related to our convertible notes, to the extent dilutive, are assumed to be converted into common stock at the beginning of the reporting period. The required use of the if-converted method for our convertible notes did not impact our diluted loss per share for the year ended December 31, 2022 as the if-converted calculation was antidilutive for the period. For further information regarding the adoption of ASU 2020-06, refer to Note 2. Summary of Significant Accounting Policies.
Note 13. Retirement Plan
We maintain a defined contribution plan covering shoreside employees. Effective January 1, 2016, we commenced annual, non-elective contributions to the plan on behalf of all eligible participants equal to 3% of participants' eligible earnings. Additional annual contributions to the plan are discretionary and are based on fixed percentages of participants' salaries and years of service, not to exceed certain maximums. Contribution expenses were $19.6 million, $17.9 million and $18.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Note 14. Income Taxes
We are subject to corporate income taxes in countries where we have operations or subsidiaries. We and the majority of our ship-operating and vessel-owning subsidiaries are currently exempt from U.S. corporate income tax on U.S. source income from the international operation of ships pursuant to Section 883 of the Internal Revenue Code. Regulations under Section 883 have limited the activities that are considered the international operation of a ship or incidental thereto. Accordingly, our provision for U.S. federal and state income taxes includes taxes on certain activities not considered incidental to the international operation of our ships.
Additionally, one of our ship-operating subsidiaries is subject to tax under the tonnage tax regime of the United Kingdom. Under this regime, income from qualifying activities is subject to corporate income tax, but the tax is computed by reference to the tonnage of the ship or ships registered under the relevant provisions of the tax regimes (the "relevant shipping profits"), which replaces the regular taxable income base. Income from activities not considered qualifying activities, which we do not consider significant, remains subject to United-Kingdom corporate income tax.
For the year ended December 31, 2022, we had an income tax expense of approximately $4.2 million primarily driven by income tax from our non-US operations and items not qualifying under Section 883. For the years ended December 31, 2021 and 2020 we had an income tax benefit of approximately $45.2 million and $15.0 million, respectively for items not qualifying under Section 883, tonnage tax and income taxes for the remainder of our subsidiaries. Income taxes are recorded within Other income (expense). In addition, all interest expense and penalties related to income tax liabilities are classified as income tax expense within Other income (expense).
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For a majority of our subsidiaries, we do not expect to incur income taxes on future distributions of undistributed earnings. Accordingly, no deferred income taxes have been provided for the distribution of these earnings. Where we do expect to incur income taxes on future distributions of undistributed earnings, we have provided for deferred taxes, which we do not consider significant to our operations.
As of December 31, 2022, the Company had deferred tax assets for U.S. and foreign net operating losses (“NOLs”) of approximately $74.2 million. We have provided a valuation allowance for approximately $23.7 million of these NOLs. $6.3 million of the NOLs deferred tax assets relate to NOLs which are subject to expiration between 2023 and 2041.
Our deferred tax assets and deferred tax liabilities and corresponding valuation allowances related to our operations were not material as of December 31, 2022 and 2021.
We regularly review deferred tax assets for recoverability based on our history of earnings, expectations of future earnings, and tax planning strategies. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income to support the amount of deferred taxes. A valuation allowance is recorded in those circumstances in which we conclude it is not more-likely-than-not we will recover the deferred tax assets prior to their expiration.
Note 15. Changes in Accumulated Other Comprehensive (Loss) Income
The following table presents the changes in accumulated other comprehensive loss by component for the years ended December 31, 2022, 2021 and 2020 (in thousands):
| Changes related to cash flow derivative hedges | Changes in defined <br>benefit plans | Foreign currency translation adjustments | Accumulated other comprehensive (loss) income | |||||
|---|---|---|---|---|---|---|---|---|
| Accumulated comprehensive loss at January 1, 2020 | $ | (688,529) | $ | (45,558) | $ | (63,626) | $ | (797,713) |
| Other comprehensive income (loss) before reclassifications | (41,109) | (22,051) | (28,698) | (91,858) | ||||
| Amounts reclassified from accumulated other comprehensive loss | 79,119 | 2,067 | 69,044 | 150,230 | ||||
| Net current-period other comprehensive income (loss) | 38,010 | (19,984) | 40,346 | 58,372 | ||||
| Accumulated comprehensive loss at January 1, 2021 | (650,519) | (65,542) | (23,280) | (739,341) | ||||
| Other comprehensive income (loss) before reclassifications | (16,667) | 4,790 | 15,703 | 3,826 | ||||
| Amounts reclassified from accumulated other comprehensive loss | 20,713 | 3,917 | — | 24,630 | ||||
| Net current-period other comprehensive (loss) income | 4,046 | 8,707 | 15,703 | 28,456 | ||||
| Accumulated comprehensive loss at January 1, 2022 | (646,473) | (56,835) | (7,577) | (710,885) | ||||
| Other comprehensive (loss) income before reclassifications | 171,040 | 45,599 | 10,295 | 226,934 | ||||
| Amounts reclassified from accumulated other comprehensive loss | (162,578) | 3,315 | — | (159,263) | ||||
| Net current-period other comprehensive (loss) income | 8,462 | 48,914 | 10,295 | 67,671 | ||||
| Accumulated comprehensive loss at December 31, 2022 | $ | (638,011) | $ | (7,921) | $ | 2,718 | $ | (643,214) |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2022, 2021 and 2020 (in thousands):
| Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into (Loss) Income | |||||||
|---|---|---|---|---|---|---|---|
| Details about Accumulated Other Comprehensive Loss Components | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Affected Line Item in Statements of Comprehensive Income (Loss) | |||
| Gain (loss) on cash flow derivative hedges: | |||||||
| Interest rate swaps | $ | (12,635) | $ | (43,185) | $ | (25,267) | Interest expense, net of interest capitalized |
| Foreign currency forward contracts | (17,085) | (15,359) | (14,679) | Depreciation and amortization expenses | |||
| Foreign currency forward contracts | (2,703) | (2,797) | (7,315) | Other (expense) income | |||
| Fuel swaps | (360) | (409) | 3,549 | Other (expense) income | |||
| Fuel swaps | 195,361 | 41,037 | (35,407) | Fuel | |||
| 162,578 | (20,713) | (79,119) | |||||
| Amortization of defined benefit plans: | |||||||
| Actuarial loss | (3,315) | (3,917) | (2,067) | Payroll and related | |||
| (3,315) | (3,917) | (2,067) | |||||
| Release of foreign cumulative translation due to sale or liquidation of businesses: | |||||||
| Foreign cumulative translation | — | — | (69,044) | Other operating | |||
| Total reclassifications for the period | $ | 159,263 | $ | (24,630) | $ | (150,230) |
During the year ended December 31, 2020, a $69.0 million net loss was recorded within Other expense in our consolidated statements of comprehensive loss, consisting of a $92.6 million loss resulting from the recognition of a currency translation adjustment, partially offset by the recognition of a deferred $23.6 million foreign exchange gain related to the Pullmantur net investment hedge. In connection with the Pullmantur reorganization in 2020, we no longer have significant involvement in the Pullmantur operations and these amounts previously deferred in Accumulated other comprehensive loss were recognized in earnings.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 16. Fair Value Measurements and Derivative Instruments
Fair Value Measurements
The estimated fair value of our financial instruments that are not measured at fair value, categorized based upon the fair value hierarchy, are as follows (in thousands):
| Fair Value Measurements at December 31, 2022 | Fair Value Measurements at December 31, 2021 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Description | Total Carrying Amount | Total Fair Value | Level 1(1) | Level 2(2) | Level 3(3) | Total Carrying Amount | Total Fair Value | Level 1(1) | Level 2(2) | Level 3(3) | ||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents(4) | $ | 1,935,005 | $ | 1,935,005 | $ | 1,935,005 | $ | — | $ | — | $ | 2,701,770 | $ | 2,701,770 | $ | 2,701,770 | $ | — | $ | — |
| Total Assets | $ | 1,935,005 | $ | 1,935,005 | $ | 1,935,005 | $ | — | $ | — | $ | 2,701,770 | $ | 2,701,770 | $ | 2,701,770 | $ | — | $ | — |
| Liabilities: | ||||||||||||||||||||
| Long-term debt (including current portion of long-term debt)(5) | $ | 23,039,859 | $ | 22,856,306 | $ | — | $ | 22,856,306 | $ | — | $ | 20,618,065 | $ | 22,376,480 | $ | — | $ | 22,376,480 | $ | — |
| Total Liabilities | $ | 23,039,859 | $ | 22,856,306 | $ | — | $ | 22,856,306 | $ | — | $ | 20,618,065 | $ | 22,376,480 | $ | — | $ | 22,376,480 | $ | — |
___________________________________________________________________
(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.
(2)Inputs other than quoted prices included within Level 1 that are observable for the liability, either directly or indirectly. For unsecured revolving credit facilities and unsecured term loans, fair value is determined utilizing the income valuation approach. This valuation model takes into account the contract terms of our debt such as the debt maturity and the interest rate on the debt. The valuation model also takes into account the creditworthiness of the Company.
(3)Inputs that are unobservable. The Company did not use any Level 3 inputs as of December 31, 2022 and 2021.
(4)Consists of cash and marketable securities with original maturities of less than 90 days.
(5)Consists of unsecured revolving credit facilities, senior notes, term loans and convertible notes. These amounts do not include our finance lease obligations.
Other Financial Instruments
The carrying amounts of accounts receivable, accounts payable, accrued interest, and accrued expenses approximate fair value as of December 31, 2022 and 2021.
Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy. The following table presents information about the Company's financial instruments recorded at fair value on a recurring basis (in thousands):
| Fair Value Measurements at December 31, 2022 | Fair Value Measurements at December 31, 2021 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Description | Total Fair Value | Level 1(1) | Level 2(2) | Level 3(3) | Total Fair Value | Level 1(1) | Level 2(2) | Level 3(3) | ||||||||
| Assets: | ||||||||||||||||
| Derivative financial instruments(4) | $ | 203,802 | $ | — | $ | 203,802 | $ | — | $ | 69,808 | $ | — | $ | 69,808 | $ | — |
| Total Assets | $ | 203,802 | $ | — | $ | 203,802 | $ | — | $ | 69,808 | $ | — | $ | 69,808 | $ | — |
| Liabilities: | ||||||||||||||||
| Derivative financial instruments(5) | $ | 135,608 | $ | — | $ | 135,608 | $ | — | $ | 200,541 | $ | — | $ | 200,541 | $ | — |
| Total Liabilities | $ | 135,608 | $ | — | $ | 135,608 | $ | — | $ | 200,541 | $ | — | $ | 200,541 | $ | — |
___________________________________________________________________
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.
(2)Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. For foreign currency forward contracts, interest rate swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms, such as maturity as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves. Derivative instrument fair values take into account the creditworthiness of the counterparty and the Company.
(3)Inputs that are unobservable. No Level 3 inputs were used in fair value measurements of other financial instruments as of December 31, 2022 and 2021
(4)Consists of foreign currency forward contracts, interest rate and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.
(5)Consists of foreign currency forward contracts, interest rate and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.
The reported fair values are based on a variety of factors and assumptions. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of December 31, 2022 or 2021, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.
Nonfinancial Instruments Recorded at Fair Value on a Nonrecurring Basis
Nonfinancial instruments include items such as goodwill, indefinite-lived intangible assets, long-lived assets, right-of-use assets and equity method investments that are measured at fair value on a nonrecurring basis when events and circumstances indicate the carrying value is not recoverable. The following table presents information about the Company’s nonfinancial instruments recorded at fair value on a nonrecurring basis (in thousands):
| Fair Value Measurements at December 31, 2022 | |||||
|---|---|---|---|---|---|
| Description | Total Carrying Amount | Total Fair Value | Level 3 | Total Impairment for the year ended December 31, 2022 (1) | |
| Long-lived assets | — | — | — | $ | 10,186 |
| Total | — | — | — | $ | 10,186 |
(1) Amount is primarily composed of construction in progress assets that were impaired during the year ended December 31, 2022 due to a reduction in scope or the decision to not complete the projects. The impairments were calculated based on orderly liquidation values. The fair value of these assets was estimated as of the date the assets were last impaired.
| Fair Value Measurements at December 31, 2021 | |||||
|---|---|---|---|---|---|
| Description | Total Carrying Amount | Total Fair Value | Level 3 | Total Impairment for the year ended December 31, 2021 (1) | |
| Long-lived assets | — | — | — | $ | 55,213 |
| Total | — | — | — | $ | 55,213 |
(1) Amount is primarily composed of construction in progress assets that were impaired during the year ended 2021 due to a reduction in scope or the decision to not complete the projects. The impairments were calculated based on orderly liquidation values. The fair value of these assets was estimated as of the date the assets were last impaired.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Master Netting Agreements
We have master International Swaps and Derivatives Association (“ISDA”) agreements in place with our derivative instrument counterparties. These ISDA agreements generally provide for final close out netting with our counterparties for all positions in the case of default or termination of the ISDA agreement. We have determined that our ISDA agreements provide us with rights of setoff on the fair value of derivative instruments in a gain position and those in a loss position with the same counterparty. We have elected not to offset such derivative instrument fair values in our consolidated balance sheets.
See Credit Related Contingent Features for further discussion on contingent collateral requirements for our derivative instruments.
The following table presents information about the Company’s offsetting of financial assets under master netting agreements with derivative counterparties (in thousands):
| Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2022 | As of December 31, 2021 | |||||||||||||||
| Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting <br>Recognized <br>Derivative Liabilities | Cash Collateral <br>Received | Net Amount of <br>Derivative Assets | Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting <br>Recognized <br>Derivative Liabilities | Cash Collateral <br>Received | Net Amount of <br>Derivative Assets | |||||||||
| Derivatives subject to master netting agreements | $ | 203,802 | $ | (105,228) | $ | — | $ | 98,574 | $ | 69,808 | $ | (67,995) | $ | — | $ | 1,813 |
| Total | $ | 203,802 | $ | (105,228) | $ | — | $ | 98,574 | $ | 69,808 | $ | (67,995) | $ | — | $ | 1,813 |
The following table presents information about the Company’s offsetting of financial liabilities under master netting agreements with derivative counterparties (in thousands):
| Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2022 | As of December 31, 2021 | |||||||||||||||
| Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting <br>Recognized <br>Derivative Assets | Cash Collateral <br>Pledged | Net Amount of <br>Derivative Liabilities | Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting <br>Recognized <br>Derivative Assets | Cash Collateral <br>Pledged | Net Amount of <br>Derivative Liabilities | |||||||||
| Derivatives subject to master netting agreements | $ | (135,608) | $ | 105,228 | $ | — | $ | (30,380) | $ | (200,541) | $ | 67,995 | $ | 44,411 | $ | (88,135) |
| Total | $ | (135,608) | $ | 105,228 | $ | — | $ | (30,380) | $ | (200,541) | $ | 67,995 | $ | 44,411 | $ | (88,135) |
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Concentrations of Credit Risk
We monitor our credit risk associated with financial and other institutions with which we conduct significant business, and to minimize these risks, we select counterparties with credit risks acceptable to us and we seek to limit our exposure to an individual counterparty. Credit risk, including, but not limited to, counterparty nonperformance under derivative instruments, our credit facilities and new ship progress payment guarantees, is not considered significant, as we primarily conduct business with large, well-established financial institutions, insurance companies and export credit agencies many of which we have long-term relationships with and which have credit risks acceptable to us or where the credit risk is spread out among a large number of counterparties. As of December 31, 2022, we had counterparty credit risk exposure under our derivative instruments of $103.3 million, which was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks. We do not anticipate nonperformance by any of our significant counterparties. In addition, we have established guidelines we follow regarding credit ratings and instrument maturities to maintain safety and liquidity. We do not normally require collateral or other security to support credit relationships; however, in certain circumstances this option is available to us.
Derivative Instruments
We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We try to mitigate these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the notional amount, term and conditions of the derivative instrument with the underlying risk being hedged. Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, our objective is not to hold or issue derivative financial instruments for trading or other speculative purposes.
We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and the vast majority are designated as hedges. We also use non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments.
At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a firm commitment or a recognized asset or liability is designated as a fair value hedge. A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.
Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments. Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of Accumulated other comprehensive loss until the underlying hedged transactions are recognized in earnings. The foreign currency transaction gain or loss of our non-derivative financial instruments and the changes in the fair value of derivatives designated as hedges of our net investment in foreign operations and investments are recognized as a component of Accumulated other comprehensive loss along with the associated foreign currency translation adjustment of the foreign operation or investment. In certain hedges of our net investment in foreign operations and investments, we exclude forward points from the assessment of hedge effectiveness and amortize the related amounts directly into earnings.
On an ongoing basis, we assess whether derivatives used in hedging transactions are "highly effective" in offsetting changes in the fair value or cash flow of hedged items. For our net investment hedges, we use the dollar offset method to measure effectiveness. For all other hedging programs, we use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship. The methodology for assessing hedge effectiveness is applied on a consistent basis for each one of our hedging programs (i.e., interest rate, foreign currency ship construction, foreign currency net investment and fuel). For our regression analyses, we use an observation period of up to three years, utilizing market data relevant to the hedge horizon of each hedge relationship. High effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the changes in the fair values of the derivative instrument and the hedged item. If it is determined that a derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be highly effective is recognized in earnings.
Cash flows from derivative instruments that are designated as fair value or cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified within investing activities. Cash flows from derivative instruments not designated as hedging instruments are classified as investing activities.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We consider the classification of the underlying hedged item’s cash flows in determining the classification for the designated derivative instrument’s cash flows. We classify derivative instrument cash flows from hedges of benchmark interest rate or hedges of fuel expense as operating activities due to the nature of the hedged item. Likewise, we classify derivative instrument cash flows from hedges of foreign currency risk on our newbuild ship payments as investing activities.
Interest Rate Risk
Our exposure to market risk for changes in interest rates primarily relates to our debt obligations including future interest payments. At December 31, 2022 and 2021, approximately 75.0% and 65.7%, respectively, of our debt was effectively fixed-rate debt. We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.
Market risk associated with our fixed-rate debt is the potential increase in fair value resulting from a decrease in interest rates. We use interest rate swap agreements that effectively convert a portion of our fixed-rate debt to a floating-rate basis to manage this risk. During the quarter ended September 30, 2022, we redeemed our 5.25% senior unsecured notes due 2022 in full and terminated the related interest rate swap agreements, which resulted in the dedesignation of the fair value hedges and recognition of an immaterial loss representing the fair value hedge carrying amount adjustment on these notes. At December 31, 2022, there were no interest rate swap agreements for fixed-rate debt instruments.
We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage the risk of increasing interest rates. At December 31, 2022, we maintained interest rate swap agreements on the following floating-rate debt instruments:
| Debt Instrument | Swap Notional as of December 31, 2022 (In thousands) | Maturity | Debt Floating Rate | All-in Swap Fixed Rate | ||
|---|---|---|---|---|---|---|
| Celebrity Reflection term loan | $ | 109,083 | October 2024 | LIBOR plus | 0.40% | 2.85% |
| Quantum of the Seas term loan | 245,000 | October 2026 | LIBOR plus | 1.30% | 3.74% | |
| Anthem of the Seas term loan | 271,875 | April 2027 | LIBOR plus | 1.30% | 3.86% | |
| Ovation of the Seas term loan | 380,417 | April 2028 | LIBOR plus | 1.00% | 3.16% | |
| Harmony of the Seas term loan (1) | 338,990 | May 2028 | EURIBOR plus | 1.15% | 2.26% | |
| Odyssey of the Seas term loan(2) | 383,333 | October 2032 | LIBOR plus | 0.96% | 3.21% | |
| Odyssey of the Seas term loan(2) | 191,667 | October 2032 | LIBOR plus | 0.96% | 2.84% | |
| $ | 1,920,365 |
___________________________________________________________________
(1) Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include EURIBOR zero-floors matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of December 31, 2022.
(2) Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor. The effective dates of the $383.3 million and $191.7 million interest rate swap agreements are October 2020 and October 2022, respectively. The unsecured term loan for the financing of Odyssey of the Seas was drawn on March 2021.
These interest rate swap agreements are accounted for as cash flow hedges.
The notional amount of interest rate swap agreements related to outstanding debt as of December 31, 2022 and 2021 was $1.9 billion and $2.9 billion, respectively.
Foreign Currency Exchange Rate Risk
Derivative Instruments
Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in Euros, our foreign currency denominated debt and our international business operations. We enter into foreign currency forward contracts to manage portions of the exposure to movements in foreign currency exchange rates. As of December 31, 2022, the aggregate cost of our ships on order was $9.8 billion, of which we had deposited $831.6 million as of such date. These amounts do not include any ships placed on order that are contingent upon completion of conditions precedent and/or financing any ships on order by our Partner Brands. Refer to Note 17. Commitments and Contingencies, for further information on our ships on order. At December 31, 2022 and 2021, approximately 52.3% and 59.0%, respectively, of the aggregate cost of the ships under construction was exposed to
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
fluctuations in the Euro exchange rate. Our foreign currency forward contract agreements are accounted for as cash flow or net investment hedges depending on the designation of the related hedge.
On a regular basis, we enter into foreign currency forward contracts and, from time to time, we utilize cross-currency swap agreements and collar options to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries. During the year ended December 31, 2022, we maintained an average of approximately $1.1 billion of these foreign currency forward contracts. These instruments are not designated as hedging instruments. For the years ended December 31, 2022, 2021 and 2020, changes in the fair value of the foreign currency forward contracts resulted in losses of $(101.8) million, $(30.9) million and $(19.0) million, respectively, which offset gains (losses) arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same years of $93.0 million, $24.3 million and $(1.5) million, respectively. These amounts were recognized in earnings within Other (expense) income in our consolidated statements of comprehensive loss.
The notional amount of outstanding foreign exchange contracts, excluding the forward contracts entered into to minimize remeasurement volatility, as of December 31, 2022 and 2021 was $2.9 billion and $3.4 billion, respectively.
Non-Derivative Instruments
We consider our investments in our foreign operations to be denominated in relatively stable currencies and of a long-term nature. We address the exposure of our investments in foreign operations by denominating a portion of our debt in our subsidiaries' and investments' functional currencies and designating it as a hedge of these subsidiaries and investments. We had designated debt as a hedge of our net investments primarily in TUI Cruises of €433.0 million, or approximately $461.9 million, as of December 31, 2022. As of December 31, 2021, we had designated debt as a hedge of our net investments primarily in TUI Cruises of €97.0 million, or approximately $110.3 million.
Fuel Price Risk
Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships. We use fuel swap agreements to mitigate the financial impact of fluctuations in fuel prices.
Our fuel swap agreements are generally accounted for as cash flow hedges. In the case that our hedged forecasted fuel consumption is not probable of occurring, hedge accounting will be discontinued and the related accumulated other comprehensive gain or loss will be reclassified to Other (expense) income immediately. For hedged forecasted fuel consumption that remains possible of occurring, hedge accounting will be discontinued and the related accumulated other comprehensive gain or loss will remain in accumulated other comprehensive gain or loss until the underlying hedged transactions are recognized in earnings or the related hedged forecasted fuel consumption is deemed probable of not occurring.
Prior suspension of our cruise operations due to the COVID-19 pandemic and our gradual resumption of cruise operations resulted in reductions to our forecasted fuel purchases. During the year ended December 31, 2021, we discontinued cash flow hedge accounting on 0.2 million metric tons of our fuel swap agreements maturing in 2021 and 2022, which resulted in the reclassification of a net $0.7 million loss from Accumulated other comprehensive loss to Other income (expense). During the year ended December 31, 2022, we did not discontinue cash flow hedge accounting on any of our fuel swap agreements. Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other (expense) income for each reporting period through the maturity dates of the fuel swaps.
Future suspension of our operations or modifications to our itineraries may affect our expected forecasted fuel purchases which could result in further discontinuance of fuel swap cash flow hedge accounting and the reclassification of deferred gains or losses from Accumulated other comprehensive loss into earnings.
At December 31, 2022, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2023. As of December 31, 2022 and December 31, 2021, we had the following outstanding fuel swap agreements:
| Fuel Swap Agreements | ||
|---|---|---|
| As of December 31, 2022 | As of December 31, 2021 | |
| (metric tons) | ||
| Designated as hedges: | ||
| 2023 | 825,651 | 249,050 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| Fuel Swap Agreements | ||||
|---|---|---|---|---|
| As of December 31, 2022 | As of December 31, 2021 | |||
| (% hedged) | ||||
| Designated hedges as a % of projected fuel purchases: | ||||
| 2023 | 50 | % | 15 | % |
At December 31, 2022, there was $7.9 million of estimated unrealized net loss associated with our cash flow hedges pertaining to fuel swap agreements that is expected to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months when compared to $23.8 million of estimated unrealized net loss at December 31, 2021. Reclassification is expected to occur as the result of fuel consumption associated with our hedged forecasted fuel purchases.
The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets were as follows (in thousands):
| Fair Value of Derivative Instruments | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Asset Derivatives | Liability Derivatives | |||||||||||||
| Balance Sheet<br>Location | As of December 31, 2022 | As of December 31, 2021 | Balance Sheet<br>Location | As of December 31, 2022 | As of December 31, 2021 | |||||||||
| Fair Value | Fair Value | Fair Value | Fair Value | |||||||||||
| Derivatives designated as hedging instruments under ASC 815-20(1) | ||||||||||||||
| Interest rate swaps | Other assets | $ | 115,049 | $ | — | Other long-term liabilities | $ | — | $ | 62,080 | ||||
| Interest rate swaps | Derivative financial instruments | — | 6,478 | Derivative Financial Instruments | — | — | ||||||||
| Foreign currency forward contracts | Derivative financial instruments | 18,892 | 7,357 | Derivative financial instruments | 84,953 | 116,027 | ||||||||
| Foreign currency forward contracts | Other assets | 25,504 | 2,070 | Other long-term liabilities | 150 | 8,813 | ||||||||
| Fuel swaps | Derivative financial instruments | 40,191 | 31,919 | Derivative financial instruments | 46,359 | 7,944 | ||||||||
| Fuel swaps | Other assets | 4,166 | 13,452 | Other long-term liabilities | 4,147 | 1,202 | ||||||||
| Total derivatives designated as hedging instruments under ASC 815-20 | 203,802 | 61,276 | 135,609 | 196,066 | ||||||||||
| Derivatives not designated as hedging instruments under ASC 815-20 | ||||||||||||||
| Fuel swaps | Derivative financial instruments | — | 8,430 | Derivative financial instruments | — | 3,264 | ||||||||
| Fuel swaps | Other assets | — | 102 | Other long-term liabilities | — | 1,211 | ||||||||
| Total derivatives not designated as hedging instruments under ASC 815-20 | — | 8,532 | — | 4,475 | ||||||||||
| Total derivatives | $ | 203,802 | $ | 69,808 | $ | 135,609 | $ | 200,541 |
___________________________________________________________________
(1)Subtopic 815-20 “Hedging-General” under ASC 815.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The carrying value and line item caption of non-derivative instruments designated as hedging instruments recorded within our consolidated balance sheets were as follows (in thousands):
| Carrying Value | |||||
|---|---|---|---|---|---|
| Non-derivative instrument designated as<br>hedging instrument under ASC 815-20 | Balance Sheet Location | As of December 31, 2022 | As of December 31, 2021 | ||
| Foreign currency debt | Current portion of long-term debt | $ | 62,282 | $ | 75,518 |
| Foreign currency debt | Long-term debt | 399,577 | 34,795 | ||
| $ | 461,859 | $ | 110,313 |
The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive income (loss) was as follows (in thousands):
| Location of Gain (Loss) Recognized in Income on Derivative and Hedged Item | Amount of Gain (Loss) Recognized in Income on Derivative | Amount of Gain (Loss) Recognized in Income on Hedged Item | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Derivatives and related Hedged Items under ASC 815-20 Fair Value Hedging Relationships | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | |||||||||||||
| Interest rate swaps | Interest expense, net of interest capitalized | $ | (3,569) | $ | (1,349) | $ | 23,819 | $ | 4,534 | $ | 11,083 | $ | (18,813) | ||||||
| $ | (3,569) | $ | (1,349) | $ | 23,819 | $ | 4,534 | $ | 11,083 | $ | (18,813) |
The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets for the cumulative basis adjustment for fair value hedges were as follows (in thousands):
| Line Item in the Statement of Financial Position Where the Hedged Item is Included | Carrying Amount of the Hedged Liabilities | Cumulative amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2022 | As of December 31, 2021 | As of December 31, 2022 | As of December 31, 2021 | |||||||||
| Current portion of long-term debt and Long-term debt | $ | — | $ | 655,502 | $ | — | $ | 6,428 | ||||
| $ | — | $ | 655,502 | $ | — | $ | 6,428 |
The effect of derivative instruments qualifying and designated as cash flow hedging instruments on the consolidated financial statements was as follows (in thousands):
| Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative | ||||||
|---|---|---|---|---|---|---|
| Derivatives under ASC 815-20 Cash Flow Hedging Relationships | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | |||
| Interest rate swaps | $ | 165,377 | $ | 45,572 | $ | (112,960) |
| Foreign currency forward contracts | (145,832) | (203,129) | 130,426 | |||
| Fuel swaps | 151,495 | 140,890 | (58,575) | |||
| $ | 171,040 | $ | (16,667) | $ | (41,109) |
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The table below represents amounts excluded from the assessment of effectiveness for our net investment hedging instruments for which the difference between changes in fair value and periodic amortization is recorded in accumulated other comprehensive loss (in thousands):
| Gain (Loss) Recognized in Income (Net Investment Excluded Components) | Year Ended December 31, 2022 | |
|---|---|---|
| Net inception fair value at January 1, 2022 | $ | (554) |
| Amount of gain recognized in income on derivatives for the year ended December 31, 2022 | 554 | |
| Amount of loss remaining to be amortized in accumulated other comprehensive loss as of December 31, 2022 | — | |
| Fair value at December 31, 2022 | $ | — |
The effect of non-derivative instruments qualifying and designated as net investment hedging instruments on the consolidated financial statements was as follows (in thousands):
| Amount of Gain (Loss)<br>Recognized in Other Comprehensive Income (Loss) | ||||||
|---|---|---|---|---|---|---|
| Non-derivative instruments under ASC 815-20<br>Net Investment Hedging Relationships | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | |||
| Foreign Currency Debt | $ | 4,757 | $ | 7,837 | $ | (28,062) |
| $ | 4,757 | $ | 7,837 | $ | (28,062) |
The effect of derivatives not designated as hedging instruments on the consolidated financial statements was as follows (in thousands):
| Amount of Gain (Loss) Recognized<br>in Income on Derivative | |||||||
|---|---|---|---|---|---|---|---|
| Derivatives Not Designated as Hedging<br>Instruments under ASC 815-20 | Location of Gain (Loss)<br>Recognized in Income<br>on Derivative | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | |||
| Foreign currency forward contracts | Other (expense) income | $ | (101,837) | $ | (30,903) | $ | (18,961) |
| Fuel swaps | Other (expense) income | (108) | 33,720 | (102,740) | |||
| $ | (101,945) | $ | 2,817 | $ | (121,701) |
Credit Related Contingent Features
Our current interest rate derivative instruments require us to post collateral if our Standard & Poor’s and Moody’s credit ratings fall below specified levels. Specifically, under most of our agreements, if on the fifth anniversary of executing a derivative instrument, or on any succeeding fifth-year anniversary, our credit ratings for our senior unsecured debt is rated below BBB- by Standard & Poor’s and Baa3 by Moody’s, then the counterparty will periodically have the right to demand that we post collateral in an amount equal to the difference between (i) the net market value of all derivative transactions with such counterparty that have reached their fifth year anniversary, to the extent negative, and (ii) the applicable minimum call amount.
The amount of collateral required to be posted will change as, and to the extent, our net liability position increases or decreases by more than the applicable 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 collateral unless we meet the collateral trigger requirement, generally, at the next fifth-year anniversary.
As of December 31, 2022, our senior unsecured debt credit rating was B by Standard & Poor's and B3 by Moody's. As of December 31, 2022, five of our interest rate derivative hedges had reached their fifth-year anniversary; however, the net market value for these derivative hedges were in a net asset position, and accordingly, we were not required to post any collateral as of such date.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 17. Commitments and Contingencies
Ship Purchase Obligations
Our future capital commitments consist primarily of new ship orders. As of December 31, 2022, we had one Oasis-class ship and three ships of a new generation, known as our Icon-class, on order for our Royal Caribbean International brand with an aggregate capacity of approximately 22,500 berths. As of December 31, 2022, we had one Edge-class ship on order for our Celebrity brand with an aggregate capacity of approximately 3,250 berths. Additionally as of December 31, 2022, we had two ships on order with an aggregate capacity of approximately 1,460 berths for our Silversea Cruises brand. The following provides further information on recent developments with respect to our ship orders.
In September 2019, Silversea Cruises entered into two credit agreements, guaranteed by us, for the unsecured financing of the first and second Evolution-class ships for an amount of up to 80% of each ship's contract price through facilities to be guaranteed 95% by Euler Hermes, the official export credit agency of Germany. The maximum loan amount under each facility is not to exceed the United States dollar equivalent of €351.6 million in the case of the first Evolution-class ship and €359.0 million in the case of the second Evolution-class ship, or approximately $375.0 million and $382.9 million, respectively, based on the exchange rate at December 31, 2022. Each loan, once funded, will amortize semi-annually and will mature 12 years following the delivery of each ship. At our election, interest on each loan will accrue either (1) at a fixed rate of 4.14% and 4.18%, respectively (inclusive of the applicable margin) or (2) at a floating rate equal to LIBOR plus 0.79% and 0.83%, respectively. The first and second Evolution-class ships will each have a capacity of approximately 730 berths. In September 2021, we amended the credit agreements for the first and second Evolution-class ships to increase their maximum loan amounts by €175.6 million on an aggregate basis, or approximately $187.3 million based on the exchange rate at December 31, 2022. At our election, interest on incremental portion of each loan will accrue either (1) at a fixed rate of 4.34% and 4.38%, respectively (inclusive of the applicable margin) or (2) at a floating rate equal to LIBOR plus 0.99% and 1.03%, respectively.
In December 2019, we entered into a credit agreement for the unsecured financing of the sixth Oasis-class ship for up to 80% of the ship’s contract price through a facility to be guaranteed 100% by BpiFrance Assurance Export, the official export credit agency of France. Under the financing arrangement, we have the right, but not the obligation, to satisfy the obligations to be incurred upon delivery and acceptance of the ship under the shipbuilding contract by assuming, at delivery and acceptance, the debt indirectly incurred by the shipbuilder during the construction of the ship. The maximum loan amount under the facility is not to exceed the United States dollar equivalent of €1.3 billion, or approximately $1.4 billion based on the exchange rate at December 31, 2022. The loan will amortize semi-annually and will mature 12 years following delivery of the ship. Interest on the loan will accrue at a fixed rate of 3.00% (inclusive of margin). The sixth Oasis-class ship will have a capacity of approximately 5,700 berths.
In December 2019, we entered into a credit agreement for the unsecured financing of the third Icon-class ship for up to 80% of the ship’s contract price. Finnvera plc, the official export credit agency of Finland, has agreed to guarantee 95% of the substantial majority of the financing, with a smaller portion of the financing to be 95% guaranteed by Euler Hermes. The maximum loan amount under the facility is not to exceed the United States dollar equivalent of €1.4 billion, or approximately $1.5 billion based on the exchange rate at December 31, 2022. The loan, once funded, will amortize semi-annually and will mature 12 years following the delivery of the ship. Approximately 60% of the loan will accrue interest at a fixed rate of 3.29%. The balance of the loan will accrue interest at a floating rate of LIBOR plus 0.85%. The third Icon-class ship will have a capacity of approximately 5,600 berths
During 2017, we entered into credit agreements for the unsecured financing of the first two Icon-class ships for up to 80% of each ship’s contract price. For each ship, Finnvera plc, has agreed to guarantee 100% of a substantial majority of the financing to the lenders, with a smaller portion of the financing to be 95% guaranteed by Euler Hermes. The maximum loan amount under each facility is not to exceed €1.4 billion, or approximately $1.5 billion, based on the exchange rate at December 31, 2022. Interest on approximately 75% of each loan will accrue at a fixed rate of 3.56% and 3.76% for the first and the second Icon-class ships, respectively, and the balance will accrue interest at a floating rate ranging from LIBOR plus 1.10% to 1.15% and LIBOR plus 1.15% to 1.20% for the first and the second Icon-class ships, respectively. Each loan will amortize semi-annually and will mature 12 years following delivery of each ship. The first and second Icon-class ships will each have a capacity of approximately 5,600 berths.
During 2017, we entered into credit agreements for the unsecured financing of the fourth Edge-class ship for up to 80% of the ship’s contract price through facilities to be guaranteed 100% by Bpifrance Assurance Export. Under these financing arrangements, we have the right, but not the obligation, to satisfy the obligations to be incurred upon delivery and acceptance of the ship under the shipbuilding contract by assuming, at delivery and acceptance, the debt indirectly incurred by the shipbuilder during the construction of the ship. The maximum loan amount under the facility is not to exceed the United States dollar
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
equivalent of €714.6 million or approximately $762.2 million based on the exchange rate at December 31, 2022. The loan will amortize semi-annually and will mature 12 years following delivery of the ship. Interest on the loan will accrue at a fixed rate of 3.18%. The fourth Edge-class ships will have a capacity of approximately 3,250 berths.
Our future capital commitments consist primarily of new ship orders. As of December 31, 2022, the dates that ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:
| Ship | Shipyard | Expected to be delivered | Approximate<br>Berths |
|---|---|---|---|
| Royal Caribbean International — | |||
| Oasis-class: | |||
| Utopia of the Seas | Chantiers de l’Atlantique | 2nd Quarter 2024 | 5,700 |
| Icon-class: | |||
| Icon of the Seas | Meyer Turku Oy | 4th Quarter 2023 | 5,600 |
| Unnamed | Meyer Turku Oy | 2nd Quarter 2025 | 5,600 |
| Unnamed | Meyer Turku Oy | 2nd Quarter 2026 | 5,600 |
| Celebrity Cruises — | |||
| Edge-class: | |||
| Celebrity Ascent | Chantiers de l’Atlantique | 4th Quarter 2023 | 3,250 |
| Silversea Cruises — | |||
| Evolution-class: | |||
| Silver Nova | Meyer Werft | 2nd Quarter 2023 | 730 |
| Silver Ray | Meyer Werft | 2nd Quarter 2024 | 730 |
| TUI Cruises (50% joint venture) — | |||
| Mein Schiff 7 | Meyer Turku Oy | 2nd Quarter 2024 | 2,900 |
| Unnamed | Fincantieri | 4th Quarter 2024 | 4,100 |
| Unnamed | Fincantieri | 2nd Quarter 2026 | 4,100 |
| Total Berths | 38,310 |
In addition, as of December 31, 2022, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship for delivery in 2025, which is contingent upon completion of conditions precedent and financing.
As of December 31, 2022, the aggregate cost of our ships on order, presented in the above table, not including any ships on order by our Partner Brands, was approximately $9.8 billion, of which we had deposited $831.6 million. Approximately 52.3% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at December 31, 2022. Refer to Note 16. Fair Value Measurements and Derivative Instruments for further information.
Litigation
As previously reported, two lawsuits were filed against us in August 2019 in the U.S. District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation ("Havana Docks Action") alleges it holds an interest in the Havana Cruise Port Terminal, and the complaint filed by Javier Garcia-Bengochea (the "Port of Santiago Action") alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban government. The complaints further allege that we trafficked in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.
The Court dismissed the Port of Santiago Action with prejudice on the basis that the plaintiff acquired his interest in the Port of Santiago after the enactment of the Helms-Burton Act. In November 2022, the United States Court of Appeals for the 11th Circuit affirmed the Court's dismissal of the lawsuit.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In the Havana Docks Action, the Court entered final judgment in December 2022 in favor of the plaintiff and awarded damages and attorneys' fees to the plaintiff in the aggregate amount of approximately $112 million. We have appealed the judgment to the United States Court of Appeals for the 11th Circuit and the plaintiff has cross-appealed with regards to the interest calculation used for purposes of determining damages. We believe we have meritorious grounds for and intend to vigorously pursue our appeal. During the fourth quarter of 2022, we recorded a charge of approximately $130.0 million to Other (expense) income within our consolidated statements of comprehensive loss related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.
In addition, we are routinely involved in claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.
Other
Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.
If any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of our board of directors is no longer comprised of individuals who were members of our board of directors on the first day of such period, we may be obligated to prepay indebtedness outstanding under our credit facilities, which we may be unable to replace on similar terms. Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.
At December 31, 2022, we have future commitments to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts as follows (in thousands):
| Year | ||
|---|---|---|
| 2023 | $ | 187,855 |
| 2024 | 101,324 | |
| 2025 | 96,798 | |
| 2026 | 55,872 | |
| 2027 | 52,883 | |
| Thereafter | 455,858 | |
| $ | 950,590 |
F-49
Document
Exhibit 4.1
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Royal Caribbean Cruises Ltd.
Ladies and Gentlemen:
In accordance with Item 601(b)(4)(iii) of Regulation S-K, Royal Caribbean Cruises Ltd. (the “Registrant”) has not filed herewith any instrument with respect to long-term debt not being registered where the total amount of securities authorized thereunder does not exceed ten percent (10%) of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such agreement to the Securities and Exchange Commission upon request.
Sincerely,
ROYAL CARIBBEAN CRUISES LTD.
By: /s/ R. Alexander Lake_______
Title: Senior Vice President, Chief Legal Officer, and Secretary
Document
Exhibit 10.72
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of April 5, 2019,
as amended on May 7, 2020,
as amended on July 28, 2020,
as amended on February 12, 2021,
as amended on July 21, 2022, and
as amended on January 12, 2023,
among
ROYAL CARIBBEAN CRUISES LTD., as the Borrower,
and
THE BANK OF NOVA SCOTIA, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, BBVA SECURITIES INC., CITIGROUP GLOBAL MARKETS LIMITED, FIFTH THIRD BANK, JPMORGAN CHASE BANK, N.A., MIZUHO BANK, LTD., SUMITOMO MITSUI BANKING CORPORATION and SUNTRUST ROBINSON HUMPHREY, INC. as Joint Lead Arrangers and Joint Bookrunners
and
JPMORGAN CHASE BANK, N.A. as Administrative Agent
and
BANK OF AMERICA, N.A., BANCO BILBAO VIZCAYA ARGENTARIA, S.A. NEW YORK BRANCH, CITIGROUP GLOBAL MARKETS LIMITED, FIFTH THIRD BANK, JPMORGAN CHASE BANK, N.A., MIZUHO BANK, LTD., SUMITOMO MITSUI BANKING CORPORATION and SUNTRUST BANK as Co-Syndication Agents
TABLE OF CONTENTS
PAGE
| Article IDEFINITIONS AND ACCOUNTING TERMS | |
|---|---|
| Section 1.1.Defined Terms | 1 |
| Section 1.2.Use of Defined Terms; Other Definitional Provisions | 28 |
| Section 1.3.Cross-References | 29 |
| Section 1.4.Accounting and Financial Determinations | 29 |
| Article IICOMMITMENTS, BORROWING PROCEDURES AND NOTES | |
| Section 2.1.The Advances and Letters of Credit | 30 |
| Section 2.2.Making the Advances | 31 |
| Section 2.3.Issuance of and Drawings and Reimbursement Under Letters of Credit | 34 |
| Section 2.4.Fees. | 36 |
| Section 2.5.Termination or Reduction of the Commitments | 37 |
| Section 2.6.Repayment of Advances and Letter of Credit Drawings | 38 |
| Section 2.7.Interest on Advances | 39 |
| Section 2.8.Interest Rate Determination | 40 |
| Section 2.9.Optional Conversion of Revolving Credit Advances | 40 |
| Section 2.10.Prepayments of Advances | 41 |
| Section 2.11.Payments and Computations | 42 |
| Section 2.12.Sharing of Payments, Etc. | 44 |
| Section 2.13.Evidence of Debt | 45 |
| Section 2.14.Increase in Aggregate Commitments | 45 |
| Section 2.15.Defaulting Lenders | 47 |
| Section 2.16.Extension of Termination Date | 49 |
| Section 2.17.Other Interest Rate Provisions | 51 |
| Section 2.17.1.Inability to Determine Rates | 51 |
| Section 2.17.2.Illegality | 52 |
| Section 2.17.3.Benchmark Replacement Setting | 52 |
| Article IIICERTAIN OTHER PROVISIONS | |
| Section 3.1.[Intentionally Omitted] | 54 |
| Section 3.2.[Intentionally Omitted] | 54 |
| Section 3.3.Increased Costs, etc. | 54 |
| Section 3.4.Funding Losses | 55 |
| Section 3.5.Increased Capital Costs | 56 |
| Section 3.6.Taxes | 57 |
i
| Section 3.7.Reserve Costs | 58 |
|---|---|
| Section 3.8.Replacement Lenders, etc. | 59 |
| Section 3.9.Setoff | 60 |
| Section 3.10.Use of Proceeds | 60 |
| Article IVCONDITIONS TO BORROWING | |
| Section 4.1.Effectiveness | 60 |
| Section 4.2.All Borrowings and Issuances | 62 |
| Section 4.3.Determinations Under Section 4.1 | 62 |
| Article VREPRESENTATIONS AND WARRANTIES | |
| Section 5.1.Organization, etc. | 63 |
| Section 5.2.Due Authorization, Non-Contravention, etc. | 63 |
| Section 5.3.Government Approval, Regulation, etc. | 63 |
| Section 5.4.Compliance with Environmental Laws | 64 |
| Section 5.5.Validity, etc. | 64 |
| Section 5.6.Financial Information | 64 |
| Section 5.7.No Default, Event of Default or Prepayment Event | 64 |
| Section 5.8.Litigation | 64 |
| Section 5.9.Vessels | 64 |
| Section 5.10.Subsidiaries | 64 |
| Section 5.11.Obligations rank pari passu | 65 |
| Section 5.12.No Filing, etc. Required | 65 |
| Section 5.13.No Immunity | 65 |
| Section 5.14.Pension Plans | 65 |
| Section 5.15.Investment Company Act | 65 |
| Section 5.16.Regulation U | 65 |
| Section 5.17.Accuracy of Information | 65 |
| Section 5.18.Compliance with Laws | 66 |
| Section 5.19.ERISA | 66 |
| Section 5.20.EEA Financial Institution | 66 |
| Article VICOVENANTS | |
| Section 6.1.Affirmative Covenants | 66 |
| Section 6.1.1.Financial Information, Reports, Notices, etc. | 66 |
| Section 6.1.2.Approvals and Other Consents | 68 |
| Section 6.1.3.Compliance with Laws, etc. | 68 |
| Section 6.1.4.[Intentionally omitted] | 69 |
| Section 6.1.5.Insurance | 69 |
ii
| Section 6.1.6.Books and Records | 69 |
|---|---|
| Section 6.2.Negative Covenants | 69 |
| Section 6.2.1.Business Activities | 69 |
| Section 6.2.2.Indebtedness | 70 |
| Section 6.2.3.Liens | 70 |
| Section 6.2.4.Financial Condition | 72 |
| Section 6.2.5.[Intentionally omitted] | 73 |
| Section 6.2.6.Consolidation, Merger, etc. | 73 |
| Section 6.2.7.Asset Dispositions, etc. | 74 |
| Section 6.2.8.Use of Proceeds | 75 |
| Section 6.2.9.Minimum Liquidity | 75 |
| Section 6.2.10.Additional Undertakings | 75 |
| Section 6.2.11.Designated Indebtedness | 75 |
| Article VIIEVENTS OF DEFAULT | |
| Section 7.1.Listing of Events of Default | 77 |
| Section 7.1.1.Non-Payment of Obligations | 77 |
| Section 7.1.2.Breach of Warranty | 77 |
| Section 7.1.3.Non-Performance of Certain Covenants and Obligations | 78 |
| Section 7.1.4.Default on Other Indebtedness | 78 |
| Section 7.1.5.Pension Plans | 79 |
| Section 7.1.6.Bankruptcy, Insolvency, etc. | 79 |
| Section 7.1.7.Guarantees | 80 |
| Section 7.2.Action if Bankruptcy | 80 |
| Section 7.3.Action if Other Event of Default | 80 |
| Article VIIIPREPAYMENT EVENTS | |
| Section 8.1.Listing of Prepayment Events | 80 |
| Section 8.1.1.Change of Control | 80 |
| Section 8.1.2.Unenforceability | 81 |
| Section 8.1.3.Approvals | 81 |
| Section 8.1.4.Non-Performance of Certain Covenants and Obligations | 81 |
| Section 8.1.5.Judgments | 81 |
| Section 8.2.Mandatory Prepayment | 81 |
| Article IXACTIONS IN RESPECT OF THE LETTERS OF CREDIT | |
| Section 9.1.Actions in Respect of the Letters of Credit | 82 |
| Article XTHE AGENTS |
iii
| Section 10.1.Actions | 82 |
|---|---|
| Section 10.2.Rights as a Lender | 83 |
| Section 10.3.Lender Indemnification | 83 |
| Section 10.4.Exculpation | 84 |
| Section 10.5.Reliance by Administrative Agent | 85 |
| Section 10.6.Delegation of Duties | 85 |
| Section 10.7.Resignation of Administrative Agent | 85 |
| Section 10.8.Non-Reliance on Administrative Agent and Other Lenders | 86 |
| Section 10.9.No Other Duties | 87 |
| Section 10.10.Copies, etc. | 87 |
| Section 10.11.Agency Fee | 87 |
| Section 10.12.Lender ERISA Matters | 87 |
| Section 10.13.Certain Erroneous Payments | 87 |
| Article XIMISCELLANEOUS PROVISIONS | |
| Section 11.1.Waivers, Amendments, etc. | 88 |
| Section 11.2.Notices | 89 |
| Section 11.3.Payment of Costs and Expenses | 91 |
| Section 11.4.Indemnification | 91 |
| Section 11.5.Survival | 92 |
| Section 11.6.Severability | 93 |
| Section 11.7.Headings | 93 |
| Section 11.8.Execution in Counterparts, Effectiveness, etc. | 93 |
| Section 11.9.Governing Law; Entire Agreement | 93 |
| Section 11.10.Successors and Assigns | 93 |
| Section 11.11.Sale and Transfer of Advances and Note; Participations in Advances | 93 |
| Section 11.11.1.Assignments | 93 |
| Section 11.11.2.Participations | 96 |
| Section 11.11.3.Register | 97 |
| Section 11.12.Other Transactions | 97 |
| Section 11.13.Forum Selection and Consent to Jurisdiction | 98 |
| Section 11.14.Process Agent | 99 |
| Section 11.15.Judgment | 99 |
| Section 11.16.No Liability of the Issuing Banks | 99 |
| Section 11.17.Waiver of Jury Trial | 100 |
| Section 11.18.Confidentiality | 100 |
| Section 11.19.No Fiduciary Relationship | 101 |
iv
| Section 11.20.Electronic Execution of Assignments and Certain Other Documents | 101 |
|---|---|
| Section 11.21.Contractual Recognition of Bail-In | 101 |
v
SCHEDULES
SCHEDULE I - First Extension Amendment Effective Date Advances and Commitments
SCHEDULE II - Disclosure Schedule
SCHEDULE III - Notices
SCHEDULE IV - Beneficiary Parties
EXHIBITS
Exhibit A - Form of Note
Exhibit B-1 - Form of Borrowing Request (Revolving Credit Borrowings)
Exhibit B-2 - Form of Borrowing Request (Swing Line Borrowings)
Exhibit C - Form of Interest Period Notice
Exhibit D - Form of Lender Assignment Agreement
Exhibit E - Form of Commitment Increase Agreement
Exhibit F - Form of Added Lender Agreement
Exhibit G - Form of Guaranty
Exhibit H - Form of Subordinated Guaranty
Exhibit I - Form of Customer Deposit Report
Exhibit J - Form of Liquidity Projections
i
Exhibit 10.72
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 5, 2019, as amended on May 7, 2020, July 28, 2020, February 12, 2021, July 21, 2022, and January 12, 2023, is among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the “Borrower”), the various financial institutions as are or shall become parties hereto as Lenders (and their respective successors or assigns, collectively, the “Lender Parties”) and the Administrative Agent (as defined below).
W I T N E S S E T H:
WHEREAS, the Borrower has obtained Commitments from the Lender Parties pursuant to which Advances have been and will be made to the Borrower and Letters of Credit will be issued for the account of the Borrower and its Subsidiaries, in a maximum aggregate principal amount and Available Amount together at any one time outstanding not to exceed (x) $722,600,000.00, from time to time prior to the Termination Date with respect to Non-Extended Commitments and (y) $1,202,400,000.00, from time to time prior to the Termination Date with respect to Extended Commitments, in each case, subject to increase or reduction in accordance with the terms of this Agreement; and
WHEREAS, the Lender Parties are willing, on the terms and subject to the conditions hereinafter set forth (including Article IV), to extend Advances to, and, in the case of the Issuing Banks, to issue Letters of Credit for the account of, the Borrower; and
WHEREAS, the proceeds of the Advances made hereunder (i) have been used to pay all of the accrued fees and interest under the Existing Credit Agreement and expenses related thereto and (ii) have been, and will be used for working capital and other general corporate purposes, including capital expenditures and acquisition financing, of the Borrower and its Subsidiaries.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, when capitalized, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):
“2022 Extension Amendment” means that certain Amendment to Credit Agreement and Appointment of Successor Administrative Agent, dated as of January 12, 2023, by and among the Borrower, Scotiabank, JPMorgan and the Lenders party thereto.
“2.875% Convertible Debt” means the aggregate amount of debt securities issued by the Borrower pursuant to the 2.875% Convertible Notes Indenture which are, in accordance with the provisions of the 2.875% Convertible Notes Indenture, converted, or to be converted, into equity securities of the Borrower on the 2.875% Maturity Date.
“2.875% Convertible Notes Indenture” means that certain Indenture, dated as of October 16, 2020 (as partially refinanced by the $1,150,000,000 6.00% convertible senior notes due 2025 issued under that certain Indenture, dated as of August 5, 2022, and as further amended, supplemented, extended, refinanced, replaced and/or otherwise modified from time to time), in
respect of the $575,000,000 2.875% convertible senior notes due 2023, by and among the Borrower, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee.
“2.875% Maturity Date” has the meaning given to the term “Maturity Date” in the 2.875% Convertible Notes Indenture (and being, as of July 21, 2022, November 15, 2023).
“4.25% Convertible Debt” means the aggregate amount of debt securities issued by the Borrower pursuant to the 4.25% Convertible Notes Indenture which are, in accordance with the provisions of the 4.25% Convertible Notes Indenture, converted, or to be converted, into equity securities of the Borrower on the 4.25% Maturity Date.
“4.25% Convertible Notes Indenture” means that certain Indenture, dated as of June 9, 2020 (as partially refinanced by the $1,150,000,000 6.00% convertible senior notes due 2025 issued under that certain Indenture, dated as of August 5, 2022, and as further amended, supplemented, extended, refinanced, replaced and/or otherwise modified from time to time), in respect of the $1,150,000,000 4.250% convertible senior notes due 2023, by and among the Borrower, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee.
“4.25% Maturity Date” has the meaning given to the term “Maturity Date” in the 4.25% Convertible Notes Indenture (and being, as of July 21, 2022, June 15, 2023).
“ABR” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus ½ of 1% and (c) the Adjusted Term SOFR Rate for a one month Interest Period as published two U.S. Government Securities Business Days prior to such day (or if such day is not a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business Day) plus 1%; provided that for the purpose of this definition, the Adjusted Term SOFR Rate for any day shall be based on the Term SOFR Reference Rate at approximately 5:00 a.m. Chicago time on such day (or any amended publication time for the Term SOFR Reference Rate, as specified by the Term SOFR Administrator in the Term SOFR Reference Rate methodology). Any change in the ABR due to a change in the Prime Rate, the Federal Funds Rate or the Adjusted Term SOFR Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Rate or the Adjusted Term SOFR Rate, respectively. If the ABR is being used as an alternate rate of interest pursuant to Section 2.17.1 (for the avoidance of doubt, only until the Benchmark Replacement has been determined pursuant to Section 2.7.3, then the ABR shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the ABR as determined pursuant to the foregoing would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.
“ABR Advances” means an Advance that bears interest based on the ABR.
“ABR Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR.”
“Acceptable Lender” means a commercial banking institution with a bank rating by Moody’s/S&P of Baa1 and BBB+ or above.
“Accumulated Other Comprehensive Income (Loss)” means at any date the Borrower’s accumulated other comprehensive income (loss) on such date, determined in accordance with GAAP.
“Added Lender” is defined in Section 2.14(a).
“Added Lender Agreement” means an Added Lender Agreement substantially in the form of Exhibit F.
“Adjusted Daily Simple RFR” means, for purposes of any calculation, the rate per annum equal to the Daily Simple RFR; provided that if the Adjusted Daily Simple RFR as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Adjusted EURIBOR Rate” means, for purposes of any calculation, the rate per annum equal to (a) the EURIBOR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate; provided that if the Adjusted EURIBOR Rate as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Adjusted Term SOFR” means, for purposes of any calculation, the rate per annum equal to (a) Term SOFR for such calculation plus (b) the Term SOFR Adjustment; provided that if Adjusted Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
“Administrative Agent” means (a) at all times prior to the First Extension Amendment Effective Date, Scotiabank and (b) at all times on and after the First Extension Amendment Effective Date, JPMorgan, and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent, and as shall have accepted such appointment, pursuant to Section 10.7.
“Administrative Agent’s Account” means (a) in the case of Advances denominated in Dollars, the account of the Agent maintained by the Administrative Agent at JPMorgan at its office at JPMorgan Chase Bank, N.A. – wiring instructions: ABA# 021 000 021, Account No. 9008113381H5521, Attention: Loan & Agency, Reference: Royal Caribbean 01/2023, (b) in the case of Advances denominated in any Committed Currency, the account of the Administrative Agent designated in writing from time to time by the Administrative Agent to the Borrower and the Lender Parties for such purpose and (c) in any such case, such other account of the Administrative Agent as is designated in writing from time to time by the Administrative Agent to the Borrower and the Lender Parties for such purpose.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“Advance” means a Revolving Credit Advance or a Swing Line Advance.
“Affiliate” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
“Agents” means (a) the Administrative Agent and (b) the Lenders listed as the co-syndication agents on the cover page hereof in their respective capacities as agents under Article X, together with their respective successors (if any) in such capacity.
“Agreed Currency” means Dollars and each Committed Currency.
“Agreement” means, on any date, this Amended and Restated Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time further amended,
supplemented, amended and restated (including by the 2022 Extension Amendment), or otherwise modified and in effect on such date.
“Annualized Net Cash from Operating Activities” means, with respect to any calculation of net cash from operating activities for any period:
(a) in the case of the period of four consecutive Fiscal Quarters ending with the first Fiscal Quarter ending after the last day of the Waiver Period (and, if applicable, with respect to the period of four consecutive Fiscal Quarters ending with the Fiscal Quarter for which compliance with the covenants set forth in Section 6.2.4 is tested for purposes of determining whether a Covenant Modification Date has occurred), the product of (i) net cash from operating activities for such Fiscal Quarter and (ii) four,
(b) in the case of the period of four consecutive Fiscal Quarters ending with the second Fiscal Quarter ending after the last day of the Waiver Period, the product of (i) the sum of net cash from operating activities for such Fiscal Quarter and the immediately preceding Fiscal Quarter and (ii) two, and
(c) in the case of the period of four consecutive Fiscal Quarters ending with the third Fiscal Quarter ending after the last day of the Waiver Period, the product of (i) the sum of net cash from operating activities for such Fiscal Quarter and the two immediately preceding Fiscal Quarters and (ii) four-thirds, in each case determined in accordance with GAAP as shown in the Borrower’s consolidated statements of cash flows for such period.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977, as amended.
“Applicable Jurisdiction” means the jurisdiction or jurisdictions under which the Borrower is organized, domiciled or resident or from which any of its business activities are conducted or in which any of its properties are located and which has jurisdiction over the subject matter being addressed.
“Applicable Margin” means as of any date, a percentage per annum determined by reference to the Senior Debt Rating in effect on such date as set forth below:
| Senior Debt Rating S&P/Moody’s | Applicable Margin for <br>ABR <br>Non-Extended Advances | Applicable Margin for <br>ABR <br>Extended Advances (other than Swing Line Advances) | Applicable Margin for <br>SOFR, EURIBOR and RFR<br>Non-Extended Advances | Applicable Margin for <br>SOFR, EURIBOR and RFR<br>Extended Advances and Swing Line Advances |
|---|---|---|---|---|
| Level 1<br>A- or A3 <br>(or higher) | 0.000% | 0.145% | 0.795% | 1.145% |
| Level 2<br>BBB+ or Baa1 | 0.000% | 0.250% | 0.900% | 1.250% |
| Level 3<br>BBB or Baa2 | 0.000% | 0.350% | 1.000% | 1.350% |
| Level 4<br>BBB- or Baa3 | 0.100% | 0.450% | 1.100% | 1.450% |
| Level 5<br>BB+ or Ba1<br>(or lower) | 0.300% | 1.050% | 1.300% | 2.050% |
“Applicable Percentage” means, as of any date a percentage per annum determined by reference to the Senior Debt Rating in effect on such date as set forth below:
| Senior Debt Rating<br>S&P/Moody’s | Applicable Percentage |
|---|---|
| Level 1<br>A- or A3 (or higher) | 0.080% |
| Level 2<br>BBB+ or Baa1 | 0.100% |
| Level 3<br>BBB or Baa2 | 0.125% |
| Level 4<br>BBB- or Baa3 | 0.150% |
| Level 5<br>BB+ or Ba1 (or lower) | 0.200% |
“Arrangers” means Scotiabank, Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any other registered broker-dealer wholly owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement), BBVA Securities Inc., Citigroup Global Markets Limited, Fifth Third Bank, JPMorgan Chase Bank, N.A., Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, and SunTrust Robinson Humphrey, Inc. in their capacities as joint lead arrangers and joint bookrunners.
“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.17.3(d).
“Benchmark” means initially, the (i) the Adjusted Daily Simple RFR for Advances denominated in Sterling, (ii) the Term SOFR Reference Rate for Advances denominated in Dollars and (iii) the Adjusted EURIBOR Rate for Advances denominated in Euros; provided that if a Benchmark Transition Event has occurred with respect to the applicable Relevant Rate or the then-current Benchmark for such Agreed Currency, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.17.3(a).
“Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment; provided that, if such Benchmark Replacement as so determined would be less than the Floor, such Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities at such time.
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(b) in the case of clause (c) of the definition of “Benchmark Transition Event”, the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the F.R.S. Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(c) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.17.3 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.17.3.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Beneficiary Party” means the Administrative Agent and each agent, trustee or other representative for each agreement listed on Schedule IV hereto, as such agreement or any of the obligations thereunder may be amended, restated, supplemented, refinanced or otherwise modified from time to time, so long as such amendment, restatement, supplement, refinancing or other modification does not increase the aggregate principal amount of Indebtedness or other monetary obligations thereunder to an amount that is more than the aggregate principal amount of commitments, Indebtedness and other monetary obligations outstanding thereunder as of the Waiver Effective Date plus the amount of any uncommitted incremental facilities available thereunder as of the Waiver Effective Date plus the amount of unpaid accrued interest and premium thereon and underwriting discounts, fees, commissions and expenses, associated with such amendment, restatement, supplement, refinancing or other modification.
“Borrower” is defined in the preamble.
“Borrowing” means a Revolving Credit Borrowing or a Swing Line Borrowing.
“Business Day” means, any day (other than a Saturday or a Sunday) on which banks are open for business in New York City; provided that, in addition to the foregoing, a Business Day shall be (a) in relation to Advances denominated in Euros and in relation to the calculation or computation of EURIBOR, any day which is a TARGET Day, (b) in relation to RFR Advances and any interest rate settings, fundings, disbursements, settlements or payments of any such RFR Advances, or any other dealings of such Advances referencing SONIA, any such day that is only a RFR Business Day and (c) in relation to Advances referencing the Adjusted Term SOFR Rate and any interest rate settings, fundings, disbursements, settlements or payments of any such Advances referencing Adjusted Term SOFR or any other dealings of such Advances referencing Adjusted Term SOFR, any such day that is a U.S. Government Securities Business Day.
“Capital Lease Obligations” means obligations of the Borrower or any Subsidiary of the Borrower under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases.
“Capitalization” means, as at any date, the sum of (a) Net Debt on such date, plus (b) Stockholders’ Equity on such date.
“Capitalized Lease Liabilities” means the principal portion of all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
“Cash Equivalents” means all amounts other than cash that are included in the “cash and cash equivalents” shown on the Borrower’s balance sheet prepared in accordance with GAAP.
“CBR Spread” means the Applicable Margin applicable to any Advance that is replaced by an Advance bearing interest at the Central Bank Rate pursuant to Section 2.17.
“Central Bank Rate” means, the greater of (I)(A) for any Advance denominated in (a) Sterling, the Bank of England (or any successor thereto)’s “Bank Rate” as published by the Bank of England (or any successor thereto) from time to time and (b) Euro, one of the following three rates as may be selected by the Administrative Agent in its reasonable discretion: (1) the fixed rate for the main refinancing operations of the European Central Bank (or any successor thereto), or, if that rate is not published, the minimum bid rate for the main refinancing operations of the European Central Bank (or any successor thereto), each as published by the European Central Bank (or any successor thereto) from time to time, (2) the rate for the marginal lending facility of the European Central Bank (or any successor thereto), as published by the European Central Bank (or any successor thereto) from time to time or (3) the rate for the deposit facility of the central banking system of the Participating Member States, as published by the European Central Bank (or any successor thereto) from time to time and (II) the Floor.
“Change of Control” means an event or series of events by which (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 50% or more of the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or (b) during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body.
“Closing Date” is defined in Section 4.1.
“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.
“Commitment” means a Revolving Credit Commitment, a Letter of Credit Commitment or a Swing Line Commitment.
“Commitment Increase” is defined in Section 2.14.
“Commitment Termination Event” means:
(a) any Event of Default described in clauses (b) through (d) of Section 7.1.6 shall occur with respect to the Borrower;
(b) the occurrence and continuance of any Event of Default (other than as described in clause (a) above) and the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated; or
(c) the occurrence and continuance of a Prepayment Event and the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated.
“Committed Currencies” means Sterling and Euros.
“Conforming Changes” means, with respect to either the use or administration of Adjusted Term SOFR, Adjusted Daily Simple RFR or the Adjusted EURIBOR Rate or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “ABR,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,”, the definition of “Target Day”, the definition of “RFR Business Day”, the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 2.17.1 and other technical, administrative or operational matters) that the Administrative Agent, in consultation with the Borrower, decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent, in consultation with the Borrower, decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent, in consultation with the Borrower, decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Consenting Lender” is defined in Section 2.16(b).
“Controlled Group” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
“Convert”, “Conversion” and “Converted” each refers to a conversion of Revolving Credit Advances of one Type into Revolving Credit Advances of the other Type pursuant to Section 2.9.
“Covenant Modification Date” means the first date after January 1, 2022 as so designated in a written notice, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, to the Administrative Agent as the “Covenant Modification Date”; provided that such notice shall provide reasonably detailed calculations, in form and substance reasonably satisfactory to the Administrative Agent, demonstrating compliance with the covenants set forth in Section 6.2.4 of this Agreement as of the most recently ended Fiscal Quarter for which financial statements were required to be delivered pursuant to Section 6.1.1 of this Agreement.
“Daily Simple RFR” means, for any day (an “RFR Interest Day”), an interest rate per annum equal to, for any RFR Advance denominated in Sterling, SONIA for the day that is 5 RFR Business Days prior to (A) if such RFR Interest Day is a RFR Business Day, such RFR
Interest Day or (B) if such RFR Interest Day is not a RFR Business Day, the RFR Business Day immediately preceding such RFR Interest Day.
“Declining Lender” has the meaning specified in Section 2.16(b).
“Default” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.
“Defaulting Lender” means, subject to Section 2.15(d), at any time, any Lender that, at such time (a) has failed to (i) fund all or any portion of its Advances within two Business Days of the date such Advances were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, any Issuing Bank, any Swing Line Bank or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Advances) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent or any Issuing Bank or Swing Line Bank in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any debtor relief law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a governmental authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such governmental authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.15(d)) upon delivery of written notice of such determination to the Borrower, each Issuing Bank, each Swing Line Bank and each Lender.
“Designated Assets” means the Vessels known on the Waiver Effective Date as (i) Symphony of the Seas, (ii) Oasis of the Seas, (iii) Harmony of the Seas, (iv) Spectrum of the Seas, (v) Quantum of the Seas, (vi) Ovation of the Seas and (vii) Anthem of the Seas (it being understood that such Vessels shall remain “Designated Assets” regardless of any change in name or ownership after the Waiver Effective Date).
“Designated Holdco Subsidiaries” means one or more Subsidiaries of the Borrower that directly own any of the equity interests issued by any Subsidiary of the Borrower that owns any Designated Assets.
“Designated Indebtedness” means any Indebtedness that is incurred by (a) the Borrower and guaranteed by one or more Designated Holdco Subsidiaries or (b) one or more Designated Holdco Subsidiaries. For the avoidance of doubt, Designated Indebtedness shall not include (x) any Indebtedness under any Permitted Secured Facility or (y) issuances of unsecured commercial paper incurred in the ordinary course of business of the Borrower and its Subsidiaries.
“Designated Release Event” means any event or other circumstance that results in all Designated Indebtedness created, incurred or assumed after the Waiver Effective Date no longer remaining outstanding (whether as a result of repayment, redemption or otherwise).
“Disclosure Schedule” means the Disclosure Schedule attached hereto as Schedule II.
“Dollar” and the sign “$” mean lawful money of the United States.
“Dollar Equivalent” means, for any amount, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in an Committed Currency, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of Dollars with the Committed Currency last provided (either by publication or otherwise provided to the Administrative Agent) by Reuters on the Business Day (New York City time) immediately preceding the date of determination or if such service ceases to be available or ceases to provide a rate of exchange for the purchase of Dollars with the Committed Currency, as provided by such other publicly available information service which provides that rate of exchange at such time in place of Reuters chosen by the Administrative Agent in its sole discretion (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems appropriate in its reasonable discretion) and (c) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems appropriate in its reasonable discretion.
“Effective Date” means April 5, 2019.
“Environmental Laws” means all applicable federal, state, local or foreign statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to the protection of the environment.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.
“EURIBOR Advance” means an Advance that bears interest at a rate based on the Adjusted EURIBOR Rate.
“EURIBOR Rate” means, with respect to any Borrowing denominated in Euros and for any Interest Period, the EURIBOR Screen Rate, two TARGET Days prior to the commencement of such Interest Period.
“EURIBOR Screen Rate” means the euro interbank offered rate administered by the European Money Markets Institute (or any other person which takes over the administration of
that rate) for any Interest Period displayed (before any correction, recalculation or republication by the administrator) on page EURIBOR01 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters as published at approximately 11:00 a.m. Brussels time two TARGET Days prior to the commencement of such Interest Period. If such page or service ceases to be available, the Administrative Agent may specify another page or service displaying the relevant rate after consultation with the Borrower.
“Euro” or “€” means the lawful currency of the European Union as constituted by the Treaty of Rome which established the European Community, as such treaty may be amended from time to time and as referred to in the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.
“Event of Default” is defined in Section 7.1.
“Existing Credit Agreement” means the Credit Agreement dated as of June 15, 2015, as amended and restated as of December 4, 2017, and as further amended, supplemented or otherwise modified from time to time prior to the date hereof, among the Borrower, the lenders parties thereto and The Bank of Nova Scotia, as administrative agent.
“Existing Principal Subsidiaries” means each Subsidiary of the Borrower that is a Principal Subsidiary on the Effective Date.
“Extended Advance” means an Extended Revolving Credit Advance or a Swing Line Advance. As of the First Extension Amendment Effective Date, the Extended Advances are entirely comprised of Extended Revolving Credit Advances.
“Extended Commitment” means an Extended Revolving Credit Commitment, a Letter of Credit Commitment or a Swing Line Commitment.
“Extended Lender” means an “Extended Lender” (as defined in the 2022 Extension Amendment).
“Extended Lender Event of Default” means any Event of Default arising from the breach of Section 6.2.9 of this Agreement.
“Extended Lender Prepayment Event” means any Prepayment Event arising from the breach of Section 6.2.9 of this Agreement.
“Extended Revolving Credit Advance” means (a) a Revolving Credit Advance held by an Extended Lender or a Lender to whom such a Revolving Credit Advance was assigned pursuant to the terms of this Agreement or (b) a Revolving Credit Advance made with respect to a Non-Extended Commitment that was converted into an Extended Revolving Credit Commitment pursuant to Section 2.14. As of the First Extension Amendment Effective Date and after giving effect to the prepayments and commitment reductions that occurred on such date, the aggregate principal amount of Extended Revolving Credit Advances is $1,171,793,454.54.
“Extended Revolving Credit Commitment” means (a) a Revolving Credit Commitment held by an Extended Lender or a Lender to whom such a Revolving Credit Commitment was assigned pursuant to the terms of this Agreement or (b) a Revolving Credit Commitment held by a Lender that has converted its Non-Extended Commitment into an Extended Revolving Credit Commitment pursuant to Section 2.14. As of the First Extension Amendment Effective Date and
after giving effect to the prepayments and commitment reductions that occurred on such date, the aggregate principal amount of Extended Revolving Credit Commitments is $1,202,400,000.00.
“Extension Date” is defined in Section 2.16.
“FATCA” means Sections 1471 through 1474 of the Code, as in effect at the date hereof (or any amended or successor version that is substantively comparable), any current or future regulations promulgated thereunder or official interpretations thereof, any agreements entered into pursuant to section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or official practices adopted pursuant to any published intergovernmental agreement entered into in connection with the implementation of such sections of the Code, any published intergovernmental agreement entered into in connection with the implementation of such Sections of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such published intergovernmental agreements.
“Federal Funds Rate” means, for any day, the greater of (a) the rate calculated by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the Federal funds effective rate and (b) the Floor.
“First Extension Amendment Effective Date” means January 12, 2023.
“First Priority Guaranty” is defined in Section 6.2.11(b).
“First Waiver Extension Date” means July 28, 2020.
“Fiscal Quarter” means any quarter of a Fiscal Year.
“Fiscal Year” means any annual fiscal reporting period of the Borrower.
“Fixed Charge Coverage Ratio” means, as of the end of any Fiscal Quarter, the ratio computed for the period of four consecutive Fiscal Quarters ending on the close of such Fiscal Quarter of:
(a) (i) net cash from operating activities (determined in accordance with GAAP) for such period; or
(ii) for each of the first three Fiscal Quarters ending after the last day of the Waiver Period (and, for purposes of determining whether a Covenant Modification Date has occurred, the Fiscal Quarter most recently ended prior to the proposed Covenant Modification Date for which financial statements were required to be delivered pursuant to Section 6.1.1 of this Agreement), Annualized Net Cash from Operating Activities for such period,
in each case as shown in the Borrower’s consolidated statements of cash flows for such period, to
(b) the sum of:
(i) dividends actually paid by the Borrower during such period (including, without limitation, dividends in respect of preferred stock of the Borrower); plus
(ii) scheduled cash payments of principal of all debt less New Financings (determined in accordance with GAAP, but in any event including Capitalized Lease Liabilities),
in each case, of the Borrower and its Subsidiaries for such period.
“Floor” means a rate of interest equal to 0.00%.
“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any successor thereto.
“GAAP” is defined in Section 1.4.
“Government-related Obligations” means obligations of the Borrower or any Subsidiary of the Borrower under, or Indebtedness incurred by the Borrower or any Subsidiary of the Borrower to satisfy obligations under, any governmental requirement imposed by any Applicable Jurisdiction that must be complied with to enable the Borrower and its Subsidiaries to continue their business in such Applicable Jurisdiction, excluding, in any event, any taxes imposed on the Borrower or any Subsidiary of the Borrower.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Guarantors” means those certain Subsidiaries of the Borrower that guarantee the Obligations from time to time.
“Hedging Instruments” means options, caps, floors, collars, swaps, forwards, futures and any other agreements, options or instruments substantially similar thereto or any series or combination thereof used to hedge interest, foreign currency and commodity exposures.
“herein”, “hereof”, “hereto”, “hereunder” and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document.
“IFRS” is defined in Section 1.4.
“Increased Commitment Date” is defined in Section 2.14(b).
“Increasing Lenders” is defined in Section 2.14(a).
“Indebtedness” means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than (i) trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 180 days of the date the respective goods are delivered or the respective services are rendered and (ii) any purchase price adjustment, earnout or deferred payment of a similar nature incurred in connection with an
acquisition (but only to the extent that no payment has at the time accrued pursuant to such purchase price adjustment, earnout or deferred payment obligation); (c) Indebtedness of others secured by a Lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) guarantees by such Person of Indebtedness of others, up to the amount of Indebtedness so guaranteed by such Person; (g) obligations of such Person in respect of surety bonds and similar obligations; and (h) liabilities arising under Hedging Instruments.
“Indemnified Liabilities” is defined in Section 11.4.
“Indemnified Parties” is defined in Section 11.4.
“Interest Period” means, for each SOFR Advance or EURIBOR Advance comprising part of the same Revolving Credit Borrowing, the period commencing on the date of such SOFR Advance or EURIBOR Advance, as applicable, or the date of the Conversion of any ABR Advance into such SOFR Advance or EURIBOR Advance, as applicable, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, and subject to clause (c) of this definition, such longer period as the Borrower and the Lenders may agree, as the Borrower may select, upon notice delivered in accordance with Article II of this Agreement in substantially the form of Exhibit C hereto (such notice delivered in accordance with this definition, an “Interest Period Notice”); provided, however, that:
(a) the Borrower may not select any Interest Period for Non-Extended Advances that ends after the latest Termination Date then in effect with respect to such Non-Extended Advances, and the Borrower may not select any Interest Period for Extended Advances that ends after the latest Termination Date then in effect with respect to such Extended Advances;
(b) Interest Periods commencing on the same date for SOFR Advances or EURIBOR Advances comprising part of the same Revolving Credit Borrowing shall be of the same duration (without limiting the ability of the Borrower to have more than one Borrowing on the same date);
(c) the Borrower shall not be entitled to select an Interest Period having duration of longer than twelve months unless, by 2:00 P.M. (New York City time) on (x) in the case of EURIBOR Advances denominated in Euros, the third Business Day prior to the first day of such Interest Period or (y) in the case of SOFR Advances denominated in Dollars, the second Business Day prior to the first day of such Interest Period, each Lender notifies the Administrative Agent that such Lender will be providing funding for such Revolving Credit Borrowing with such Interest Period (the failure of any Lender to so respond by such time being deemed for all purposes of this Agreement as an objection by such Lender to the requested duration of such Interest Period); provided that, if any or all of the Lenders object to the requested duration of such Interest Period, the duration of the Interest Period for such Revolving Credit Borrowing shall be one, two, three, six or twelve months, as specified by the Borrower in the applicable Notice of Revolving Credit Borrowing as the desired alternative to such requested Interest Period;
(d) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to
occur on the next succeeding Business Day; provided, however, that, if in the case of an Interest Period of longer than seven days such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day;
(e) whenever the first day of any Interest Period of longer than seven days occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month; and
(f) the Borrower may not select an Interest Period of seven days more than twelve times in any calendar year.
“Interest Period Notice” has the meaning assigned to such term in the definition of “Interest Period”.
“Issuance” with respect to any Letter of Credit means the issuance, amendment, renewal or extension of such Letter of Credit.
“Issuing Bank” means (a) a Lender Party listed on Schedule I hereto with a Letter of Credit Commitment, (b) any other Lender acceptable to the Borrower in its discretion so long as such Lender expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its lending office (which information shall be recorded by the Administrative Agent in the Register), or (c) or any office, branch, subsidiary or Affiliate of the forgoing, in the case of each of the forgoing clauses (a) through (c), for so long as such Issuing Bank or Lender, as the case may be, shall have a Letter of Credit Commitment.
“L/C Cash Collateral Account” means an interest bearing cash collateral account to be established and maintained by the Administrative Agent, over which the Administrative Agent (for the benefit of the Issuing Banks) shall have sole dominion and control, upon terms as may be satisfactory to the Administrative Agent.
“L/C Exposure” means, at any time, the sum of (a) the aggregate Available Amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all disbursements under Letters of Credit that have not yet been reimbursed by or on behalf of the Borrower at such time. The L/C Exposure of any Lender at any time shall be its Ratable Share of the total L/C Exposure at such time, as may be adjusted in accordance with Section 2.15(a)(i).
“L/C Related Documents” is defined in Section 2.6(b)(i).
“Lender” means each Lender Party listed on Schedule I hereto with a Revolving Credit Commitment, each Added Lender and their respective successors and assigns.
“Lender Assignment Agreement” means a Lender Assignment Agreement substantially in the form of Exhibit D.
“Lender Parties” is defined in the preamble. Unless the context otherwise requires, the term “Lender Parties” includes the Issuing Banks and the Swing Line Bank.
“Letter of Credit” is defined in Section 2.1(b).
“Letter of Credit Agreement” is defined in Section 2.3(a).
“Letter of Credit Commitment” means, with respect to each Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower and its Subsidiaries in (a) the Dollar amount set forth opposite the Issuing Bank’s name on Schedule I hereto under the caption “Letter of Credit Commitment,” (b) if such Issuing Bank has become a Lender hereunder pursuant to an Added Lender Agreement, the Dollar amount set forth in such Added Lender Agreement or (c) if such Issuing Bank has entered into one or more Lender Assignment Agreements, the Dollar amount set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 11.11.3 as such Issuing Bank’s “Letter of Credit Commitment,” in each case as such amount may be reduced prior to such time pursuant to Section 2.5 or increased pursuant to Section 2.14; provided, however, (i) the Letter of Credit Commitment of Scotiabank shall, upon the permanent cancellation of any Scotiabank Letter of Credit, automatically decrease by the face amount of such Scotiabank Letter of Credit and (ii) the Letter of Credit Commitment of JPM shall, at such time, automatically increase by such amount; provided, further, that in no event shall the Letter of Credit Commitment of JPM exceed the maximum amount of the Letter of Credit Facility.
“Letter of Credit Facility” means, at any time, an amount equal to the least of (a) the aggregate amount of the Issuing Banks’ Letter of Credit Commitments at such time, (b) $175,000,000 and (c) the aggregate amount of the Revolving Credit Commitments, as such amount may be reduced at or prior to such time pursuant to Section 2.5.
“Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever.
“Loan Document” means this Agreement, the First Priority Guaranty (if then in effect pursuant to the terms hereof), the Subordinated Guaranty (if then in effect pursuant to the terms hereof), the Notes, if any, each amendment to this Agreement and any other document designated by the Borrower and the Administrative Agent as a Loan Document.
“Material Adverse Effect” means a material adverse effect on (a) the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender Party under the Loan Documents or (c) the ability of the Borrower to perform its payment Obligations under the Loan Documents.
“Material Litigation” is defined in Section 5.8.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
“Net Debt” means, at any time, the aggregate outstanding principal amount of all debt (including, without limitation, Capitalized Lease Liabilities) of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) less the sum of (without duplication);
(a) all cash on hand of the Borrower and its Subsidiaries; plus
(b) all Cash Equivalents;
provided that for purposes of determining the Net Debt to Capitalization Ratio for all periods commencing after October 1, 2022, the 2.875% Convertible Debt and the 4.25% Convertible Debt shall be deemed not to be debt.
“Net Debt to Capitalization Ratio” means, as at any date, the ratio of (a) Net Debt on such date to (b) Capitalization on such date.
“New Financings” means proceeds from:
(a) borrowed money (whether by loan or issuance and sale of debt securities), including drawings under this Agreement and any other revolving credit facilities, and
(b) the issuance and sale of equity securities.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (i) requires the approval of all or all affected Lenders in accordance with the terms of Section 11.1 and (ii) has been approved by the Required Lenders.
“Non-Defaulting Lenders” is defined in Section 2.15(a).
“Non-Extended Advance” means a Revolving Credit Advance that is not an Extended Revolving Credit Advance. As of the First Extension Amendment Effective Date, the aggregate principal amount of Non-Extended Advances is $704,206,545.45.
“Non-Extended Commitment” means a Revolving Credit Commitment that is not an Extended Revolving Credit Commitment. As of the First Extension Amendment Effective Date, the aggregate principal amount of Non-Extended Commitments is $722,600,000.00 and the Non-Extended Commitment of each Lender is set forth on Schedule I hereto.
“Note” means a promissory note of the Borrower payable to any Lender, delivered pursuant to a request made under Section 2.13 in substantially the form of Exhibit A hereto or such other form as the Administrative Agent and the Borrower reasonably agree, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender.
“Notice” is defined in Section 11.2(c).
“Notice Date” has the meaning specified in Section 2.16(b).
“Notice of Issuance” is defined in Section 2.3(a).
“Notice of Revolving Credit Borrowing” is defined in Section 2.2(a).
“Notice of Swing Line Borrowing” is defined in Section 2.2(b).
“Obligations” means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement and the Notes.
“Organic Document” means, relative to the Borrower, its articles of incorporation (inclusive of any articles of amendment to its articles of incorporation) and its by-laws.
“Other Beneficiary Party” means each agent, trustee or other representative (other than a Beneficiary Party) for any agreement which evidences any obligation of the Borrower or any of its Subsidiaries (other than any unsecured debt securities or any Permitted Secured Facility) outstanding on the Waiver Effective Date, in each case, as such agreement or any of the obligations thereunder may be amended, restated, supplemented, refinanced or otherwise modified from time to time, so long as such amendment, restatement, refinancing or other modification does not increase the aggregate principal amount of obligations thereunder to an
amount that is more than the obligations outstanding thereunder as of the Waiver Effective Date plus the amount of any uncommitted incremental facilities available thereunder as of the Waiver Effective Date plus the amount of unpaid accrued interest and premium thereon and underwriting discounts, fees, commissions and expenses, associated with such amendment, restatement, supplement, refinancing or other modification.
“Other Revolving Facility” means that certain Credit Agreement, as amended and restated on October 12, 2017, among the Borrower, the various financial institutions party thereto, as lenders, and JPMorgan, as successor administrative agent to Nordea Bank ABP, New York Branch, in each case as may be amended, amended and restated, supplemented, extended, refinanced, replaced and/or otherwise modified from time to time.
“Participant” is defined in Section 11.11.2.
“Participant Register” is defined in Section 11.11.2(f).
“Participating Member State” means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
“Payment” is defined in Section 10.13(a).
“Payment Notice” is defined in Section 10.13(b).
“Payment Office” means, for any Committed Currency, such office of JPMorgan as shall be from time to time selected by the Administrative Agent and notified by the Administrative Agent to the Borrower and the Lender Parties.
“Pension Plan” means a “pension plan,” as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.
“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR.”
“Permitted Early Refinancing” means any permanent termination of Non-Extended Commitments or any prepayment of outstanding Non-Extended Advances to the extent such prepayment (a) accompanies the permanent termination of the Non-Extended Commitments in respect of such Non-Extended Advances and (b) is applied to all then outstanding Non-Extended Advances on a pro rata basis and (c) is funded substantially concurrently with the receipt of the proceeds of indebtedness that is not prohibited by this Agreement from being incurred.
“Permitted Secured Facility” means (a) the Secured Indenture or (b) any other Indebtedness incurred by the Borrower or its Subsidiaries that is (i) permitted under Section 6.2.3 of this Agreement, (ii) secured solely by Permitted Secured Facility Collateral and (iii) guaranteed only by the Secured Facility Guarantors, as amended, restated, supplemented or otherwise modified from time to time (but always subject to the limitations in clause (b)).
“Permitted Secured Facility Collateral” means (a) any and all assets that constitute (or purport to constitute) Collateral (as defined in the Secured Indenture) as of March 30, 2021, and (b) any other asset of the Borrower that is subject to a lien to secure obligations under any
Permitted Secured Facility (which, for the avoidance of doubt, shall not include any Designated Assets or Priority Assets).
“Person” means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity.
“Prepayment Event” is defined in Section 8.1.
“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the F.R.S. Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the F.R.S. Board (as determined by the Administrative Agent). Any change in the Prime Rate shall take effect at the opening of business on the day such change is publicly announced or quoted as being effective.
“Principal Subsidiary” means any Subsidiary of the Borrower that owns a Vessel.
“Priority Assets” means the Vessels known on the Waiver Effective Date as (i) Azamara Quest, (ii) Azamara Pursuit, (iii) Azamara Journey, (iv) Celebrity Edge, (v) Celebrity Apex, (vi) Celebrity Flora, (vii) Celebrity Xpedition, (viii) Celebrity Xperience, (ix) Celebrity Xploration, (x) Monarch, (xi) Horizon and (xii) Sovereign (it being understood that such Vessels shall remain “Priority Assets” regardless of any change in name or ownership after the Waiver Effective Date).
“Priority Holdco Subsidiaries” means (a) RCL Cruises Ltd. or any other Subsidiaries of the Borrower that directly own all of the equity interests in (i) RCL TUI Cruises German Verwaltungs GmbH and (ii) RCL TUI Cruises German Holding GmbH & Co. KG and (b) one or more Subsidiaries that directly own any of the equity interests issued by any other Subsidiary of the Borrower that owns any Priority Asset. For the avoidance of doubt, Priority Holdco Subsidiaries shall not include any Principal Subsidiary.
“Priority Release Event” means any event or other circumstance that results in no Permitted Secured Facility remaining outstanding (whether as a result of repayment, redemption or otherwise).
“Ratable Share” of any amount means, with respect to any Lender at any time, the product of such amount times a fraction, the numerator of which is the amount of such Lender’s Revolving Credit Commitment at such time (or, if the Revolving Credit Commitments shall have been terminated, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the aggregate amount of all Revolving Credit Commitments at such time (or, if the Revolving Credit Commitments shall have been terminated, the aggregate amount of all Revolving Credit Commitments as in effect immediately prior to such termination); provided that in the case of Section 2.15 when a Defaulting Lender shall exist, “Ratable Share” shall mean the percentage of the total Revolving Credit Commitments (disregarding any Defaulting Lender’s Revolving Credit Commitments) represented by such Lender’s Revolving Credit Commitment.
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such Benchmark is the Term SOFR Rate, 5:00 a.m. (Chicago time) on the day that is two U.S. Government Securities Business Days preceding the date of such setting, (2) if such Benchmark is EURIBOR Rate, 11:00 a.m. Brussels time two TARGET Days preceding the date of such
setting, (3) if such Benchmark is SONIA, then four RFR Business Days prior to such setting, or (4) if such Benchmark is none of the Term SOFR Rate, the EURIBOR Rate or SONIA, the time determined by the Administrative Agent in its reasonable discretion.
“Register” is defined in Section 11.11.3.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors (including lawyers and accountants) and representatives of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means (i) with respect to a Benchmark Replacement in respect of Advances denominated in Dollars, the F.R.S. Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the F.R.S. Board and/or the Federal Reserve Bank of New York or, in each case, any successor thereto, (ii) with respect to a Benchmark Replacement in respect of Advances denominated in Sterling, the Bank of England, or a committee officially endorsed or convened by the Bank of England or, in each case, any successor thereto and (iii) with respect to a Benchmark Replacement in respect of Advances denominated in Euros, the European Central Bank, or a committee officially endorsed or convened by the European Central Bank or, in each case, any successor thereto.
“Relevant Rate” means (i) with respect to any Borrowing denominated in Dollars, the Adjusted Term SOFR Rate, (ii) with respect to any Borrowing denominated in Euros, the Adjusted EURIBOR Rate or (iii) with respect to any Borrowing denominated in Sterling, the Adjusted Daily Simple RFR.
“Relevant Screen Rate” means (i) with respect to any Borrowing denominated in Dollars, the Term SOFR Reference Rate and (ii) with respect to any Borrowing denominated in Euros, the EURIBOR Screen Rate
“Required Extended Lenders” means, at any time, Extended Lenders that, in the aggregate, hold more than 50% of the aggregate unpaid principal amount (based on the Dollar Equivalent at such time) of the Extended Advances or, if no such principal amount is then outstanding, Extended Lenders that in the aggregate have more than 50% of the Extended Revolving Credit Commitments; provided that if any Extended Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Extended Lenders at such time the Extended Revolving Credit Commitments and Extended Advances of such Lender at such time.
“Required Lenders” means, at any time, Lenders that, in the aggregate, hold more than 50% of the aggregate unpaid principal amount (based on the Dollar Equivalent at such time) of the Revolving Credit Advances or, if no such principal amount is then outstanding, Lenders that in the aggregate have more than 50% of the Revolving Credit Commitments; provided that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time the Revolving Credit Commitments of such Lender at such time.
“Rescindable Amount” is defined in Section 2.11(d).
“Resignation Effective Date” is defined in Section 10.7(a).
“Revaluation Date” means (a) with respect to any Advance denominated in any Committed Currency, each of the following: (i) the date of the Borrowing of such Advance and (ii) (A) with respect to any SOFR Advance or any EURIBOR Advance, each date of a
conversion into or continuation of such Advance pursuant to the terms of this Agreement and (B) with respect to any RFR Advance, each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such Advance (or, if there is no such numerically corresponding day in such month, then the last day of such month) and (b) with respect to any Letter of Credit denominated in a Committed Currency, each of the following: (i) the date on which such Letter of Credit is issued, (ii) the first Business Day of each calendar month and (iii) the date of any amendment of such Letter of Credit that has the effect of increasing the face amount thereof.
“Revolving Credit Advance” means an advance by a Lender to the Borrower as part of a Revolving Credit Borrowing and refers to an ABR Advance, a SOFR Advance, a EURIBOR Advance or an RFR Advance (each of which shall be a “Type” of Revolving Credit Advance).
“Revolving Credit Borrowing” means a borrowing consisting of Extended Revolving Credit Advances or Non-Extended Advances, in each case, of the same Type and, if applicable, having the same Interest Period, made by each of the relevant Lenders.
“Revolving Credit Borrowing Minimum” means, in respect of Revolving Credit Advances denominated in Dollars, $5,000,000, in respect of Revolving Credit Advances denominated in Sterling, £5,000,000 and, in respect of Revolving Credit Advances denominated in Euros, €5,000,000.
“Revolving Credit Borrowing Multiple” means, in respect of Revolving Credit Advances denominated in Dollars, $1,000,000 in respect of Revolving Credit Advances denominated in Sterling, £1,000,000 and, in respect of Revolving Credit Advances denominated in Euros, €1,000,000.
“Revolving Credit Commitment” means as to any Lender (a) the Dollar amount set forth opposite such Lender’s name on Schedule I hereto as such Lender’s “Revolving Credit Commitment” or (b) if such Lender has become a Lender hereunder pursuant to an Added Lender Agreement, the Dollar amount set forth in such Added Lender Agreement or (c) if such Lender has entered into a Lender Assignment Agreement, the Dollar amount set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 11.11.3, as such amount may be reduced pursuant to Section 2.5 or increased pursuant to Section 2.14.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Credit Advances and its L/C Exposure and Swing Line Exposure at such time.
“RFR” means SONIA.
“RFR Advance” means an Advance that bears interest at a rate based on the Adjusted Daily Simple RFR.
“RFR Business Day” means, any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which banks are closed for general business in London.
“RFR Interest Day” has the meaning specified in the definition of “Daily Simple RFR”.
“S&P” means S&P Global Ratings and any successor thereto.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of the First Extension Amendment Effective Date,
the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, the Crimea Region of Ukraine, Cuba, Iran, North Korea and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, Global Affairs Canada or by the United Nations Security Council, the European Union or any European Union member state, His Majesty’s Treasury of the United Kingdom or any Person 50% or more owned or otherwise controlled by any such Person or Persons, as applicable under relevant Sanctions, or (b) any Person that is the target of blocking Sanctions, even if not appearing on any Sanctions-related list (e.g., the governments of Sanctioned Countries or the government of Venezuela) or (c) any Person located, organized or resident in a Sanctioned Country.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, Canada or (b) the United Nations Security Council, the European Union, any European Union member state or His Majesty’s Treasury of the United Kingdom.
“Scotiabank Letters of Credit” means the Letters of Credit issued by Scotiabank as Issuing Bank and outstanding as of the First Extension Amendment Effective Date.
“Secured Facility Guarantors” means those certain Subsidiaries of the Borrower that guarantee the Secured Indenture as of the First Extension Amendment Effective Date and any of their respective Subsidiaries.
“Secured Indenture” means that certain Indenture dated as of May 19, 2020, among the Borrower, certain subsidiaries of the Borrower, and The Bank of New York Mellon Trust Company, N.A., as trustee and security agent, as in effect on the First Waiver Extension Date.
“Senior Debt Rating” means, as of any date, (a) the implied senior debt rating of the Borrower for debt pari passu in right of payment and in right of collateral security with the Obligations as given by Moody’s and S&P or (b) in the event the Borrower receives an actual unsecured senior debt rating (apart from an implied rating) from Moody’s and/or S&P, such actual rating or ratings, as the case may be (and in such case the Senior Debt Rating shall not be determined by reference to any implied senior debt rating from either agency). For purposes of the foregoing, (i) if only one of S&P and Moody’s shall have in effect a Senior Debt Rating, the Applicable Margin and the Applicable Percentage shall be determined by reference to the available rating; (ii) if neither S&P nor Moody’s shall have in effect a Senior Debt Rating, the Applicable Margin and the Applicable Percentage will be set in accordance with Level 5 under the definition of “Applicable Margin” or “Applicable Percentage,” as the case may be, unless (A) within 21 days of being notified by the Administrative Agent that both Moody’s and S&P have ceased to give a Senior Debt Rating, the Borrower has obtained from at least one of such agencies a private implied rating for its senior debt or (B) having failed to obtain such private rating within such 21-day period, the Borrower and the Lenders shall have agreed within a further 15-day period (during which period the Borrower and the Agents shall consult in good faith to find an alternative method of providing an implied rating of the Borrower’s senior debt) on an alternative rating method, which agreed alternative shall apply for the purposes of this Agreement; (iii) if the ratings established by S&P and Moody’s shall fall within different levels, the Applicable Margin and the Applicable Percentage shall be based upon the higher rating unless such ratings differ by two or more levels, in which case the applicable level will be deemed to be one level below the higher of such levels; (iv) if any rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (v) if S&P or Moody’s
shall change the basis on which ratings are established, each reference to the Senior Debt Rating announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Advance” means an Advance that bears interest at a rate based on Adjusted Term SOFR, other than pursuant to clause (c) of the definition of “ABR.”
“SONIA” means, with respect to any Business Day, a rate per annum equal to the Sterling Overnight Index Average for such Business Day published by the SONIA Administrator on the SONIA Administrator’s Website on the immediately succeeding Business Day.
“SONIA Administrator” means the Bank of England (or any successor administrator of the Sterling Overnight Index Average).
“SONIA Administrator’s Website” means the Bank of England’s website, currently at http://www.bankofengland.co.uk, or any successor source for the Sterling Overnight Index Average identified as such by the SONIA Administrator from time to time.
“Specified Designated Holdco Subsidiaries” means those certain Designated Holdco Subsidiaries that are obligors with respect to any Designated Indebtedness.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the F.R.S. Board to which the Administrative Agent is subject with respect to the Adjusted EURIBOR Rate, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D) or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Advances. Such reserve percentage shall include those imposed pursuant to Regulation D. Advances for which the associated Benchmark is adjusted by reference to the Statutory Reserve Rate (per the related definition of such Benchmark) shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“Sterling” means the lawful currency of the United Kingdom of Great Britain and Northern Ireland.
“Stockholders’ Equity” means, as at any date, the Borrower’s stockholders’ equity on such date, excluding Accumulated Other Comprehensive Income (Loss), determined in accordance with GAAP; provided that:
for purposes of calculating compliance with the financial covenants contained in Section 6.2.4, for all periods commencing after October 1, 2022, the amount of the 4.25% Convertible Debt and 2.875% Convertible Debt will be accounted for as equity and accordingly shall be added to Stockholders’ Equity; provided that, for the Fiscal Quarter ended March 31,
2023, the amount of the 4.25% Convertible Debt shall be deemed to be $1,150,000,000 minus (i) the amount of the 4.25% Convertible Debt that the Borrower has elected to settle in cash (rather than equity) in accordance with Section 14.02 of the 4.25% Convertible Notes Indenture and (ii) the value of any new equity securities issued by the Borrower in replacement or settlement in equity securities of any 4.25% Convertible Debt; provided, further, that, on and after (x) the 4.25% Maturity Date, only the amount of 4.25% Convertible Debt actually converted into equity securities and (y) the 2.875% Maturity Date, only the amount of 2.875% Convertible Debt actually converted to equity securities, shall, in each case, be added to Stockholders’ Equity; and
(a) any non-cash charge to Stockholders’ Equity resulting (directly or indirectly) from a change after the Effective Date in GAAP or in the interpretation thereof shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such charge shall be added back to Stockholders’ Equity;
(b) (i) any non-cash write-off to Stockholders’ Equity with respect to the Fiscal Year ended December 31, 2020 and (ii) any non-cash write-off to goodwill with respect to any Fiscal Year commencing after December 31, 2020, shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such write-offs shall be added back to Stockholders’ Equity;
(c) any non-cash write-off to Stockholders’ Equity with respect to the Fiscal Year ended December 31, 2021 or December 31, 2022 (excluding any such write-offs to goodwill with respect to either such Fiscal Year) shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such write-off shall be added back to Stockholders’ Equity; provided that the aggregate amount of such write-offs added back to Stockholders’ Equity pursuant to this clause (c) shall not exceed the greater of (i) 10.0% of the total assets of the Borrower and its Subsidiaries taken as a whole as determined in accordance with GAAP as at the last day of the most recently ended Fiscal Quarter and (ii) $3,000,000,000;
(d) “net loss attributable to Royal Caribbean Cruises Ltd.” (but excluding any net loss associated with an impairment or write-off added back pursuant to clause (b) or (c) above), determined in accordance with GAAP as shown in the Borrower’s consolidated statement of comprehensive (loss) income, attributable to the Fiscal Years ended December 31, 2021 or December 31, 2022 (excluding, for the avoidance of doubt, any such amount attributable to goodwill or write-offs with respect the Fiscal Year ended December 31, 2020) shall be added back to Stockholders’ Equity; provided that the aggregate amount added back to Stockholders’ Equity pursuant to clause (c) above and this clause (d) shall not exceed $4,500,000,000; and
(e) the impact on the computation of Stockholders’ Equity of one-time expenses (including, without limitation, prepayment penalties) related to the refinancing of secured or guaranteed Indebtedness of the Borrower or its Subsidiaries in respect of any Fiscal Quarter commencing after March 31, 2020, shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such expenses shall be added back to Stockholders’ Equity.
For the avoidance of doubt, no item added back to Stockholders’ Equity pursuant to clause (b), clause (c), clause (d) or clause (e) shall also be added back pursuant to any other such clause.
“Subordinated Guaranty” is defined in Section 6.2.11(c).
“Subsidiary” means, with respect to any Person, any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person.
“Swing Line Advance” means an advance made by the Swing Line Bank pursuant to Section 2.1(c) or any Lender pursuant to Section 2.2(b).
“Swing Line Bank” means JPMorgan.
“Swing Line Borrowing” means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank.
“Swing Line Commitment” means the amount set forth opposite the Swing Line Bank’s name on Schedule I hereto, as such amount may be reduced pursuant to Section 2.5.
“Swing Line Exposure” means, at any time, the aggregate principal amount of all Swing Line Advances outstanding at such time. The Swing Line Exposure of any Lender at any time shall be its Ratable Share of the total Swing Line Exposure at such time, as may be adjusted in accordance with Section 2.15(a)(i).
“Swing Line Facility” is defined in Section 2.1(c).
“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.
“TARGET Day” means any day on which TARGET2 (or, if such payment system ceases to be operative, such other payment system, if any, determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in Euro.
“Taxes” is defined in Section 3.6.
“Term SOFR” means (a) for any calculation with respect to a SOFR Advance, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 P.M. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and (b) for any calculation with respect to an ABR Advance on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “ABR Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 P.M. (New York City time) on any ABR Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement
Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such ABR Term SOFR Determination Day.
“Term SOFR Adjustment” means a percentage equal to 0.10% per annum.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Termination Date” means (i) with respect to the Non-Extended Commitments and the Non-Extended Advances, the earliest of (a) April 5, 2024, subject to the extension thereof pursuant to Section 2.16, (b) the date of termination in whole of the Non-Extended Commitments pursuant to Section 2.5 and (c) the date on which any Commitment Termination Event occurs; provided, however, that the Termination Date with respect to any Non-Extended Advance and Non-Extended Commitment of any Lender that does not consent to any requested extension pursuant to Section 2.16 shall be the Termination Date in effect with respect to such Non-Extended Advance and Non-Extended Commitment immediately prior to the applicable Extension Date for all purposes of this Agreement, and (ii) with respect to the Extended Commitments and the Extended Advances, the earliest of (a) April 12, 2025, subject to the extension thereof pursuant to Section 2.16, (b) the date of termination in whole of the Extended Commitments pursuant to Section 2.5 and (c) the date on which any Commitment Termination Event occurs; provided, however, that the Termination Date with respect to any Extended Advance and Extended Commitment of any Lender that does not consent to any requested extension pursuant to Section 2.16 shall be the Termination Date in effect with respect to such Extended Advance and Extended Commitment immediately prior to the applicable Extension Date for all purposes of this Agreement; provided, further, in each case, if such date is not a Business Day, the Termination Date shall be the next preceding Business Day.
“Type” when used in reference to any Advance or Borrowing, refers to whether the rate of interest on such Advance, or on the Advances comprising such Borrowing, is determined by reference to Adjusted Term SOFR, ABR, the Adjusted EURIBOR Rate or the Adjusted Daily Simple RFR.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unissued Letter of Credit Commitment” means, with respect to any Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower or any of its Subsidiaries in an amount equal to the excess of (a) the amount of its Letter of Credit Commitment over (b) the aggregate Available Amount of all Letters of Credit issued by such Issuing Bank.
“United States” or “U.S.” means the United States of America, its fifty States and the District of Columbia.
“Unsecured Indenture” means that certain Indenture dated as of June 9, 2020, among the Borrower, RCI Holdings LLC, and The Bank of New York Mellon Trust Company, N.A., as trustee, as in effect on the First Waiver Extension Date.
“Unused Commitment” means, with respect to each Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Advances made by such Lender (in its capacity as a Lender, and not as a Swing Line Bank) and outstanding at such time, plus (ii) such Lender’s Ratable Share of (A) the aggregate Available Amount of all the Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Advances made by each Issuing Bank pursuant to Section 2.3(c) that have not been ratably funded by such Lender and outstanding at such time and (C) the aggregate principal amount of all Swing Line Advances then outstanding.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“Vessel” means a passenger cruise vessel owned by the Borrower or one of its Subsidiaries.
“Waiver Effective Date” means May 7, 2020.
“Waiver Period” means the period commencing on the Waiver Effective Date and ending on the earlier of (i) September 30, 2022 and (ii) the Covenant Modification Date.
Section 1.2. Use of Defined Terms; Other Definitional Provisions.
(a) Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall, when capitalized, have such meanings when used in the Disclosure Schedule and in each Note, Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing, Notice of Issuance, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document.
(b) Any reference herein to a merger, transfer, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability company (or the unwinding of such a division or allocation), as if it were a merger, transfer, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, as applicable, to, of or with a separate Person. Any division of a limited liability company shall constitute a separate Person hereunder (and each division of any limited liability company that is a Subsidiary, joint venture or any other like term shall also constitute such a Person or entity).
Section 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.
Section 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 6.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with United States generally accepted accounting principles (“GAAP”) consistently applied (or, if not consistently applied, accompanied by details of the inconsistencies); provided that if the Borrower elects to apply or is required to apply International Financial Reporting Standards (“IFRS”) accounting principles in lieu of GAAP, upon any such election and notice to the Administrative Agent, references herein to GAAP shall
thereafter be construed to mean IFRS (except as otherwise provided in this Agreement); provided, further, that if, as a result of (i) any change in GAAP or IFRS or in the interpretation thereof or (ii) the application by the Borrower of IFRS in lieu of GAAP, in each case, after the date of the financial statements referred to in Section 5.6, there is a change in the manner of determining any of the items referred to herein that are to be determined by reference to GAAP, and the effect of such change would (in the reasonable opinion of the Borrower or the Administrative Agent) be such as to affect the basis or efficacy of the covenants contained in Section 6.2.4 in ascertaining the financial condition of the Borrower or the consolidated financial condition of the Borrower and its Subsidiaries and the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate such change occurring after the date hereof in GAAP or the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), then such item shall for the purposes of such Sections of this Agreement continue to be determined in accordance with GAAP relating thereto as GAAP were applied immediately prior to such change in GAAP or in the interpretation thereof until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding the foregoing, all obligations of any person that are or would be characterized as operating lease obligations in accordance with GAAP as in effect on December 31, 2018 (whether or not such operating lease obligations were in effect on such date) shall continue to be accounted for as operating lease obligations for purposes of this Agreement regardless of any change in GAAP following December 31, 2018, that would otherwise require such obligations to be recharacterized (on a prospective or retroactive basis or otherwise) as capitalized leases; provided that, for clarification purposes, operating leases recorded as liabilities on the balance sheet due to a change in accounting treatment, or otherwise, shall for all purposes not be treated as Indebtedness, Capital Lease Obligations or Capitalized Lease Liabilities.
Section 1.5. Exchange Rates. The Administrative Agent or the applicable Issuing Bank, as applicable, shall determine the Dollar Equivalent amounts of EURIBOR Advances or RFR Advances or Letter of Credit extensions denominated in Committed Currencies. Such Dollar Equivalent amounts shall become effective as of such Revaluation Date and shall be the Dollar Equivalent of such amounts until the next Revaluation Date to occur. Except for purposes of financial statements delivered by the Borrower hereunder or calculating financial covenants hereunder or except as otherwise provided herein, the applicable amount of any Agreed Currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as so determined by the Administrative Agent or the applicable Issuing Bank, as applicable.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
Section 2.1. The Advances and Letters of Credit. (a) Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Credit Advances to the Borrower from time to time on any Business Day during the period from the Closing Date until the Termination Date applicable to such Lender in an amount (based in respect of any Revolving Credit Advances to be denominated in a Committed Currency by reference to the Dollar Equivalent thereof determined on the date of delivery of the applicable Notice of Revolving Credit Borrowing) not to exceed such Lender’s Unused Commitment. Each Revolving Credit Borrowing shall be in an amount not less than the Revolving Credit Borrowing Minimum or the Revolving Credit Borrowing Multiple in excess thereof and shall consist of Revolving Credit Advances of the same Type and in the same currency made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. Within the limits of each Lender’s Revolving Credit Commitment, the Borrower may borrow under this Section 2.1(a), prepay pursuant to Section 2.10 and reborrow under this Section 2.1(a) (it being
understood that (i) Non-Extended Advances may not be prepaid pursuant to Section 2.10 unless the outstanding principal amount of Extended Advances is zero before giving effect to such prepayment and (ii) until the Termination Date with respect to the Non-Extended Commitments, the Borrower may not borrow Extended Advances if there are unused Non-Extended Commitments available at such time).
(b) Letters of Credit. Each Issuing Bank agrees, on the terms and conditions hereinafter set forth, in reliance upon the agreements of the Lenders set forth in this Agreement, to issue letters of credit (each, a “Letter of Credit”) denominated in Dollars or a Committed Currency for the account of the Borrower and its Subsidiaries from time to time on any Business Day during the period from the Closing Date until 30 days before the latest Termination Date in effect at the date of issuance thereof in an aggregate Available Amount (based in respect of any Letters of Credit to be denominated in a Committed Currency by reference to the Dollar Equivalent thereof determined on the date of delivery of the applicable Notice of Issuance) (i) for all Letters of Credit issued by each Issuing Bank not to exceed at any time the lesser of (x) the Letter of Credit Facility at such time and (y) such Issuing Bank’s Letter of Credit Commitment at such time and (ii) for each such Letter of Credit not to exceed an amount equal to the Unused Commitments of the Lenders at such time; provided that no Letter of Credit shall have an expiration date later than five Business Days prior to the Termination Date of Lenders having Commitments in an amount equal to or exceeding the available undrawn amount of all Letters of Credit after giving effect to the issuance of such Letter of Credit. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than five Business Days before the latest Termination Date. Within the limits referred to above, the Borrower may from time to time request the Issuance of Letters of Credit under this Section 2.1(b). Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the Dollar Equivalent of the stated amount of such Letter of Credit available to be drawn at such time; provided that with respect to any Letter of Credit that, by its terms, provides for one or more automatic increases in the available amount thereof, the amount of such Letter of Credit shall be deemed to be the Dollar Equivalent of the maximum amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum amount is available to be drawn at such time.
(c) The Swing Line Advances. The Swing Line Bank agrees, on the terms and conditions hereinafter set forth, to make Swing Line Advances denominated in Dollars to the Borrower from time to time on any Business Day during the period from the Closing Date until the Termination Date applicable to the Swing Line Bank in an aggregate principal amount (i) for all Swing Line Advances made by the Swing Line Bank not to exceed at any time the lesser of (x) $300,000,000 (the “Swing Line Facility”) and (y) the Swing Line Bank’s Swing Line Commitment at such time and (ii) in an amount for each such Advance not to exceed the Unused Commitments of the Lenders on such Business Day. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $1,000,000 or an integral multiple thereof. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Section 2.1(c), prepay pursuant to Section 2.10 and reborrow under this Section 2.1(c).
Section 2.2. Making the Advances. (a) Except as otherwise provided in Section 2.2(b) or Section 2.3(c), each Revolving Credit Borrowing shall be made on notice, given not later than (w) 11:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of SOFR Advances, (x) 12:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of EURIBOR Advances, (y) 12:00 P.M. (New York City time) on the fifth RFR Business Day prior to the date of the proposed Revolving Credit
Borrowing in the case of a Revolving Credit Borrowing consisting of RFR Advances or (z) 11:00 A.M. (New York City time) on the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of ABR Advances, by the Borrower to the Administrative Agent by telecopier or other electronic transmission, which shall give to each Lender prompt notice (in the case of a proposed Revolving Credit Borrowing consisting of ABR Advances, by 12:00 P.M. (New York City time)) thereof by telecopier or other electronic transmission. Each such notice of a Revolving Credit Borrowing (a “Notice of Revolving Credit Borrowing”) shall be by telephone, confirmed promptly in writing, telecopier or other electronic transmission in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Revolving Credit Borrowing and portion of the Advances comprising such Revolving Credit Borrowing that will be Extended Revolving Credit Advances and/or Non-Extended Advances, (ii) Type of Advances comprising such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of a Revolving Credit Borrowing consisting of SOFR Advances or EURIBOR Advances, initial Interest Period and currency for each such Revolving Credit Advance. Each applicable Lender shall, before 11:00 A.M. (New York City time) on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of SOFR Advances or EURIBOR Advances, before 1:00 P.M. (New York City time) on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of ABR Advances and before 11:00 A.M. (London time) on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of RFR Advances, make available for the account of its lending office to the Administrative Agent at the applicable Administrative Agent’s Account, in same day funds, such Lender’s ratable portion of such Revolving Credit Borrowing. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Section 4.2 the Administrative Agent will make such funds available to the Borrower at the account of the Borrower specified in the applicable Notice of Revolving Credit Borrowing; provided, however, that, if such borrowing is denominated in Dollars, the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances made by the Swing Line Bank and by any other Lender and outstanding on the date of such Revolving Credit Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Swing Line Bank and such other Lenders for repayment of such Swing Line Advances.
(b) Each Swing Line Borrowing shall be made on notice, given not later than 1:00 P.M. (New York City time) on the date of the proposed Swing Line Borrowing by the Borrower to the Swing Line Bank and the Administrative Agent, of which the Administrative Agent shall give prompt notice to the Lenders. Each such notice of a Swing Line Borrowing (a “Notice of Swing Line Borrowing”) shall be by telephone, confirmed promptly in writing, telecopier or other electronic transmission in substantially the form of Exhibit B-2 hereto, specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the tenth day after the requested date of such Borrowing). The Swing Line Bank shall, before 4:00 P.M. (New York City time) on the date of such Swing Line Borrowing, make the Swing Line Borrowing available to the Administrative Agent at the Administrative Agent’s Account, in same day funds. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Section 4.2, the Administrative Agent will make such funds available to the Borrower at the account of the Borrower specified in the applicable Notice of Swing Line Borrowing. Upon written demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent, each other Lender will purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Lender, such other Lender’s Ratable Share (after giving effect to the reallocation provisions of this subsection) of such outstanding Swing Line Advance, by making available for the account of its lending office to the Administrative Agent for the account of the Swing Line Bank, by deposit to the Administrative Agent’s Account, in same day funds, an amount equal to the portion of the outstanding principal
amount of such Swing Line Advance to be purchased by such Lender. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Ratable Share (after giving effect to the reallocation provisions of this subsection) of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank; provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Swing Line Bank to any other Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, this Agreement, the Notes or the Borrower. If and to the extent that any Lender shall not have so made the amount of such Swing Line Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date such Lender is required to have made such amount available to the Administrative Agent until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. If the Termination Date shall have occurred in respect of any Revolving Credit Commitments at a time when any other Revolving Credit Commitments are in effect with a later Termination Date, then on the earliest occurring Termination Date all then-outstanding Swing Line Advances shall be repaid in full (and there shall be no adjustment to the participations in such Swing Line Advances as a result of the occurrence of such earliest Termination Date); provided, however, that if on the occurrence of such earliest Termination Date (after giving effect to any repayments of Revolving Credit Advances and any reallocation of Letter of Credit participations as contemplated in Section 2.3(b)), there shall exist sufficient unutilized Revolving Credit Commitments so that the respective outstanding Swing Line Advances could be incurred pursuant to such Revolving Credit Commitments which will remain in effect after the occurrence of such earliest Termination Date, then there shall be an automatic adjustment on such date of the risk participations of each Lender holding such unutilized Revolving Credit Commitments and such outstanding Swing Line Advances shall be deemed to have been incurred solely pursuant to such relevant Revolving Commitments of such unutilized Revolving Credit Commitments and such Swing Line Advances shall not be so required to be repaid in full on such earliest Termination Date.
(c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select SOFR Advances for any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is less than the Revolving Credit Borrowing Minimum or if the obligation of the Lenders to make SOFR Advances shall then be suspended pursuant to Section 2.8 or 3.1 and (ii) the SOFR Advances may not be outstanding as part of more than 15 separate Revolving Credit Borrowings.
(d) Each Notice of Revolving Credit Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Revolving Credit Borrowing that the related Notice of Revolving Credit Borrowing specifies is to be comprised of SOFR Advances, the Borrower shall indemnify each applicable Lender in accordance with Section 3.4.
(e) Unless the Administrative Agent shall have received notice from an applicable Lender or the Swing Line Bank prior to the time of any Revolving Credit Borrowing or Swing Line Borrowing, as the case may be, that such Lender or the Swing Line Bank will not
make available to the Administrative Agent such Lender’s or the Swing Line Bank’s ratable portion of such Revolving Credit Borrowing or Swing Line Borrowing, as the case may be, the Administrative Agent may assume that such Lender or the Swing Line Bank has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) or (b) of this Section 2.2, as applicable, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender or the Swing Line Bank shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Advances comprising such Borrowing and (ii) in the case of such Lender or the Swing Line Bank, (A) the Federal Funds Rate in the case of Advances denominated in Dollars or (B) the cost of funds incurred by the Administrative Agent in respect of such amount in the case of Advances denominated in Committed Currencies. If such Lender or the Swing Line Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s or the Swing Line Bank’s Advance as part of such Borrowing for purposes of this Agreement.
(f) The failure of any Lender to make the Revolving Credit Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Credit Advance to be made by such other Lender on the date of any Revolving Credit Borrowing.
(g) If any Lender shall default in its obligations under Section 2.1, the Agents shall, at the request of the Borrower, use reasonable efforts to find a bank or other financial institution acceptable to the Borrower and reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank to replace such Lender on terms acceptable to the Borrower and to have such bank or other financial institution replace such Lender.
(h) Each Lender may, if it so elects, fulfill its obligation to make or continue Advances hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such Advance; provided that such Advance shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such Advance shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility.
(i) Subject to Section 2.17, each Borrowing shall be comprised (i) in the case of Borrowings in Dollars, entirely of ABR Advances or SOFR Advances, (ii) in the case of Borrowings in Sterling, entirely of RFR Advances and (iii) in the case of Borrowings in Euro, entirely EURIBOR Advances, as the Borrower may request in accordance herewith. Each Swingline Loan shall be an ABR Advance.
Section 2.3. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. (i) Each Letter of Credit shall be issued upon notice, given not later than 11:00 A.M. (New York City time) on the fifth Business Day prior to the date of the proposed Issuance of such Letter of Credit (or on such shorter notice as the applicable Issuing Bank may agree), by the Borrower to any Issuing Bank, and such Issuing Bank shall give the Administrative Agent, prompt notice thereof. Each such notice by the Borrower of Issuance of a Letter of Credit (a “Notice of Issuance”) shall be by telecopier, other electronic transmission or telephone, confirmed immediately in writing, specifying therein the requested (A) date of such Issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit,
(C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, such Letter of Credit shall be issued pursuant to such application and agreement for letter of credit as such Issuing Bank and the Borrower shall agree for use in connection with such requested Letter of Credit (a “Letter of Credit Agreement”). If the requested form of such Letter of Credit is acceptable to such Issuing Bank in its reasonable discretion (it being understood that any such form shall have only explicit documentary conditions to draw and shall not include discretionary conditions), such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Section 4.2, make such Letter of Credit available to the Borrower at its office referred to in Section 11.2 or as otherwise agreed with the Borrower in connection with such Issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern.
(b) Participations. By the Issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing or decreasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, such Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Ratable Share (after giving effect to the reallocation provisions of this subsection) of the Available Amount of such Letter of Credit. The Borrower hereby agrees to each such participation. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of such Issuing Bank, such Lender’s Ratable Share (after giving effect to the reallocation provisions of this subsection) of each drawing made under a Letter of Credit funded by such Issuing Bank and not reimbursed by the Borrower on the date made, or of any reimbursement payment required to be refunded to the Borrower for any reason, which amount will be advanced, and deemed to be an Advance to the Borrower hereunder, regardless of the satisfaction of the conditions set forth in Section 4.2. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Credit Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender further acknowledges and agrees that its participation in each Letter of Credit will be automatically adjusted to reflect such Lender’s Ratable Share of the Available Amount of such Letter of Credit at each time such Lender’s Revolving Credit Commitment is amended pursuant to a Commitment Increase in accordance with Section 2.14, an assignment in accordance with Section 11.11.1 or otherwise pursuant to this Agreement. If the Termination Date in respect of any Revolving Credit Commitments occurs prior to the expiration of any Letter of Credit, then (i) if, on the date that is five Business Days prior to such Termination Date, other Revolving Credit Commitments in respect of which the Termination Date shall not have occurred are then in effect, such Letters of Credit shall automatically, on such fifth Business Day prior to such Termination Date, be deemed to have been issued (including for purposes of the obligations of the Lenders to purchase participations therein and to make Advances and payments in respect thereof pursuant to this Agreement) under (and ratably participated in by Lenders pursuant to) such other Revolving Credit Commitments up to an aggregate amount not to exceed the aggregate principal amount of the unutilized amount of such other Revolving Credit Commitments at such time (it being understood that no partial face amount of any Letter of Credit may be so reallocated) and (ii) to the extent not reallocated pursuant to immediately preceding clause (i), the Borrower shall cash collateralize or backstop any such Letter of Credit on the earlier of (x) the date during such five Business Day period that the Administrative Agent requests such cash collateralization or backstopping and (y) such Termination Date. Except to the extent of reallocations of participations described in this Section 2.3(b) the occurrence of a Termination Date with respect to a given Revolving Credit Commitment shall have no effect
upon (and shall not diminish) the percentage participations of the Lenders in any Letter of Credit issued before such Termination Date.
(c) Drawing and Reimbursement. The payment by an Issuing Bank of a draft drawn under any Letter of Credit which is not reimbursed by the Borrower on the date made shall constitute for all purposes of this Agreement the making by any such Issuing Bank of an Advance, which, in the case of a Letter of Credit denominated in Dollars, shall be a ABR Advance in the amount of such draft, and, in the case of a Letter of Credit denominated in a Committed Currency, shall be a ABR Advance in an amount equal to the Dollar Equivalent of such Committed Currency determined on the date of such drawing, without regard to whether the making of such an Advance would exceed such Issuing Bank’s Unused Commitment. Each Issuing Bank shall give prompt notice of each drawing under any Letter of Credit issued by it to the Borrower and the Administrative Agent. Upon written demand by such Issuing Bank, with a copy of such demand to the Administrative Agent and the Borrower, each Lender shall pay to the Administrative Agent such Lender’s Ratable Share (after giving effect to the reallocation provisions of Section 2.3(b)) of such outstanding Advance pursuant to Section 2.3(b). Each Lender acknowledges and agrees that its obligation to make Advances pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Credit Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Promptly after receipt thereof, the Administrative Agent shall transfer such funds to such Issuing Bank. Each Lender agrees to fund its Ratable Share (after giving effect to the reallocation provisions of Section 2.3(b)) of an outstanding Advance on (i) the Business Day on which demand therefor is made by such Issuing Bank; provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day, or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. If and to the extent that any Lender shall not have so made the amount of such Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by any such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of any such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute an Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Advance made by such Issuing Bank shall be reduced by such amount on such Business Day.
(d) Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Administrative Agent and the Borrower on the fifth Business Day of each month a written report summarizing Issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all Letters of Credit and (B) to the Administrative Agent and the Borrower on the fifth Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank. The Administrative Agent shall furnish copies of such reports to the Lenders reasonably promptly after receipt thereof.
(e) Failure to Make Advances. The failure of any Lender to make the Advance to be made by it on the date specified in Section 2.3(c) shall not relieve any other Lender of its obligation hereunder to make its Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on such date.
(f) No Obligation. An Issuing Bank shall not be under any obligation to issue any Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any law applicable to such Issuing Bank shall prohibit, or require that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Second Extension Amendment Effective Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense that was not applicable on the Second Extension Amendment Effective Date and that such Issuing Bank in good faith deems material to it; or
(ii) the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank applicable to letters of credit generally.
(g) Letters of Credit Issued for Account of Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder supports any obligations of, or is for the account of, a Subsidiary, or states that a Subsidiary is the “account party,” “applicant,” “customer,” “instructing party,” or the like of or for such Letter of Credit, and without derogating from any rights of the applicable Issuing Bank (whether arising by contract, at law, in equity or otherwise) against such Subsidiary in respect of such Letter of Credit, the Borrower (i) shall reimburse, indemnify and compensate the applicable Issuing Bank hereunder for such Letter of Credit (including to reimburse any and all drawings thereunder) as if such Letter of Credit had been issued solely for the account of the Borrower and (ii) irrevocably waives any and all defenses that might otherwise be available to it as a guarantor or surety of any or all of the obligations of such Subsidiary in respect of such Letter of Credit. The Borrower hereby acknowledges that the issuance of such Letters of Credit for its Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.
Section 2.4. Fees.
(a) Facility Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee on the aggregate amount of such Lender’s Revolving Credit Commitment from the Effective Date in the case of each Lender party hereto on the Effective Date and from the effective date specified in the Added Lender Agreement or in the Lender Assignment Agreement pursuant to which it became a Lender in the case of each other Lender until the Termination Date applicable to such Lender at a rate per annum equal to the relevant Applicable Percentage in effect from time to time, which shall accrue quarterly through the last day of each March, June, September and December, commencing June 30, 2019, and on the Termination Date applicable to such Lender, and which shall be payable in arrears within fifteen (15) days of the end of such quarter; provided that no Defaulting Lender shall be entitled to receive any facility fee in respect of its Revolving Credit Commitment for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay such fee that otherwise would have been required to have been paid to that Defaulting Lender), other than a facility fee, as described above, on the aggregate principal amount of Advances funded by such Defaulting Lender outstanding from time to time.
(b) Letter of Credit Fees. (i) The Borrower shall pay to the Administrative Agent for the account of each Lender a commission on such Lender’s Ratable Share (after giving effect to the reallocation provisions of Section 2.3(b)) of the average daily aggregate Available Amount of all Letters of Credit issued for the account of the Borrower or any of its Subsidiaries and outstanding from time to time at a rate per annum equal to the Applicable Margin for SOFR Advances made by such Lender in effect from time to time during such calendar quarter, payable in arrears quarterly on the last day of each March, June, September and December, commencing with the quarter ended June 30, 2019, and on the Termination Date applicable to such Lender; provided that no Defaulting Lender shall be entitled to receive any commission in respect of Letters of Credit for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay such commission to that Defaulting Lender but shall pay such commission as set forth in Section 2.15);
(ii) The Borrower shall pay to each Issuing Bank, for its own account, a fronting fee in an amount agreed between the Borrower and such Issuing Bank and such other issuance fees, transfer fees and other fees and charges in connection with the Issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree.
Section 2.5. Termination or Reduction of the Commitments.
(a) Ratable Termination or Reduction. The Borrower shall have the right, upon at least three Business Days’ notice to the Administrative Agent, to terminate in whole or permanently reduce ratably (except with respect to a Permitted Early Refinancing and with respect to any other reduction or termination of Extended Commitments) in part the Unused Commitments or the Unissued Letter of Credit Commitments of the Lenders; provided that (except with respect to a Permitted Early Refinancing) no termination or reduction of Non-Extended Commitments shall be made pursuant to this Section 2.5 unless the Extended Commitments have been (or are concurrently being) terminated in full; provided, further, that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b) Termination of Defaulting Lender. The Borrower shall be entitled at any time to (i) terminate the Unused Commitment of any Lender that is a Defaulting Lender (determined after giving effect to any reallocation of such Defaulting Lender’s L/C Exposure and Swing Line Exposure, as provided in Section 2.15) (the “Defaulted Commitments”) upon prior notice of not less than one Business Day to the Administrative Agent (which shall promptly notify the Lenders thereof), and/or (ii) replace all of the Commitments or the Defaulted Commitments of any Lender that is a Defaulting Lender with Commitments of another financial institution reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank; provided that (x) each such assignment shall be either an assignment of all of the rights and obligations of the Defaulting Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the Defaulting Lender under this Agreement with respect to all of the Commitments or the Defaulted Commitments, as the case may be, and (y) concurrently with such assignment, either the Borrower or one or more assignees shall pay for the account of such Defaulting Lender an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Defaulting Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Defaulting Lender under this Agreement. In either such event, the provisions of Section 2.15(e) shall apply to all amounts thereafter paid by the Borrower or such assignees for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, facility fees, Letter of Credit commissions or other amounts); provided that (i) no Default and no Prepayment Event shall have occurred and be continuing and (ii) such
termination or assignment shall not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, each Issuing Bank, the Swing Line Bank or any Lender may have against such Defaulting Lender.
Section 2.6. Repayment of Advances and Letter of Credit Drawings.
(a) Revolving Credit Advances. The Borrower shall repay to the Administrative Agent for the account of each Lender on the relevant Termination Date applicable to such Lender the aggregate principal amount of the Non-Extended Advances and Extended Revolving Credit Advances, as applicable, made by such Lender and then outstanding.
(b) Letter of Credit Drawings. The obligations of the Borrower to reimburse amounts drawn under any Letter of Credit issued for the account of the Borrower or any of its Subsidiaries as provided in Section 2.3(c) shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, any Letter of Credit Agreement and any other agreement or instrument under all circumstances, including, without limitation, the following circumstances (it being understood that any such payment by the Borrower is without prejudice to, and does not constitute a waiver of, any rights the Borrower might have or might acquire as a result of the payment by any Issuing Bank of any draft or the reimbursement by the Borrower thereof):
(i) any lack of validity or enforceability of this Agreement, any Note, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “L/C Related Documents”);
(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank, the Administrative Agent, any Lender or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction;
(iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not comply with the terms of such Letter of Credit;
(vi) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the obligations of the Borrower in respect of the L/C Related Documents; or
(vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor.
(c) Swing Line Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Swing Line Bank and each other Lender which has made a Swing Line Advance the outstanding principal amount of each Swing Line Advance made to it by each of them on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than ten days after the requested date of such Borrowing) and the Termination Date applicable to the Swing Line Bank.
Section 2.7. Interest on Advances.
(a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance made to it and owing to each Lender or the Swing Line Bank, as the case may be, from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(i) ABR Advances. During such periods as such Advance is a ABR Advance, a rate per annum equal at all times to the result of (x) the ABR in effect from time to time plus (y) the Applicable Margin for the applicable ABR Advances in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such ABR Advance shall be Converted or paid in full.
(ii) SOFR Advances. During such periods as such Advance is a SOFR Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the result of (x) the Adjusted Term SOFR for such Interest Period for such SOFR Advance plus (y) the Applicable Margin for the applicable SOFR Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such SOFR Advance shall be Converted or paid in full.
(iii) Swing Line Advances. A rate per annum equal at all times to the result of (x) the Federal Funds Rate in effect from time to time plus (y) the Applicable Margin for Swing Line Advances in effect from time to time, in each case payable in arrears on the date such Swing Line Advance shall be paid in full.
(iv) EURIBOR Advances. During such periods as such Advance is a EURIBOR Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the result of (x) the Adjusted EURIBOR Rate for such Interest Period plus (y) the Applicable Margin for the applicable EURIBOR Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such EURIBOR Advance shall be Converted or paid in full.
(v) RFR Advances. During such periods as such Advance is a RFR Advance a rate per annum equal at all times to the result of (x) the Adjusted Daily Simple RFR plus (y) the Applicable Margin for such RFR Advance in effect from time to time, payable in arrears quarterly on the last day of each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such Advance (or, if there is no such numerically corresponding day in such month, then the last day of such month) and on the date such RFR Advance shall be Converted or paid in full.
(b) Default Interest. After the date any principal amount of any Advance is due and payable (whether on the applicable Termination Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on ABR Advances pursuant to clause (a)(i) above (as certified by the Administrative Agent to the Borrower (which certification shall be conclusive in the absence of manifest error)).
Section 2.8. Interest Rate Determination. (a) If the Borrower shall fail to select the duration of any Interest Period for any SOFR Advances or EURIBOR Advances, as applicable, in accordance with the provisions contained in the definition of “Interest Period” in Section 1.1, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances shall, on such last day, automatically be continued as an Advance with an Interest Period having a duration of one month.
(b) In connection with the use or administration of Term SOFR, the Administrative Agent will have the right, in consultation with the Borrower, to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.
Section 2.9. Optional Conversion of Revolving Credit Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent in substantially the form of Exhibit C not later than 11:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.8 and 3.1, Convert all Revolving Credit Advances denominated in Dollars of one Type comprising the same Borrowing into Revolving Credit Advances denominated in Dollars of the other Type; provided, however, that any Conversion of SOFR Advances into ABR Advances shall be made only on the last day of an Interest Period for such SOFR Advances, as applicable, any Conversion of ABR Advances into SOFR Advances shall be in an amount not less than the minimum amount specified in Section 2.2(c) and no Conversion of any Revolving Credit Advances shall result in more separate Revolving Credit Borrowings than permitted under Section 2.2(c). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Dollar denominated Revolving Credit Advances to be Converted, and (iii) if such Conversion is into SOFR Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower.
Section 2.10. Prepayments of Advances.
(a) Optional. The Borrower may, upon notice at least three Business Days prior to the date of such prepayment, in the case of EURIBOR Advances, at least two Business Days prior to the date of such prepayment, in the case of SOFR Advances, at least three Business Days prior to the date of such prepayment, in the case of RFR Advances at least five RFR
Business Days prior to the date of such prepayment and not later than 11:00 A.M. (New York City time) on the date of such prepayment, in the case of ABR Advances or Swing Line Advances, to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advances comprising part of the same Borrowing in whole or (except with respect to a Permitted Early Refinancing) ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (A) each partial prepayment of SOFR Advances shall be in an aggregate principal amount of not less than the Revolving Credit Borrowing Minimum or a Revolving Credit Borrowing Multiple in excess thereof and in the event of any such prepayment of a SOFR Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 3.4 and (B) each partial prepayment of Swing Line Advances shall be in an aggregate principal amount of not less than $1,000,000. Notwithstanding the foregoing, the Borrower shall not be permitted to prepay Non-Extended Advances pursuant to this Section 2.10 unless the outstanding principal amount of Extended Advances is zero before giving effect to such prepayment (except with respect to a Permitted Early Refinancing).
(b) Mandatory. (i) If, on the last day of any calendar month, the Administrative Agent notifies the Borrower that, on any interest payment date, the sum of (A) the aggregate principal amount of all Extended Advances denominated in Dollars plus the aggregate Available Amount of all Letters of Credit denominated in Dollars then outstanding and attributable to the Extended Revolving Credit Commitments plus (B) the Dollar Equivalent (determined on the third Business Day prior to such interest payment date) of the aggregate principal amount of all Extended Advances denominated in Committed Currencies plus the Available Amount of all Letters of Credit denominated in Committed Currencies then outstanding and attributable to the Extended Revolving Credit Commitments exceeds 105% of the aggregate Extended Revolving Credit Commitments of the Lenders on such date, the Borrower shall, as soon as practicable and in any event within five Business Days after receipt of such notice, prepay the outstanding principal amount of any Extended Advances owing by the Borrower in an aggregate amount sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Extended Revolving Credit Commitments of the Lenders on such date. Each prepayment made pursuant to this Section 2.10(b)(i) shall be made together with any interest accrued to the date of such prepayment on the principal amounts prepaid and, in the case of any prepayment of a SOFR Advance on a date other than the last day of an Interest Period or at its maturity, any additional amounts which the Borrower shall be obligated to reimburse to the Lenders in respect thereof pursuant to Section 3.4. The Administrative Agent shall give prompt notice of any prepayment required under this Section 2.10(b)(i) to the Borrower and the Lenders with Extended Revolving Credit Commitments.
(ii) If, on the last day of any calendar month, the Administrative Agent notifies the Borrower that, on any interest payment date, the sum of (A) the aggregate principal amount of all Non-Extended Advances denominated in Dollars plus the aggregate Available Amount of all Letters of Credit denominated in Dollars then outstanding and attributable to the Non-Extended Commitments plus (B) the Dollar Equivalent (determined on the third Business Day prior to such interest payment date) of the aggregate principal amount of all Non-Extended Advances denominated in Committed Currencies plus the Available Amount of all Letters of Credit denominated in Committed Currencies then outstanding and attributable to the Non-Extended Commitments exceeds 105% of the aggregate Non-Extended Commitments of the Lenders on such date, the Borrower shall, as soon as practicable and in any event within five Business Days after receipt of such notice, prepay the outstanding principal amount of any Non-Extended Advances owing by the Borrower in an aggregate amount sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Non-Extended Commitments of the Lenders on such date. Each prepayment made pursuant to this
Section 2.10(b)(ii) shall be made together with any interest accrued to the date of such prepayment on the principal amounts prepaid and, in the case of any prepayment of a SOFR Advance on a date other than the last day of an Interest Period or at its maturity, any additional amounts which the Borrower shall be obligated to reimburse to the Lenders in respect thereof pursuant to Section 3.4. The Administrative Agent shall give prompt notice of any prepayment required under this Section 2.10(b)(ii) to the Borrower and the Lenders with Non-Extended Commitments.
Section 2.11. Payments and Computations. (a) The Borrower shall make each payment hereunder (except with respect to principal of, interest on, and other amounts relating to, Advances denominated in a Committed Currency), irrespective of any right of counterclaim or set-off, not later than 11:00 A.M. (New York City time) on the day when due in Dollars to the Administrative Agent at the applicable Administrative Agent’s Account in same day funds. The Borrower shall make each payment hereunder with respect to principal of, interest on, and other amounts relating to, Advances denominated in a Committed Currency, irrespective of any right of counterclaim or set-off, not later than 11:00 A.M. (at the Payment Office for such Committed Currency) on the day when due in such Committed Currency to the Administrative Agent, by deposit of such funds to the applicable Administrative Agent’s Account in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest, fees or commissions ratably (other than amounts payable pursuant to Section 2.4(b)(ii), 3.3, 3.4, 3.5, 3.6 or 3.7) to the applicable Lenders for the account of their respective lending offices, and like funds relating to the payment of any other amount payable to any Lender Party to such Lender Party for the account of its lending office, in each case to be applied in accordance with the terms of this Agreement. Upon any Added Lender becoming a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.14, and upon the Administrative Agent’s receipt of such Lender’s Added Lender Agreement and recording of the information contained therein in the Register, from and after the applicable Increased Commitment Date, the Administrative Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assumed thereby to the Added Lender. Upon its acceptance of a Lender Assignment Agreement and recording of the information contained therein in the Register pursuant to Section 11.11.3, from and after the effective date specified in such Lender Assignment Agreement, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Lender Assignment Agreement shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b) All interest, fees and Letter of Credit commissions hereunder shall be computed on the basis of a year of 360 days (or in the case of interest computed by reference to the ABR at times when the ABR is based on the Prime Rate, such interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year)), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on any Advance shall be computed on a daily basis based upon the outstanding principal amount of such Advance as of the applicable date of determination. The applicable ABR, Adjusted Term SOFR or the Adjusted EURIBOR Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day; provided, however, that, if such extension would cause payment of interest on or principal of SOFR Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day and provided, further, that any such adjustment to the payment date shall in each case be made in the computation of payment of interest, fee or commission, as the case may be.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders and/or Issuing Banks hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders and/or Issuing Banks, as the case may be, the amount due.
(e) To the extent that the Administrative Agent receives funds for application to the amounts owing by the Borrower under or in respect of this Agreement or any Note in currencies other than the currency or currencies required to enable the Administrative Agent to distribute funds to the Lender Parties in accordance with the terms of this Section 2.11, the Administrative Agent, to the extent permitted by applicable law, shall be entitled to convert or exchange such funds into Dollars or into a Committed Currency or from Dollars to a Committed Currency or from a Committed Currency to Dollars, as the case may be, to the extent necessary to enable the Administrative Agent to distribute such funds in accordance with the terms of this Section 2.11; provided that the Borrower and each of the Lender Parties hereby agree that the Administrative Agent shall not be liable or responsible for any loss, cost or expense suffered by the Borrower or such Lender Party as a result of any conversion or exchange of currencies affected pursuant to this Section 2.11(e) or as a result of the failure of the Administrative Agent to effect any such conversion or exchange; and provided further that the Borrower agrees, to the extent permitted by applicable law, to indemnify the Administrative Agent and each Lender Party, and hold the Administrative Agent and each Lender Party harmless, for any and all losses, costs and expenses incurred by the Administrative Agent or any Lender Party for any conversion or exchange of currencies (or the failure to convert or exchange any currencies) in accordance with this Section 2.11(e).
Section 2.12. Sharing of Payments, Etc. If any Lender Party shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than (v) as payment of an Advance made by an Issuing Bank pursuant to the first sentence of Section 2.3(c), (w) as a payment of a Swing Line Advance made by the Swing Line Bank that has not been participated to the other Lender Parties pursuant to Section 2.2(b), (x) pursuant to Section 3.3, 3.4, 3.5, 3.6 or 3.7, (y) any payments made in accordance with the express terms of this Agreement at any time that a Defaulting Lender exists or in accordance with Section 2.10 and (z) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Commitments or Advances in accordance with Section 2.15, Section 11.11.1 or Section 11.11.2) in excess of its Ratable Share of payments on account of the relevant Revolving Credit Advances obtained by all the applicable Lender Parties, such Lender Party shall forthwith purchase from the other applicable Lender Parties such participations in the Revolving Credit Advances owing to them as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each Lender Party shall be rescinded and such Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such recovery together with an amount equal to such Lender Party’s ratable share (according to the proportion of (i) the amount of such Lender Party’s required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing a participation from another Lender Party pursuant to this Section 2.12 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such participation.
Section 2.13. Evidence of Debt. (a) Each Lender Party shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender Party resulting from each Advance owing to such Lender Party from time to time, including the amounts of principal and interest payable and paid to such Lender Party from time to time hereunder in respect of Advances. The Borrower agrees that upon notice by any Lender to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Note payable to such Lender in a principal amount up to the Revolving Credit Commitment of such Lender.
(b) The Register maintained by the Administrative Agent pursuant to Section 11.11.3 shall include a control account, and a subsidiary account for each Lender Party, in which accounts (taken together) shall be recorded (i) the date, currency and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Added Lender Agreement and each Lender Assignment Agreement delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender Party hereunder and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender Party’s share thereof.
(c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender Party in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender Party and, in the case of such account or accounts, such Lender Party, under this Agreement, absent manifest error.
Section 2.14. Increase in Aggregate Commitments. (a) The Borrower shall have the right prior to the latest Termination Date then in effect, by notice to the Administrative Agent, to effectuate from time to time an increase in the aggregate Extended Revolving Credit Commitments under this Agreement with the consent of the Issuing Banks and the Swing Line Bank (such consent not to be unreasonably withheld or delayed) (i) by adding to this Agreement one or more commercial banks or financial institutions reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank (who shall, upon completion of the requirements of this Section 2.14 constitute “Lenders” hereunder) (an “Added Lender”), or (ii) by allowing one or more Lenders in their sole discretion to increase their respective Extended Revolving Credit Commitments hereunder or convert their respective Non-Extended Commitments hereunder into Extended Revolving Credit Commitments (each an “Increasing Lender”), so that such added and increased Extended Revolving Credit Commitments shall equal the increase in the Extended Revolving Credit Commitments effectuated pursuant to this Section 2.14; provided that (i) no added Extended Revolving Credit Commitment shall be less than $10,000,000, (ii) no increase in or added Extended Revolving Credit Commitments pursuant to this Section 2.14 shall result in aggregate Revolving Credit Commitments exceeding $2,025,000,000, and (iii) no Lender’s Revolving Credit Commitment shall be increased or converted under this Section 2.14 without the consent of such Lender. The Borrower shall deliver to the Administrative Agent on or before the effective date of any increase in the Extended Revolving Credit Commitments of each of the following items with respect to each Added Lender and Increasing Lender:
(i) a written notice of the Borrower’s intention to increase the aggregate Extended Revolving Credit Commitments pursuant to this Section 2.14, which shall specify each Added Lender and the amount of such Added Lender’s Extended Revolving Credit Commitment (if any), each Increasing Lender and the amount of the
increase in or conversion of such Increasing Lender’s Revolving Credit Commitment (if any), and such other information as is reasonably requested by the Administrative Agent;
(ii) documents in the form of Exhibit E or Exhibit F, as applicable, executed and delivered by each Added Lender and each Increasing Lender, pursuant to which such Lender becomes a party hereto or increases or converts its Revolving Credit Commitment, as the case may be; and
(iii) if requested by the applicable Lender, Notes or replacement Notes, as the case may be, executed and delivered by the Borrower.
(b) Upon receipt of any notice referred to in clause (a)(i) above, the Administrative Agent shall promptly notify each Lender thereof. Upon execution and delivery of such documents (the “Increased Commitment Date”) and satisfaction of the conditions set forth in clause (c) below, such new Lender shall constitute a “Lender” hereunder with an Extended Revolving Credit Commitment as specified therein, or such Increasing Lender’s Extended Revolving Credit Commitment shall increase (or be converted from a Non-Extended Commitment) as specified therein, as the case may be. Immediately upon the effectiveness of the addition of such Added Lender or the increase in (or conversion to) the Extended Revolving Credit Commitment of such Increasing Lender under this Section 2.14, (i) the respective Ratable Shares of the applicable Lenders shall be deemed modified as appropriate to correspond to such changed aggregate Revolving Credit Commitments, and (ii) if there are at such time outstanding any Extended Advances, each Lender whose Ratable Share has been decreased as a result of the increase in the aggregate Extended Revolving Credit Commitments shall be deemed to have assigned, without recourse, to each Added Lender and Increasing Lender such portion of such Lender’s Extended Advances as shall be necessary to effectuate such adjustment in Ratable Shares. Each Increasing Lender and Added Lender (A) shall be deemed to have assumed such portion of such Extended Advances and (B) shall fund to each other applicable Lender on the Increased Commitment Date the amount of Extended Advances assigned by it to such Lender.
(c) Conditions to Effectiveness of Increases. Notwithstanding the foregoing, the increase of or conversion into Extended Revolving Credit Commitments pursuant to this Section shall not be effective with respect to any Lender unless:
(i) no Default or Prepayment Event or event which with notice or lapse of time or both would become a Prepayment Event shall have occurred and be continuing on the date of such increase and after giving effect thereto; and
(ii) the representations and warranties contained in this Agreement (excluding, however, those contained in the last sentence of Section 5.6) are true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct) on and as of the date of such extension and after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
Section 2.15. Defaulting Lenders.
(a) If any L/C Exposure or Swing Line Exposure exists at the time a Lender becomes a Defaulting Lender, and the Commitments have not been terminated in accordance with Section 7.3, then:
(i) so long as no Default and no Prepayment Event shall have occurred and be continuing, all or any part of the L/C Exposure or Swing Line Exposure
of such Defaulting Lender shall be reallocated among the Lenders that are not Defaulting Lenders (“Non-Defaulting Lenders”) in accordance with their respective Ratable Shares (disregarding any Defaulting Lender’s Revolving Credit Commitment and after giving effect to the reallocation provisions of Sections 2.2(b) and 2.3(b)) but only to the extent that each Non-Defaulting Lender’s total Revolving Credit Exposure does not exceed the Commitment of such Non-Defaulting Lender as in effect at the time of such reallocation. Subject to Section 11.21, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within three Business Days following notice by any Issuing Bank or the Swing Line Bank, first (x) cover the exposure of the Swing Line Bank to such Defaulting Lender’s Swing Line Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) by prepaying Swing Line Advances in an amount sufficient to permit such reallocation to be effected completely or providing cash collateral or a letter of credit to the Swing Line Bank, and second (y) cover the exposure of such Issuing Bank to such Defaulting Lender’s L/C Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) by prepaying Revolving Credit Advances in an amount sufficient to permit such reallocation to be effected completely or providing cash collateral or a letter of credit to such Issuing Bank; provided that in each case of clauses (x) and (y) above, such cash collateral or letter of credit shall be released promptly upon the earliest of, (A) so long as no Default and no Prepayment Event shall have occurred and be continuing, the reallocation of the Defaulting Lender’s L/C Exposure and Swing Line Exposure among Non-Defaulting Lenders in accordance with clause (i) above, (B) the termination of the Defaulting Lender status of the applicable Lender or (C) the existence of excess cash collateral or letter of credit coverage (in which case, the amount equal to such excess cash collateral or letter of credit coverage shall be released);
(iii) if the L/C Exposure of any Non-Defaulting Lender is reallocated pursuant to this Section 2.15(a), then the fees payable to such Non-Defaulting Lender pursuant to Section 2.4(b)(i) shall be adjusted in accordance with such Non-Defaulting Lender’s Ratable Share of the total L/C Exposure (after giving effect to the reallocation provisions of Section 2.3(b)); and
(iv) if any Defaulting Lender’s L/C Exposure is neither cash collateralized nor reallocated pursuant to Section 2.15(a), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all letter of credit fees payable under Section 2.4(b)(i) with respect to such Defaulting Lender’s Ratable Share of the total L/C Exposure shall be payable to the Issuing Bank until such Defaulting Lender’s L/C Exposure is cash collateralized, backed by a letter of credit and/or reallocated.
(b) So long as any Lender is a Defaulting Lender, no Issuing Bank shall be required to issue, amend or increase any Letter of Credit, and no Swing Line Bank shall be required to make any Swing Line Advance, unless the Issuing Bank or the Swing Line Bank, as the case may be, is satisfied that the related L/C Exposure or Swing Line Exposure, as the case may be, will be 100% covered by the Revolving Credit Commitments of the Non-Defaulting Lenders, cash collateral or a letter of credit provided by the Borrower, and participating interests in any such newly issued or increased Letter of Credit or Swing Line Advance shall be allocated among Non-Defaulting Lenders in a manner consistent with Section 2.15(a)(i) (and Defaulting Lenders shall not participate therein).
(c) No Revolving Credit Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.15, performance by the Borrower of its obligations shall not be excused or otherwise modified as a result of the operation of this Section 2.15. The rights and remedies against a Defaulting Lender under this Section 2.15 are in addition to any other rights and remedies which the Borrower, the Administrative Agent, each Issuing Bank, the Swing Line Bank or any Lender may have against such Defaulting Lender.
(d) If the Borrower, the Administrative Agent, the Swing Line Bank and each Issuing Bank agree in writing in their reasonable determination that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral or letters of credit), that Lender will, to the extent applicable, purchase at par that portion of outstanding Advances of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Credit Exposure to be held on a pro rata basis by the Lenders in accordance with their Ratable Shares (without giving effect to Section 2.15(a) but after giving effect to the reallocation provisions of Sections 2.2(b) and 2.3(b)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.
(e) Notwithstanding anything to the contrary contained in this Agreement, any payment of principal, interest, facility fees, Letter of Credit commissions or other amounts received by the Administrative Agent for the account of any Defaulting Lender under this Agreement (whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise) shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to each Issuing Bank or the Swing Line Bank hereunder; third, if so determined by the Administrative Agent or requested by each Issuing Bank, to be held as cash collateral for future funding obligations of such Defaulting Lender in respect of any participation in any Letter of Credit; fourth, as the Borrower may request (so long as no Default and no Prepayment Event shall have occurred and be continuing), to the funding of any Advance in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in the L/C Cash Collateral Account and released in order to satisfy obligations of such Defaulting Lender to fund Advances under this Agreement; sixth, to the payment of any amounts owing to the Lenders, each Issuing Bank or the Swing Line Bank as a result of any judgment of a court of competent jurisdiction obtained by any Lender, Issuing Bank or the Swing Line Bank against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default and no Prepayment Event shall have occurred and be continuing, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Advance in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Advances were made or the related Letters of Credit were issued at a time when the applicable conditions set forth in Article IV were satisfied or waived, such payment shall be applied solely to pay the Advances of all Non-Defaulting
Lenders on a pro rata basis prior to being applied to the payment of any Advances of such Defaulting Lender and provided further that any amounts held as cash collateral for funding obligations of a Defaulting Lender shall be returned to such Defaulting Lender upon the termination of this Agreement and the satisfaction of such Defaulting Lender’s obligations hereunder. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section 2.15 shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
Section 2.16. Extension of Termination Date.
(a) Requests for Extension. The Borrower may, by notice to the Administrative Agent (who shall promptly notify the applicable Lenders) not earlier than 60 days and not later than 45 days prior to any anniversary of the Effective Date, request that each Lender with an Extended Revolving Credit Commitment and/or each Lender with a Non-Extended Commitment extend such Lender’s Termination Date for an additional one year from the Termination Date then applicable to such Lender; provided that the Borrower may not extend the Termination Date under this Section 2.16 on more than two occasions.
(b) Lender Elections to Extend. Each Lender that receives a request pursuant to clause (a) above, acting in its sole and individual discretion, shall, by notice to the Administrative Agent given not later than the date (the “Notice Date”) that is 30 days prior to such anniversary, advise the Administrative Agent whether or not such Lender agrees to such extension (and each such Lender that determines not to so extend its Termination Date (a “Declining Lender”) shall notify the Administrative Agent of such fact promptly after such determination (but in any event no later than the Notice Date) and any such Lender that does not so advise the Administrative Agent on or before the Notice Date shall be deemed to be a Declining Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree.
(c) Notification by Administrative Agent. The Administrative Agent shall notify the Borrower of each Lender’s determination under this Section no later than the date 25 days prior to the applicable anniversary of the Effective Date (or, if such date is not a Business Day, on the immediately preceding Business Day).
(d) Additional Commitment Lenders. The Borrower shall have the right on or before the applicable anniversary of the Effective Date to replace each Declining Lender with, and add as “Lenders” under this Agreement in place thereof, one or more commercial banks or financial institutions reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank (each, an “Additional Commitment Lender”) as provided in Section 11.11 each of which Additional Commitment Lenders shall have entered into a Lender Assignment Agreement pursuant to which such Additional Commitment Lender shall, effective as of such anniversary, undertake an Extended Commitment or a Non-Extended Commitment, as applicable (and, if any such Additional Commitment Lender is already a Lender, its applicable Commitment shall be in addition to such Lender’s applicable Commitment(s) hereunder on such date); provided that no Declining Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Declining Lender shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Declining Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Declining Lender under this Agreement.
(e) Minimum Extension Requirement. If (and only if) the total of the Extended Commitments and/or Non-Extended Commitments of the Lenders that have agreed so to extend their Termination Date and the additional applicable Commitments of the Additional Commitment Lenders shall be more than 50% of the aggregate amount of the Extended Commitments and/or Non-Extended Commitments, as the case may be, in effect immediately prior to the applicable anniversary of the Effective Date, then, effective as of such anniversary, the Termination Date with respect to the relevant Commitments and Advances of each consenting Lender and of each Additional Commitment Lender shall be extended to the date falling one year after the latest Termination Date then in effect, as applicable, for Extended Commitments and Extended Advances, on the one hand, or for Non-Extended Commitments and Non-Extended Advances, on the other hand (except that, if such date is not a Business Day, such Termination Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall thereupon become a “Lender” for all purposes of this Agreement.
(f) Conditions to Effectiveness of Extensions. Notwithstanding the foregoing, the extension of the Termination Date pursuant to this Section shall not be effective with respect to any Lender unless:
(i) no Default or Prepayment Event or event which with notice or lapse of time or both would become a Prepayment Event shall have occurred and be continuing on the date of such extension and after giving effect thereto; and
(ii) the representations and warranties contained in this Agreement are true and correct on and as of the date of such extension and after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
Section 2.17. Other Interest Rate Provisions.
Section 2.17.1. Inability to Determine Rates. Subject to Section 2.17.3, if, on or prior to the first day of any Interest Period for any SOFR Advance or EURIBOR Advance, or, with respect to any RFR Advance, at any time:
(a) the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that (i) “Adjusted Term SOFR” or “Adjusted EURIBOR Rate” cannot be determined pursuant to the definition thereof (including because the Relevant Screen Rate is not available or published on a current basis) or (ii) adequate and reasonable means do not exist for ascertaining Adjusted Daily Simple RFR; or
(b) the Administrative Agent is advised by the Required Lenders that (i) in connection with any request for a SOFR Advance or EURIBOR Advance or a conversion thereto or a continuation thereof, that Adjusted Term SOFR or the Adjusted EURIBOR Rate, as applicable, for any requested Interest Period does not adequately and fairly reflect the cost to such Lenders of making and maintaining such Advance or (ii) Adjusted Daily Simple RFR will not adequately and fairly reflect the cost to such Lenders of making and maintaining their RFR Advance, and, in each case, the Required Lenders have provided notice of such determination to the Administrative Agent (provided that if the circumstances giving rise to such notice affect only one Type of Borrowing, then all other Types of Borrowings shall be unaffected by such notice), then the Administrative Agent will promptly so notify the Borrower and each Lender
(c) and, until (x) the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect to the applicable Benchmark and (y) the Borrower delivers a new Interest Period Notice or a new Notice of Revolving Credit Borrowing, as applicable, with respect to such affected Advances,
then (A)(1) if the Benchmark identified in such notice is the Adjusted Term SOFR Rate, any Interest Period Notice that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a SOFR Advance and any Notice of Borrowing that requests a SOFR Advance shall instead be deemed to be an Interest Period Notice or a Notice of Revolving Borrowing, as applicable, for an ABR Advance and (2) any SOFR Advance outstanding on the last day of the Interest Period applicable to such SOFR Advance following the Borrower’s receipt of such notice shall be deemed to have been converted to an ABR Advance as of such date and (B)(1) if the Benchmark identified in such notice is the Adjusted EURIBOR Rate or the Adjusted Daily Simple RFR, any Interest Period Notice that requests the conversion to, or continuation of any Borrowing as a EURIBOR Advance or an RFR Advance, as applicable, shall instead be deemed to be an Interest Period Notice or a Notice of Revolving Borrowing, as applicable, for a Central Bank Rate Advance in the applicable Committed Currency and (2) any EURIBOR Advance outstanding on the last day of the Interest Period applicable to such EURIBOR Advance following the Borrower’s receipt of such notice, or any RFR Advance outstanding on the date of the Borrower’s receipt of such notice shall, as of such date, bear interest at the Central Bank Rate for such Committed Currency plus the applicable CBR Spread; provided that, if the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that the Central Bank Rate for the applicable Committed Currency cannot be determined, any outstanding affected Advances denominated in such Committed Currency shall, at the Borrower’s election be prepaid by the Borrower on such date, or, solely for the purpose of calculating the interest rate applicable to such Advance, shall be deemed to be a SOFR Advance denominated in Dollars and shall accrue interest at the same interest rate applicable to SOFR Advances denominated in Dollars at such time.
Section 2.17.2. Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Advances whose interest is determined by reference to SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBOR, the Adjusted EURIBOR Rate, or to determine or charge interest based upon SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBOR, or the Adjusted EURIBOR Rate, then, upon notice thereof by such Lender to the Borrower (through the Administrative Agent) (an “Illegality Notice”), (a) any obligation of the Lenders to make SOFR Advances, and any right of the Borrower to continue SOFR Advances or to convert ABR Advances to SOFR Advances, shall be suspended, and (b) the interest rate on which ABR Advances shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to clause (c) of the definition of “ABR”, in each case until each affected Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of an Illegality Notice, the Borrower shall, if necessary to avoid such illegality, upon demand from any Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all SOFR Advances or EURIBOR Advances, as applicable, to ABR Advances (the interest rate on which ABR Advances shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to clause (c) of the definition of “ABR”), on the last day of the Interest Period therefor, if all affected Lenders may lawfully continue to maintain such SOFR Advances to such day, or immediately, if any Lender may not lawfully continue to maintain such SOFR Advances to such day, in each case until the Administrative Agent is advised in writing by each affected Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBOR or the Adjusted EURIBOR Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid
or converted, together with any additional amounts required pursuant to Section 3.4.
Section 2.17.3. Benchmark Replacement Setting.
(a) Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, the Administrative Agent and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 P.M. (New York City time) on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all affected Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. No replacement of a Benchmark with a Benchmark Replacement pursuant to this Section 2.17.3(a) will occur prior to the applicable Benchmark Transition Start Date.
(b) In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right, in consultation with the Borrower and the Borrower, to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(c) The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 2.17.3(d) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.17.3, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.17.3.
(d) Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate or the EURIBOR Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(e) Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, (i) the Borrower may revoke any pending request for a SOFR Advance, EURIBOR Advance or RFR Advance of, conversion to or continuation of SOFR Advances, EURIBOR Advances or RFR Advances, as applicable, to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request with respect to any affected Advance into a request for a Borrowing of or conversion to an ABR Advance and (ii)(1) if such notice is delivered with respect to the Term SOFR Reference Rate, any SOFR Advances outstanding on the last day of the Interest Period applicable to such SOFR Advance following the Borrower’s receipt of such notice shall be deemed to have been converted to an ABR Advance on such date and (2) if such notice is delivered in respect of the Adjusted EURIBOR Rate or the Adjusted Daily Simple RFR, any affected EURIBOR Advances or RFR Advances, as applicable, shall bear interest at the Central Bank Rate for the applicable Committed Currency plus the CBR Spread as of, in the case of a EURIBOR Advance, the last day of the Interest Period applicable to such EURIBOR Advance following the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, and, in the case of an RFR Advance, on the date of the Borrower’s receipt of such notice; provided that, if the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that the Central Bank Rate for such Committed Currency cannot be determined, any outstanding affected Advances denominated in such Committed Currency shall, at the Borrower’s election, be prepaid by the Borrower on such day or, solely for the purpose of calculating the interest rate applicable to such Advance, be deemed to be a SOFR Advance denominated in Dollars and shall accrue interest at the same interest rate applicable to SOFR Advances denominated in Dollars at such time. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of ABR.
ARTICLE III
CERTAIN OTHER PROVISIONS
Section 3.1. [Intentionally Omitted].
Section 3.2. [Intentionally Omitted].
Section 3.3. Increased Costs, etc. If a change in any applicable treaty, law, regulation or regulatory requirement (including by introduction or adoption of any new treaty, law, regulation or regulatory requirement) or in the interpretation thereof or in its application to the Borrower, or if compliance by any Lender Party with any applicable direction, request, requirement or guideline (whether or not having the force of law, and for the avoidance of doubt, including any changes resulting from (i) requests, rules, guidelines or directives concerning capital adequacy or liquidity issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, and in each case for both clauses (i) and (ii), regardless of the date enacted, adopted or issued) of any governmental or other authority including, without limitation, any agency of the United States or the United Kingdom, the European Union or similar monetary or multinational authority insofar as it may be changed or imposed after the date hereof, shall:
(a) subject any Lender Party to any taxes, levies, duties, charges, fees, deductions or withholdings of any nature with respect to its commitment to lend or to issue or participate in Letters of Credit and other commitments of such type or the issuance or maintenance of participations in Letters of Credit (or similar contingent obligations) or any part
thereof imposed, levied, collected, withheld or assessed by any jurisdiction or any political subdivision or taxing authority thereof (other than taxation on overall net income and, to the extent such taxes are described in Section 3.6, withholding taxes); or
(b) change the basis of taxation to any Lender Party (other than a change in taxation on the overall net income of such Lender Party) of payments of principal or interest or any other payment due or to become due pursuant to this Agreement; or
(c) impose, modify or deem applicable any reserve, liquidity or capital adequacy requirements (other than the reserve costs described in Section 3.7) or other banking or monetary controls or requirements which affect the manner in which a Lender Party shall allocate its capital resources to its obligations hereunder or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, any Lender Party (provided that such Lender Party shall, unless prohibited by law, allocate its capital resources to its obligations hereunder in a manner which is consistent with its present treatment of the allocation of its capital resources); or
(d) impose on any Lender Party any other condition affecting its commitment to lend or to issue or participate in Letters of Credit hereunder, and the result of any of the foregoing is either (i) to increase the cost to such Lender Party of making Advances or of issuing or participating in Letters of Credit or maintaining its Commitment or any part thereof, (ii) to reduce the amount of any payment received by such Lender Party or its effective return hereunder or on its capital or (iii) to cause such Lender Party to make any payment or to forego any return based on any amount received or receivable by such Lender Party hereunder, then and in any such case if such increase or reduction in the opinion of such Lender Party materially affects the interests of such Lender Party, (A) the Lender Party concerned shall (through the Administrative Agent) notify the Borrower of the occurrence of such event and use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different lending office if the making of such a designation would avoid the effects of such law, regulation or regulatory requirement or any change therein or in the interpretation thereof and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party and (B) the Borrower shall forthwith upon demand pay to the Administrative Agent for the account of such Lender Party such amount as is necessary to compensate such Lender Party for such additional cost or such reduction and ancillary expenses, including taxes, incurred as a result of such adjustment. Such notice shall (i) describe in reasonable detail the event leading to such additional cost, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such additional cost, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is the Lender Party’s standard method of calculating such amount, (v) certify that such request is consistent with its treatment of other borrowers that are subject to similar provisions, and (vi) certify that, to the best of its knowledge, such change in circumstance is of general application to the commercial banking industry in such Lender Party’s jurisdiction of organization or in the relevant jurisdiction in which such Lender Party does business. Failure or delay on the part of any Lender Party to demand compensation pursuant to this Section shall not constitute a waiver of such Lender Party’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender Party pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender Party notifies the Borrower of the circumstance giving rise to such increased costs or reductions and of such Lender Party’s intention to claim compensation therefor; provided further that, if the circumstance giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender Party notifies the Borrower of the circumstance giving rise to such cost or reductions and of such Lender Party’s intention to claim compensation therefor.
Section 3.4. Funding Losses. In the event any Lender shall incur any loss or expense (other than loss of profits, business or anticipated savings) by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Advance as a SOFR Advance as a result of:
(a) any conversion or repayment or prepayment of the principal amount of any SOFR Advances on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; or
(b) any SOFR Advances not being made in accordance with the Notice of Revolving Credit Borrowing therefor due to the fault of the Borrower or as a result of any of the conditions precedent set forth in Article IV not being satisfied,
then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five Business Days of its receipt thereof, pay directly to such Lender such amount as will reimburse such Lender for such loss or expense. Such written notice shall include calculations in reasonable detail setting forth the loss or expense to such Lender.
Section 3.5. Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law and for the avoidance of doubt, including any changes resulting from (i) requests, rules, guidelines or directives concerning capital adequacy or liquidity issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, and in each case for both clauses (i) and (ii), regardless of the date enacted, adopted or issued) of any court, central bank, regulator or other governmental authority increases the amount of capital required to be maintained by any Lender Party or any Person controlling such Lender Party, and the rate of return on its or such controlling Person’s capital as a consequence of its Commitments or the Advances made by such Lender Party is reduced to a level below that which such Lender Party or such controlling Person would have achieved but for the occurrence of any such change in circumstance, then, in any such case upon notice from time to time by such Lender Party to the Borrower, the Borrower shall immediately pay directly to such Lender Party additional amounts sufficient to compensate such Lender Party or such controlling Person for such reduction in rate of return. Any such notice shall (i) describe in reasonable detail the capital adequacy or liquidity requirements which have been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such lowered return, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is such Lender Party’s standard method of calculating such amount, (v) certify that such request for such additional amounts is consistent with its treatment of other borrowers that are subject to similar provisions and (vi) certify that, to the best of its knowledge, such change in circumstances is of general application to the commercial banking industry in the jurisdictions in which such Lender Party does business. In determining such amount, such Lender Party may use any method of averaging and attribution that it shall, subject to the foregoing sentence, deem applicable. Each Lender Party agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different lending office if the making of such a designation would avoid such reduction in such rate of return and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. Failure or delay on the part of any Lender Party to demand compensation pursuant to this Section shall not constitute a waiver of such Lender Party’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender Party pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender Party notifies the
Borrower of the circumstance giving rise to such reductions and of such Lender Party’s intention to claim compensation therefor; provided, further, that, if the circumstance giving rise to such reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender Party notifies the Borrower of the circumstance giving rise to such reductions and of such Lender Party’s intention to claim compensation therefor.
Section 3.6. Taxes. All payments by the Borrower of principal of, and interest on, the Advances and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding, with respect to each Lender Party, taxes imposed on or measured by such Lender Party’s net income or receipts and franchise taxes imposed in lieu of net income taxes or taxes on receipts, by the jurisdiction under the laws of which such Lender Party is organized or any political subdivision thereof or the jurisdiction of such Lender Party’s lending office or any political subdivision thereof or any other jurisdiction unless such net income taxes are imposed solely as a result of the Borrower’s activities in such other jurisdiction, and any taxes imposed under FATCA (such non-excluded items being called “Taxes”). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will:
(a) pay directly to the relevant authority the full amount required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of the Lender Parties such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender Party will equal the full amount such Lender Party would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender Party with respect to any payment received by the Administrative Agent or such Lender Party hereunder, the Administrative Agent or such Lender Party may pay such Taxes and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by such Person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Person would have received had no such Taxes been asserted.
Any Lender Party claiming any additional amounts payable pursuant to this Section agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party.
If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lender Parties, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lender Parties for any incremental withholding Taxes, interest or penalties that may become payable by any Lender Party as a result of any such failure (so long as such amount did not become payable as a result of the failure of such Lender Party to provide timely notice to the
Borrower of the assertion of a liability related to the payment of Taxes). For purposes of this Section 3.6, a distribution hereunder by the Administrative Agent or any Lender Party to or for the account of any Lender Party shall be deemed a payment by the Borrower.
If any Lender Party is entitled to any refund, credit, deduction or other reduction in tax by reason of any payment made by the Borrower in respect of any tax under this Section 3.6 or by reason of any payment made by the Borrower pursuant to Section 3.3, such Lender Party shall use reasonable efforts to obtain such refund, credit, deduction or other reduction and, promptly after receipt thereof, will pay to the Borrower such amount (plus any interest received by such Lender Party in connection with such refund, credit, deduction or reduction) as is equal to the net after-tax value to such Lender Party of such part of such refund, credit, deduction or reduction as such Lender Party reasonably determines is allocable to such tax or such payment (less out-of-pocket expenses incurred by such Lender Party); provided that no Lender Party shall be obligated to disclose to the Borrower any information regarding its tax affairs or tax computations.
Each Lender Party (and each Participant) agrees with the Borrower and the Administrative Agent that it will (i) in the case of a Lender Party or a Participant that is organized under the laws of a jurisdiction other than the United States (a) provide to the Administrative Agent and the Borrower an appropriately executed copy of Internal Revenue Service Form W-8ECI certifying that any payments made to or for the benefit of such Lender Party or such Participant are effectively connected with a trade or business in the United States (or, alternatively, an Internal Revenue Service Form W-8BEN or W-8BEN-E claiming the benefits of a tax treaty, but only if the applicable treaty described in such form provides for a complete exemption from U.S. federal income tax withholding), or any successor form, on or prior to the date hereof (or, in the case of any assignee as provided for in Section 11.11.1 or Participant, on or prior to the date of the relevant assignment or participation) in each case attached to an Internal Revenue Service Form W-8IMY, if appropriate, (b) notify the Administrative Agent and the Borrower if the certifications made on any form provided pursuant to this paragraph are no longer accurate and true in all material respects and (c) provide such other tax forms or other documents as shall be prescribed by applicable law, if any, or as otherwise reasonably requested, to demonstrate, to the extent applicable, that payments to such Lender Party (or Participant) hereunder are exempt from withholding under FATCA, and (ii) in all cases, provide such forms, certificates or other documents or information, as and when reasonably requested by the Borrower, necessary to claim any applicable exemption from, or reduction of, Taxes or any payments made to or for benefit of such Lender Party or such Participant; provided that the Lender Party or Participant is legally able to deliver such forms, certificates or other documents. For any period with respect to which a Lender Party (or Participant) has failed to provide the Borrower with the foregoing forms (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided (which, in the case of an assignee as provided for in Section 11.11.1, would be the date on which the original assignor was required to provide such form) or if such form otherwise is not required hereunder) such Lender Party (or Participant) shall not be entitled to the benefits of this Section 3.6 with respect to Taxes imposed by reason of such failure.
Section 3.7. Reserve Costs. Without in any way limiting the Borrower’s obligations under Section 3.3, the Borrower shall pay to each Lender on the last day of each Interest Period of each SOFR Advance, so long as the relevant lending office of such Lender is required to maintain reserves against “Eurocurrency liabilities” under Regulation D of the F.R.S. Board, upon notice from such Lender, an additional amount equal to the product of the following for each SOFR Advance for each day during such Interest Period:
(i) the principal amount of such SOFR Advance outstanding on such day; and
(ii) the remainder of (x) a fraction the numerator of which is the rate (expressed as a decimal) at which interest accrues on such SOFR Advance for such Interest Period as provided in this Agreement (less the Applicable Margin applicable to the relevant SOFR Advances and the relevant Applicable Percentage) and the denominator of which is one minus any increase after the Effective Date in the effective rate (expressed as a decimal) at which such reserve requirements are imposed on such Lender minus (y) such numerator; and
(iii) 1/360.
Such notice shall (i) describe in reasonable detail the reserve requirement that has been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the applicable reserve percentage, (iii) certify that such request is consistent with such Lender’s treatment of other borrowers that are subject to similar provisions and (iv) certify that, to the best of its knowledge, such requirements are of general application in the commercial banking industry in the United States.
Each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to avoid the requirement of maintaining such reserves (including by designating a different lending office) if such efforts would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
Section 3.8. Replacement Lenders, etc. If the Borrower shall be required to make any payment to any Lender pursuant to Section 3.3, 3.4, 3.5, 3.6 or 3.7, the Borrower shall be entitled at any time (so long as no Default and no Prepayment Event shall have occurred and be continuing) within 180 days after receipt of notice from such Lender Party of such required payment to (a) terminate such Lender Party’s Revolving Credit Commitment (whereupon the Ratable Shares of each other Lender Party shall automatically be adjusted to an amount equal to each such Lender Party’s ratable share of the remaining Revolving Credit Commitments), and such Lender Party’s right to receive any facility fee accruing after such termination, (b) prepay the affected portion of such Lender Party’s Advances in full, together with accrued interest thereon through the date of such prepayment (provided that the Borrower shall not prepay any such Lender Party pursuant to this clause (b) without replacing such Lender Party pursuant to the following clause (c) until a 30-day period shall have elapsed during which the Borrower and the Agents shall have attempted in good faith to replace such Lender Party), and/or (c) replace such Lender Party with another financial institution reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank; provided that (i) each such assignment shall be either an assignment of all of the rights and obligations of the assigning Lender Party under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender Party under this Agreement and (ii) no Lender Party shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Lender Party shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender Party, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender Party under this Agreement. Each Lender Party represents and warrants to the Borrower that, as of the date of this Agreement (or, with respect to any Lender Party not a party hereto on the date hereof, on the date that such Lender Party becomes a party hereto), there is no existing treaty, law, regulation, regulatory requirement, interpretation, directive, guideline, decision or request pursuant to which such Lender Party would be entitled to request any payments under any of Sections 3.3, 3.4, 3.5, 3.6 and 3.7 to or for account of such Lender Party.
Section 3.9. Setoff. Upon the occurrence and during continuance of an Event of Default or Prepayment Event, each Lender Party shall have, to the extent permitted by applicable law, the right to appropriate and apply to the payment of the Obligations then due and owing to it any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender Party; provided that any such appropriation and application shall be subject to the provisions of Section 2.12; provided, further, that in the event that any Defaulting Lender exercises any such right of setoff, (x) all amounts so set off will be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.15(e) and, pending such payment, will be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Banks, the Swing Line Bank and the Lenders and (y) the Defaulting Lender will provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. Each Lender Party agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender Party; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender Party under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender Party may have.
Section 3.10. Use of Proceeds. The Borrower shall apply the proceeds of each Borrowing in accordance with the third recital; without limiting the foregoing, no proceeds of any Advance will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any “margin stock”, as defined in F.R.S. Board Regulation U.
ARTICLE IV
CONDITIONS TO BORROWING
Section 4.1. Effectiveness. The obligations of the Lender Parties to fund any Borrowing or to issue any Letter of Credit became effective on and as of the first date (the “Closing Date”) on which each of the conditions precedent set forth in this Section 4.1 were satisfied.
(a) Resolutions, etc. The Administrative Agent shall have received from the Borrower:
(i) a certificate, dated the Closing Date, of its Secretary or Assistant Secretary as to the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document and as to the truth and completeness of the attached:
(x) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document, and
(y) Organic Documents of the Borrower,
and upon which certificate each Lender Party may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower canceling or amending such prior certificate; and
(ii) Certificate of Good Standing issued by the relevant Liberian authorities in respect of the Borrower.
(b) Delivery of Notes. The Administrative Agent shall have received, for the account of the respective Lenders, the Notes requested by Lenders pursuant to Section 2.13 at least five Business Days prior to the Closing Date, duly executed and delivered by the Borrower.
(c) Opinions of Counsel. The Administrative Agent shall have received opinions, dated the Closing Date and addressed to the Agents and each Lender Party, from:
(i) Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Borrower, as to New York law, in a form reasonably satisfactory to the Administrative Agent; and
(ii) Watson Farley & Williams LLP, counsel to the Borrower, as to Liberian law, in a form reasonably satisfactory to the Administrative Agent.
(d) Closing Fees, Expenses, etc. The Administrative Agent shall have received for its own account, or for the account of each Lender Party, as the case may be, all fees that the Borrower shall have agreed in writing to pay to the Administrative Agent (whether for its own account or for account of any of the Lender Parties) and all invoiced expenses of the Administrative Agent (including the agreed fees and expenses of counsel to the Administrative Agent) on or prior to the Closing Date.
(e) Know your Customer. Each Lender shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the Patriot Act to the extent reasonably requested by such Lender at least five Business Days prior to the Closing Date.
(f) Beneficial Ownership Certifications. At least five (5) days prior to the Effective Date, if the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, it shall deliver, to each Lender that so requests, a Beneficial Ownership Certification in relation to the Borrower.
(g) Payment Under the Existing Credit Agreement. The Borrower shall, substantially simultaneously with the occurrence of the Closing Date (and in any event no later than the close of business on the Closing Date), pay all of the accrued fees and interest under the Existing Credit Agreement, and each of the Lenders that is a party to the Existing Credit Agreement hereby waives, upon execution of this Agreement, any notice required by the Existing Credit Agreement relating to such payments thereunder.
Section 4.2. All Borrowings and Issuances. The obligation of each Lender to fund any Advance on the occasion of any Borrowing (including the initial Borrowing) (other than (x) a Swing Line Advance made by a Lender pursuant to Section 2.2(b) or (y) an Advance made by any Issuing Bank or any Lender pursuant to Section 2.3(c)) and the obligation of any Issuing Bank to issue a Letter of Credit shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 4.2.
(a) Compliance with Warranties, No Default, etc. Both before and after giving effect to any Borrowing or Issuance the following statements shall be true and correct:
(i) the representations and warranties set forth in Article V (excluding, however, those contained in the last sentence of Section 5.6 and in Sections 5.8, 5.9(b), 5.10 and 5.12) shall be true and correct in all material respects except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct, with the same effect as if then made; and
(ii) no Default and no Prepayment Event and no event which (with notice or lapse of time or both) would become a Prepayment Event shall have then occurred and be continuing.
(b) Request. The Administrative Agent shall have received a Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing or a Notice of Issuance, as applicable. Each of the delivery of a Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing or a Notice of Issuance, as applicable, and the acceptance by the Borrower of the proceeds of such Borrowing or Issuance shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or Issuance (both immediately before and after giving effect to such Borrowing or Issuance and the application of the proceeds thereof) the statements made in Section 4.2(a) are true and correct.
Section 4.3. Determinations Under Section 4.1. For purposes of determining compliance with the conditions specified in Section 4.1, each Lender Party was deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties. The Administrative Agent previously notified the Lender Parties of the occurrence of the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lender Parties and the Administrative Agent to enter into this Agreement, to make Advances and to issue Letters of Credit hereunder, the Borrower represented and warranted to the Administrative Agent and each Lender Party as set forth in this Article V as of the Closing Date and, except with respect to the representations and warranties in Sections 5.6 (with respect to the final sentence only), 5.8, 5.9(b), 5.10 and 5.12, the Borrower represents and warrants to the Administrative Agent and each Lender Party as set forth in this Article V as of the date of each Borrowing and Issuance after the Closing Date.
Section 5.1. Organization, etc. The Borrower and each of the Principal Subsidiaries is a corporation validly organized and existing and in good standing under the laws of its jurisdiction of incorporation; the Borrower is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect; and the Borrower has full power and authority, has taken all corporate action and holds all governmental and creditors’ licenses, permits, consents and other approvals necessary to enter into each Loan Document and to perform the Obligations.
Section 5.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower of this Agreement and each other Loan Document, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not:
(a) contravene the Borrower’s Organic Documents;
(b) contravene any law or governmental regulation of any Applicable Jurisdiction except as would not reasonably be expected to result in a Material Adverse Effect;
(c) contravene any court decree or order binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect;
(d) contravene any contractual restriction binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect; or
(e) result in, or require the creation or imposition of, any Lien on any of the Borrower’s properties except as would not reasonably be expected to result in a Material Adverse Effect.
Section 5.3. Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower of this Agreement or any other Loan Document (except for authorizations or approvals not required to be obtained on or prior to the Closing Date that have been obtained or actions not required to be taken on or prior to the Closing Date that have been taken). Each of the Borrower and each Principal Subsidiary holds all governmental licenses, permits and other approvals required to conduct its business as conducted by it on the Closing Date, except to the extent the failure to hold any such licenses, permits or other approvals would not have a Material Adverse Effect.
Section 5.4. Compliance with Environmental Laws. The Borrower and each Principal Subsidiary is in compliance with all applicable Environmental Laws, except to the extent that the failure to so comply would not have a Material Adverse Effect.
Section 5.5. Validity, etc. This Agreement constitutes, and the Notes will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
Section 5.6. Financial Information. The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2021, and the related consolidated statements of operations and cash flows of the Borrower and its Subsidiaries, copies of which have been furnished to the Administrative Agent and each Lender Party, have been prepared in accordance with GAAP, and present fairly in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as at December 31, 2021, and the results of their operations for the Fiscal Year then ended. Since December 31, 2021, there has been no material adverse change in the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole.
Section 5.7. No Default, Event of Default or Prepayment Event. No Default, Event of Default or Prepayment Event has occurred and is continuing.
Section 5.8. Litigation. There is no action, suit, litigation, investigation or proceeding pending or, to the knowledge of the Borrower, threatened against the Borrower or any Principal Subsidiary, that (i) except as set forth in filings made by the Borrower with the Securities and Exchange Commission, in the Borrower’s reasonable opinion might reasonably be expected to materially adversely affect the business, operations or financial condition of the Borrower and its Subsidiaries (taken as a whole) (collectively, “Material Litigation”) or (ii) purports to affect the legality, validity or enforceability of the Loan Documents or the consummation of the transactions contemplated hereby.
Section 5.9. Vessels. Each Vessel is
(a) legally and beneficially owned by the Borrower or a Principal Subsidiary,
(b) registered in the name of the Borrower or such Principal Subsidiary under the flag identified in Item 5.9(b) of the Disclosure Schedule,
(c) free of all recorded Liens, other than Liens permitted by Section 6.2.3, and
(d) insured against loss or damage in compliance with Section 6.1.5.
Section 5.10. Subsidiaries. The Borrower has no Existing Principal Subsidiaries on the Effective Date, except those Existing Principal Subsidiaries which are identified in Item 5.10 of the Disclosure Schedule. All Existing Principal Subsidiaries are direct or indirect wholly-owned Subsidiaries of the Borrower, except to the extent any such Existing Principal Subsidiary or an interest therein has been sold in accordance with clause (b) of Section 6.2.7 or such Existing Principal Subsidiary no longer owns a Vessel.
Section 5.11. Obligations rank pari passu. The Obligations rank at least pari passu in right of payment and in all other respects with all other unsecured unsubordinated Indebtedness of the Borrower other than Indebtedness preferred as a matter of law.
Section 5.12. No Filing, etc. Required. No filing, recording or registration and no payment of any stamp, registration or similar tax is necessary under the laws of any Applicable Jurisdiction to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement or the other Loan Documents (except for filings, recordings, registrations or payments not required to be made on or prior to the Closing Date that have been made).
Section 5.13. No Immunity. The Borrower is subject to civil and commercial law with respect to the Obligations. Neither the Borrower nor any of its properties or revenues is entitled to any right of immunity in any Applicable Jurisdiction from suit, court jurisdiction, judgment, attachment (whether before or after judgment), set-off or execution of a judgment or from any other legal process or remedy relating to the Obligations (to the extent such suit, court jurisdiction, judgment, attachment, set-off, execution, legal process or remedy would otherwise be permitted or exist).
Section 5.14. Pension Plans. To the extent that, at any time after the Effective Date, there are any Pension Plans, no Pension Plan shall have been terminated, and no contribution failure will have occurred with respect to any Pension Plan, in each case which could (a) give rise to a Lien under section 302(f) of ERISA and (b) result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty which, in either case, would have a Material Adverse Effect.
Section 5.15. Investment Company Act. The Borrower is not required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section 5.16. Regulation U. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Advances will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U. Terms for which meanings are provided in F.R.S. Board Regulation U or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.
Section 5.17. Accuracy of Information. The financial and other information (other than financial projections or other forward looking information) furnished to the Administrative Agent and the Lender Parties in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller in connection with the negotiation of this Agreement is, when taken as a whole, to the best knowledge and belief of the Borrower, true and correct and
contains no misstatement of a fact of a material nature. All financial projections, if any, that have been furnished to the Administrative Agent and the Lender Parties in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller in connection with this Agreement have been or will be prepared in good faith based upon assumptions believed by the Borrower to be reasonable at the time made (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrower’s control, and that no assurance can be given that the projections will be realized). All financial and other information furnished to the Administrative Agent and the Lender Parties in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller after the date of this Agreement shall have been prepared by the Borrower in good faith. As of the Effective Date, to the knowledge of the Borrower, the information included in the Beneficial Ownership Certification of the Borrower (to the extent required to be delivered hereunder) is true and correct in all respects.
Section 5.18. Compliance with Laws. The Borrower is in compliance with all applicable laws, rules, regulations and orders, except to the extent that the failure to so comply does not and could not reasonably be expected to have a Material Adverse Effect, and the Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions. The Borrower and its Subsidiaries and, to the knowledge of the Borrower, their respective officers, employees, directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions, in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in Borrower being designated as a Sanctioned Person. None of (a) the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary any of their respective directors, officers or employees, or (b) to the knowledge of the Borrower, any agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person.
Section 5.19. ERISA. As of the date hereof, the Borrower is not and will not be (1) an employee benefit plan subject to Title I of ERISA, (2) a plan or account subject to Section 4975 of the Code; (3) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code; or (4) a “governmental plan” within the meaning of ERISA.
Section 5.20. EEA Financial Institution. The Borrower is not an EEA Financial Institution.
ARTICLE VI
COVENANTS
Section 6.1. Affirmative Covenants. The Borrower agrees with the Administrative Agent and each Lender Party that, until all Commitments have terminated and all Obligations (other than the contingent amounts for which no claim or demand has been made) have been paid in full, the Borrower will perform the obligations set forth in this Section 6.1.
Section 6.1.1. Financial Information, Reports, Notices, etc.
The Borrower will furnish, or will cause to be furnished, to the Administrative Agent (with sufficient copies for distribution to each Lender Party) the following financial statements, reports, notices and information:
(a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a copy of the Borrower’s
report on Form 10-Q (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Quarter, containing unaudited consolidated financial statements of the Borrower for such Fiscal Quarter (including a balance sheet and profit and loss statement) prepared in accordance with GAAP, subject to normal year-end audit adjustments;
(b) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, a copy of the Borrower’s annual report on Form 10-K (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Year, containing audited consolidated financial statements of the Borrower for such Fiscal Year prepared in accordance with GAAP (including a balance sheet and profit and loss statement) and audited by PricewaterhouseCoopers LLP or another firm of independent public accountants of similar standing;
(c) together with each of the statements delivered pursuant to the foregoing clause (a) or (b), a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing, as of the last day of the relevant Fiscal Quarter or Fiscal Year compliance with the covenants set forth in Section 6.2.4 (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Administrative Agent); it being understood and agreed, for the avoidance of doubt, that no such certificate shall be required to be delivered with respect to any Fiscal Quarter or Fiscal Year ending during the Waiver Period;
(d) as soon as possible after the occurrence of a Default or Prepayment Event, a statement of the chief financial officer of the Borrower setting forth details of such Default or Prepayment Event (as the case may be) and the action which the Borrower has taken and proposes to take with respect thereto;
(e) as soon as the Borrower becomes aware thereof, notice of any Material Litigation except to the extent that such Material Litigation is disclosed by the Borrower in filings with the SEC;
(f) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to all holders of each security issued by the Borrower, and all registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange;
(g) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender Party through the Administrative Agent may from time to time reasonably request;
(h) within five Business Days after the end of each month in which the covenant set forth Section 6.2.9 remains in effect, a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing, as of the last day of the immediately preceding month, compliance with such covenant; provided that, if the Borrower is not in compliance with the covenant set forth in Section 6.2.9 as of the last day of such month, the Borrower shall show compliance with such covenant as of the date such certificate is delivered;
(i) within ten Business Days after the end of each month during the period commencing on the Waiver Effective Date and ending with delivery of information for the month ending on September 30, 2023, a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing (x) a breakdown of customer deposits between valid cruises, cancelled cruises and future cruise certificates and (y) a
reconciliation of the Borrower’s consolidated customer deposit balance, in substantially the form attached hereto as Exhibit I; and
(j) within fifteen Business Days after the end of each Fiscal Quarter during the period commencing on the Waiver Effective Date and ending with delivery of information for the Fiscal Quarter ending on September 30, 2023, updated liquidity projections, in substantially the form attached hereto as Exhibit J, covering the next twelve-month period;
provided that information required to be furnished to the Administrative Agent under subsections (a) through (f) of this Section 6.1.1 shall be deemed furnished to the Administrative Agent when available free of charge on the Borrower’s website at http://www.rclinvestor.com or the website of the U.S. Securities and Exchange Commission at http://www.sec.gov; provided, however, that the Borrower shall as soon as reasonably practicable notify the Administrative Agent when such information required to be furnished to the Administrative Agent under subsections (c) and (d) of this Section 6.1.1 is made available free of charge on one of the websites listed in the preceding proviso.
Section 6.1.2. Approvals and Other Consents. The Borrower will obtain (or cause to be obtained) all such governmental licenses, authorizations, consents, permits and approvals as may be required for (a) the Borrower to perform its obligations under this Agreement and the other Loan Documents and (b) except to the extent that failure to obtain (or cause to be obtained) such governmental licenses, authorizations, consents, permits and approvals would not be expected to have a Material Adverse Effect, the operation of each Vessel in compliance with all applicable laws.
Section 6.1.3. Compliance with Laws, etc. The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, except (other than as described in clause (a) below) to the extent that the failure to so comply would not have a Material Adverse Effect, which compliance shall in any case include (but not be limited to):
(a) in the case of each of the Borrower and the Principal Subsidiaries, the maintenance and preservation of its corporate existence (subject to the provisions of Section 6.2.6);
(b) in the case of the Borrower, maintenance of its qualification as a foreign corporation in the State of Florida;
(c) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent being diligently contested in good faith by appropriate proceedings;
(d) compliance with all applicable Environmental Laws;
(e) compliance with all anti-money laundering and anti-corrupt practices laws and regulations applicable to the Borrower, including by not making or causing to be made any offer, gift or payment, consideration or benefit of any kind to anyone, either directly or indirectly, as an inducement or reward for the performance of any of the transactions contemplated by this agreement to the extent the same would be in contravention of such applicable laws; and
(f) The Borrower will maintain in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers and employees with Anti-Corruption Laws and applicable Sanctions.
Section 6.1.4. [Intentionally omitted].
Section 6.1.5. Insurance. The Borrower will, or will cause one or more of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies insurance with respect to all of the material properties and operations of the Borrower and each Principal Subsidiary against such casualties, third-party liabilities and contingencies and in such amounts as is customary for other businesses of similar size in the passenger cruise line industry (provided that in no event will the Borrower or any Subsidiary be required to obtain any business interruption, loss of hire or delay in delivery insurance) and will, upon request of the Administrative Agent, furnish to the Administrative Agent (with sufficient copies for distribution to each Lender Party) at reasonable intervals a certificate of a senior officer of the Borrower setting forth the nature and extent of all insurance maintained by the Borrower and the Subsidiaries and certifying as to compliance with this Section.
Section 6.1.6. Books and Records. The Borrower will, and will cause each of its Principal Subsidiaries to, keep books and records that accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender Party or any of their respective representatives, at reasonable times and intervals and upon reasonable prior notice, to visit each of its offices, to discuss its financial matters with its officers and to examine any of its books or other corporate records.
Section 6.2. Negative Covenants. The Borrower agrees with the Administrative Agent and each Lender Party that, until all Commitments have terminated and all Obligations (other than the contingent amounts for which no claim or demand has been made) have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 6.2.
Section 6.2.1. Business Activities. The Borrower will not, and will not permit any of its Subsidiaries to, engage in any principal business activity other than those engaged in by the Borrower and its Subsidiaries on the date hereof and other business activities reasonably related, ancillary or complimentary thereto or that are reasonable extensions thereof.
Section 6.2.2. Indebtedness. The Borrower will not permit any of the Existing Principal Subsidiaries to create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following:
(a) Indebtedness secured by Liens of the type described in Section 6.2.3;
(b) Indebtedness owing to the Borrower or a direct or indirect Subsidiary of the Borrower;
(c) Indebtedness incurred to finance, refinance or refund the cost (including the cost of construction) of assets acquired after the Effective Date;
(d) Indebtedness in an aggregate principal amount, together with (but without duplication of) Indebtedness permitted to be secured under Section 6.2.3(c), at any one time
outstanding not exceeding (determined at the time of creation of such Lien or the incurrence by any Existing Principal Subsidiary of such Indebtedness, as applicable) 10.0% of the total assets of the Borrower and its Subsidiaries taken as a whole as determined in accordance with GAAP as at the last day of the most recent ended Fiscal Quarter; and
(e) Indebtedness of Silversea Cruise Holding Ltd. and its subsidiaries (“Silversea”) outstanding on the Effective Date and identified in Item 6.2.2 of the Disclosure Schedule.
Section 6.2.3. Liens.
The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except:
(a) Liens on assets (including, without limitation, shares of capital stock of corporations and assets owned by any corporation that becomes a Subsidiary of the Borrower after the Effective Date) acquired after the Effective Date (whether by purchase, construction or otherwise) by the Borrower or any of its Subsidiaries (other than (x) an Existing Principal Subsidiary or (y) any other Principal Subsidiary which, at any time, after three months after the acquisition of a Vessel, owns a Vessel free of any mortgage Lien), which Liens were created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such assets, so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each such Lien is created within three months after the acquisition of the relevant assets;
(b) in addition to other Liens permitted under this Section 6.2.3, Liens securing Indebtedness in an aggregate principal amount, together with (but without duplication of) Indebtedness permitted under Section 6.2.2(d), at any one time outstanding not exceeding (determined at the time of creation of such Lien or the incurrence by any Existing Principal Subsidiary of such indebtedness, as applicable) 10.0% of the total assets of the Borrower and its Subsidiaries taken as a whole as determined in accordance with GAAP as at the last day of the most recent ended Fiscal Quarter; provided that Liens securing any Permitted Secured Facility that are incurred pursuant to this clause (b) shall only extend to Permitted Secured Facility Collateral prior to the occurrence of a Priority Release Event;
(c) Liens on assets acquired after the Effective Date by the Borrower or any of its Subsidiaries (other than by (x) any Subsidiary that is an Existing Principal Subsidiary or (y) any other Principal Subsidiary which, at any time, owns a Vessel free of any mortgage Lien) so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each of such Liens existed on such assets before the time of its acquisition and was not created by the Borrower or any of its Subsidiaries in anticipation thereof;
(d) Liens on any asset of any corporation that becomes a Subsidiary of the Borrower (other than a corporation that also becomes a Subsidiary of an Existing Principal Subsidiary) after the Effective Date so long as (i) the acquisition or creation of such corporation by the Borrower is not otherwise prohibited by the terms of this Agreement and (ii) such Liens are in existence at the time such corporation becomes a Subsidiary of the Borrower and were not created by the Borrower or any of its Subsidiaries in anticipation thereof;
(e) Liens securing Government-related Obligations;
(f) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings;
(g) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue by more than 60 days or being diligently contested in good faith by appropriate proceedings;
(h) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits;
(i) Liens for current crew’s wages and salvage;
(j) Liens arising by operation of law as the result of the furnishing of necessaries for any Vessel so long as the same are discharged in the ordinary course of business or are being diligently contested in good faith by appropriate proceedings;
(k) Liens on Vessels that:
(i) secure obligations covered (or reasonably expected to be covered) by insurance;
(ii) were incurred in the course of or incidental to trading such Vessel in connection with repairs or other work to such Vessel; or
(iii) were incurred in connection with work to such Vessel that is required to be performed pursuant to applicable law, rule, regulation or order;
provided that, in each case described in this clause (k), such Liens are either (x) discharged in the ordinary course of business or (y) being diligently contested in good faith by appropriate proceedings;
(l) normal and customary rights of setoff upon deposits of cash or other Liens originating solely by virtue of any statutory or common law provision relating to bankers’ liens, rights of setoff or similar rights in favor of banks or other depository institutions;
(m) Liens in respect of rights of setoff, recoupment and holdback in favor of credit card processors securing obligations in connection with credit card processing services incurred in the ordinary course of business;
(n) Liens on cash collateral required to be provided by the Borrower pursuant to (a) Section 2.15(a) and (b) the Borrower’s existing credit facilities as in effect on the First Extension Amendment Effective Date;
(o) Liens on cash, cash equivalents or marketable securities of the Borrower or any Subsidiary securing obligations under Hedging Instruments not incurred for speculative purposes;
(p) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business and deposits securing liabilities to insurance carriers under insurance or self-insurance arrangements;
(q) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary;
(r) licenses, sublicenses, leases, or subleases granted to other Persons not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; and
(s) Liens on any property of Silversea in existence as of the Effective Date and identified in Item 6.2.3 of the Disclosure Schedule.
Section 6.2.4. Financial Condition. The Borrower will not permit:
(a) Net Debt to Capitalization Ratio, as at the end of any Fiscal Quarter, to be greater than the applicable level set forth below opposite such Fiscal Quarter under the heading “Net Debt to Capitalization Ratio”:
| Fiscal Quarter Ending | Net Debt to Capitalization Ratio |
|---|---|
| September 30, 2022 | 0.775 to 1 |
| December 31, 2022 | 0.750 to 1 |
| March 31, 2023 | 0.750 to 1 |
| June 30, 2023 | 0.750 to 1 |
| September 30, 2023 | 0.750 to 1 |
| December 31, 2023 | 0.750 to 1 |
| March 31, 2024 | 0.725 to 1 |
| June 30, 2024 | 0.700 to 1 |
| September 30, 2024 | 0.675 to 1 |
| December 31, 2024 | 0.650 to 1 |
| March 31, 2025 and thereafter | 0.625 to 1 |
(b) Fixed Charge Coverage Ratio to be less than 1.25 to 1 as at the last day of any Fiscal Quarter.
Notwithstanding anything to the contrary in this Agreement, the Borrower shall not be required to comply with the requirements of this Section 6.2.4 during the Waiver Period.
Section 6.2.5. [Intentionally omitted].
Section 6.2.6. Consolidation, Merger, etc.
The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation except:
(a) any such Subsidiary may (i) liquidate or dissolve voluntarily, and may merge with and into, the Borrower or any other Subsidiary, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary or (ii) merge with and into another Person in connection with a sale or other disposition permitted by Section 6.2.7; and
(b) so long as no Event of Default or Prepayment Event has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may merge into any other Person, or any other Person may merge into the Borrower or any such Subsidiary, or the Borrower or any of its Subsidiaries may purchase or otherwise acquire all or substantially all of the assets of any Person, in each case so long as:
(i) after giving effect thereto, the Stockholders’ Equity of the Borrower and its Subsidiaries is at least equal to 90% of such Stockholders’ Equity immediately prior thereto; and
(ii) in the case of a merger involving the Borrower where the Borrower is not the surviving corporation:
(A) the surviving corporation shall have assumed in a writing, delivered to the Administrative Agent, all of the Borrower’s obligations hereunder and under the other Loan Documents;
(B) the surviving corporation shall, promptly upon the request of the Administrative Agent or any Lender, supply such documentation and other evidence as is reasonably requested by the Administrative Agent or any Lender in order for the Administrative Agent or such Lender to carry out and be satisfied it has complied with the results of all necessary “know your customer” or other similar checks under all applicable laws and regulations; and
(C) as soon as practicable after receiving notice from the Borrower of such merger, and in any event no later than five Business Days after the delivery of such notice, for a surviving corporation that is organized under the laws of a jurisdiction other than of the United States or a political subdivision thereof or Liberia, any Lender that may not legally lend to, establish credit for the account of and/or do any business whatsoever with such surviving corporation, either directly or through an Affiliate of such Lender (a “Protesting Lender”) shall so notify the Borrower and the Administrative Agent in writing. With respect to each Protesting Lender, the Borrower shall, effective on or before the date that such surviving corporation shall have the right to borrow hereunder, notify the Administrative Agent and such Protesting Lender that the Commitments of such Protesting Lender shall be terminated; provided that such Protesting Lender shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Protesting Lender, together with accrued interest thereon to
the date of payment of such principal amount and all other amounts payable to such Protesting Lender under this Agreement.
Section 6.2.7. Asset Dispositions, etc.
The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or substantially all of the assets of (a) the Borrower or (b) the Subsidiaries of the Borrower, taken as a whole, except for sales of assets between or among the Borrower and Subsidiaries of the Borrower.
Section 6.2.8. Use of Proceeds. The Borrower will not request any Borrowing or Letter of Credit, and the Borrower and its Subsidiaries shall not use the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, or (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, unless permitted under all applicable Sanctions.
Section 6.2.9. Minimum Liquidity. The Borrower will not allow the aggregate amount of unrestricted cash, Cash Equivalents, undrawn Revolving Credit Commitments and undrawn commitments under the Other Revolving Facility or any other credit facility available to the Borrower and/or any of its Subsidiaries the proceeds of which are available for general corporate purposes or which would, once utilized, otherwise increase the liquidity of the Borrower or the relevant Subsidiary as determined in accordance with GAAP to be less than $350,000,000 as of the last day of any calendar month. Notwithstanding anything set forth herein to the contrary, only the consent of the Required Extended Lenders and the Borrower shall be required to amend, waive or modify this Section 6.2.9 or Section 6.1.1(h) or change the definition of “Required Extended Lenders”, “Extended Lender Event of Default” or “Extended Lender Prepayment Event”.
Section 6.2.10. Additional Undertakings.
(a) [reserved].
(b) The Borrower will not enter into any transaction that would result in the Borrower or any of its Subsidiaries not being able to grant the guarantees required pursuant to Section 6.2.11(b) or 6.2.11(c) hereof.
Section 6.2.11. Designated Indebtedness.
(a) The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Designated Indebtedness in an aggregate principal amount in excess of (x) $1,700,000,000 less (y) the aggregate principal amount of Designated Indebtedness repaid or prepaid in accordance with Section 6.2.11(e)(ii), at any time outstanding; provided that this clause (a) shall no longer apply if a Designated Release Event has occurred.
(b) It is hereby acknowledged that each Priority Holdco Subsidiary as of the First Extension Amendment Effective Date has delivered to the Administrative Agent a guaranty in favor of the Administrative Agent for the benefit of the Lenders (the “First Priority Guaranty”); it being understood and agreed that the First Priority Guaranty shall automatically terminate upon the occurrence of a Priority Release Event.
(c) It is hereby acknowledged that each Specified Designated Holdco Subsidiary as of the First Extension Amendment Effective Date has delivered to the Administrative Agent a subordinated guaranty in favor of the Administrative Agent for the benefit of the Lenders (the “Subordinated Guaranty”), and the Administrative Agent contemporaneously entered into a subordination agreement pursuant to which the obligations of the Specified Designated Holdco Subsidiaries under the Subordinated Guaranty were fully subordinated in right of payment to the obligations of the Specified Designated Holdco Subsidiaries under such Designated Indebtedness or any guaranties related thereto (and, for the avoidance of doubt, the Administrative Agent shall promptly enter into substantially similar subordination agreements in respect of any other Designated Indebtedness permitted under this Agreement upon the Borrower’s reasonable request); it being understood and agreed that the Subordinated Guaranty shall automatically terminate upon the occurrence of a Designated Release Event.
(d) Until a Priority Release Event has occurred, the Borrower will not:
(i) permit any Priority Holdco Subsidiary, or any Subsidiary thereof, to incur, grant or suffer to exist any Indebtedness, including any guaranty obligation, other than any guaranty in favor of one or more of the Beneficiary Parties and the Other Beneficiary Parties in form and substance substantially similar to the First Priority Guaranty; provided that each such Other Beneficiary Party shall have entered into a subordination agreement pursuant to which the obligations of such Priority Holdco Subsidiary under such guaranty will be fully subordinated in right of payment to the obligations of such Priority Holdco Subsidiary under any guaranty given in favor of the Administrative Agent for the benefit of the Lenders pursuant to this Agreement, which subordination agreement will be in form and substance reasonably satisfactory to the Administrative Agent and such Other Beneficiary Party (and, for the avoidance of doubt, the Administrative Agent shall execute such subordination agreements upon the Borrower’s reasonable request);
(ii) permit, or permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien securing Indebtedness on any Priority Assets; or
(iii) permit any Subsidiary to sell, transfer, license, lease, dispose, distribute or otherwise transfer any Priority Assets or any equity interests in a Subsidiary that owns, directly or indirectly, any Priority Assets, other than (a) to any other entity that is (or will become) a Priority Holdco Subsidiary or (b) any Priority Assets or equity interests in a Subsidiary that owns, directly or indirectly, any Priority Assets with a fair market value of less than, in the aggregate, the sum of (x) $250,000,000 plus (y) the fair market value of any asset (other than (1) current assets, intercompany debt or equity instruments and (2) Priority Assets or other assets owned by another Priority Holdco Subsidiary immediately prior to acquisition) acquired by any Priority Holdco Subsidiary after the Waiver Effective Date; provided that, in the case of this clause (b), such Subsidiary shall receive fair market value and at least 75% cash consideration in connection with such sale, transfer, license, lease, disposition, distribution or other transfer.
(e) Until a Designated Release Event has occurred, the Borrower will not:
(i) permit any Designated Holdco Subsidiary, or any Subsidiary thereof, to incur, grant or suffer to exist any Indebtedness, including any guaranty obligation, other than (a) any Designated Indebtedness or (b) any subordinated guaranty in favor of one or more of the Beneficiary Parties and the Other Beneficiary Parties in form and substance substantially similar to the Subordinated Guaranty; provided that
each such Other Beneficiary Party shall have entered into a subordination agreement pursuant to which the obligations of such Designated Holdco Subsidiary under such subordinated guaranty will be fully subordinated in right of payment to the obligations of such Designated Holdco Subsidiary under any guaranty given in favor of the Administrative Agent for the benefit of the Lenders pursuant to this Agreement, which subordination agreement will be in form and substance reasonably satisfactory to the Administrative Agent and such Other Beneficiary Party (and, for the avoidance of doubt, the Administrative Agent shall execute such subordination agreements upon the Borrower’s reasonable request); or
(ii) permit any Subsidiary to sell, transfer, license, lease, dispose, distribute or otherwise transfer any Designated Assets or any equity interests in a Subsidiary that owns, directly or indirectly, any Designated Assets, other than (a) to any other entity that is (or will become) a Designated Holdco Subsidiary or (b) any Designated Assets or equity interests in a Subsidiary that owns, directly or indirectly, any Designated Assets (i) the net proceeds of which are applied to repay or redeem any Designated Indebtedness or (ii) with a fair market value of less than, in the aggregate, the sum of (x) $250,000,000 in the aggregate plus (y) the fair market value of any asset (other than (1) current assets, intercompany debt or equity instruments and (2) Designated Assets or other assets owned by another Designated Holdco Subsidiary immediately prior to acquisition) acquired by any Designated Holdco Subsidiary after the Waiver Effective Date.
(f) Notwithstanding the foregoing, this Section 6.2.11 shall not restrict (i) any Subsidiary of the Borrower with respect to any unsecured issuances of commercial paper incurred in the ordinary course of business of the Borrower and its Subsidiaries or (ii) the ability of the Borrower or any of its Subsidiaries to incur, create, assume or otherwise become liable for any Permitted Secured Facility.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 7.1 shall constitute an “Event of Default.”
Section 7.1.1. Non-Payment of Obligations. The Borrower shall default in the payment when due of any principal of or interest on any Advance, any facility fee, any Letter of Credit commission or the agency fee provided for in Section 10.11 or its obligation to cash collateralize or backstop any Letter of Credit as required by clause (ii) within Section 2.3(b); provided that, in the case of any default in the payment of any interest on any Advance or of any facility fee or commission or failure by the Borrower to cash collateralize or backstop any Letter of Credit as required by clause (ii) within Section 2.3(b), such default shall continue unremedied for a period of at least five Business Days after notice thereof shall have been given to the Borrower by any Lender Party; and provided further that, in the case of any default in the payment of such agency fee, such default shall continue unremedied for a period of at least ten days after notice thereof shall have been given to the Borrower by the Administrative Agent.
Section 7.1.2. Breach of Warranty. Any representation or warranty of the Borrower made or deemed to be made hereunder or under any other Loan Document (including any certificates delivered pursuant to Article IV) is or shall be incorrect in any material respect when made.
Section 7.1.3. Non-Performance of Certain Covenants and Obligations. (a) The Borrower shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document (other than the covenants set forth in Sections 6.2.4, 6.2.9, 6.2.10 or 6.2.11 and the obligations referred to in Section 7.1.1) and such default shall continue unremedied for a period of five days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender (or, if (i) such default is capable of being remedied within 30 days (commencing on the first day following such five-day period) and (ii) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 35 days after such notice to the Borrower).
(b) The Borrower shall default in the due performance and observance of the covenants set forth in Section 6.2.11 and such default shall continue unremedied for a period of five Business Days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender.
Section 7.1.4. Default on Other Indebtedness. (a) The Borrower or any of its Principal Subsidiaries shall fail to pay any Indebtedness that is outstanding in a principal amount of at least $100,000,000 (or the equivalent in other currencies) in the aggregate (but excluding Indebtedness hereunder or with respect to the Hedging Instruments) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness, (b) the occurrence under any Hedging Instrument of an Early Termination Date (as defined in such Hedging Instrument) resulting from (A) any event of default under such Hedging Instrument as to which the Borrower is the Defaulting Party (as defined in such Hedging Instrument) or (B) any Termination Event (as so defined) as to which the Borrower is an Affected Party (as so defined) and, in either event, the termination value with respect to any such Hedging Instrument owed by the Borrower as a result thereof is greater than $100,000,000 and the Borrower fails to pay such termination value when due after applicable grace periods, (c) any other event shall occur or condition shall exist under any agreement or instrument evidencing, securing or relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to cause or permit the holder or holders of such Indebtedness to cause such Indebtedness to become due and payable prior to its scheduled maturity (other than as a result of any sale or other disposition of any property or assets under the terms of such Indebtedness), or (d) any such Indebtedness shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption or by voluntary agreement), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness is required to be made, in each case prior to the scheduled maturity thereof (other than as a result of any sale or other disposition of any property or assets under the terms of such Indebtedness); provided that any required prepayment or right to require prepayment triggered by terms that are certified by the Borrower to be unique to, but customary in, ship financings shall not constitute an Event of Default under this Section 7.1.4 so long as any required prepayment is made when due. For purposes of determining Indebtedness for any Hedging Instrument, the principal amount of the obligations under any such instrument at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or any Principal
Subsidiary would be required to pay if such instrument were terminated at such time.
Section 7.1.5. Pension Plans. Any of the following events shall occur with respect to any Pension Plan:
(a) Any termination of a Pension Plan by the Borrower, any member of its Controlled Group or any other Person if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $100,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
and, in each case, such event shall continue unremedied for a period of five Business Days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender Party (or, if (a) such default is capable of being remedied within 15 days (commencing on the first day of such five-Business-Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 15 days).
Section 7.1.6. Bankruptcy, Insolvency, etc.
The Borrower or any of the Principal Subsidiaries (or any of its other Subsidiaries to the extent that the relevant event described below would have a Material Adverse Effect) shall:
(a) generally fail to pay, or admit in writing its inability to pay, its debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for it or any of its property, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for it or for a substantial part of its property, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days; provided that in the case of such an event in respect of the Borrower, the Borrower hereby expressly authorizes the Administrative Agent and each Lender Party to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their respective rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower or any of such Subsidiaries, and, if any such case or proceeding is not commenced by the Borrower or such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed; provided that the Borrower hereby expressly authorizes the Administrative Agent and each Lender Party to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their respective rights under the Loan Documents; or
(e) take any corporate action authorizing, or in furtherance of, any of the foregoing.
Section 7.1.7. Guarantees. Once provided pursuant to Section 6.2.11(b) or 6.2.11(c), any guarantee of a Priority Holdco Subsidiary or a Designated Holdco Subsidiary shall cease to be, or shall be asserted by the Borrower, any Priority Holdco Subsidiary or any Designated Holdco Subsidiary not to be, in full force and effect (other than in accordance with the express terms hereof).
Section 7.2. Action if Bankruptcy. If any Event of Default described in clauses (b) through (d) of Section 7.1.6 shall occur with respect to the Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Advances and all other Obligations shall automatically be and become immediately due and payable, without notice or demand; provided that the foregoing shall not relieve any Lender of its obligation to make Advances pursuant to Section 2.2(b) or Section 2.3(c).
Section 7.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (b) through (d) of Section 7.1.6 with respect to the Borrower) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all of the outstanding principal amount of the Advances and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Advances and other Obligations shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate; provided that the foregoing shall not relieve any Lender of its obligation to make Advances pursuant to Section 2.2(b) or Section 2.3(c); provided, further, that with respect to any Event of Default that is an Extended Lender Event of Default, such direction shall be provided only by the Required Extended Lenders.
ARTICLE VIII
PREPAYMENT EVENTS
Section 8.1. Listing of Prepayment Events. Each of the following events or occurrences described in this Section 8.1 shall constitute a “Prepayment Event.”
Section 8.1.1. Change of Control. There occurs any Change of Control.
Section 8.1.2. Unenforceability. Any Loan Document shall cease to be the legally valid, binding and enforceable obligation of the Borrower (in each case, other than with respect to provisions of any Loan Document (i) identified as unenforceable in the opinion of the Borrower’s counsel delivered pursuant to Section 4.1(c)(i) or (ii) that a court of competent jurisdiction has determined are not material) and such event shall continue unremedied for 15 days after notice thereof has been given to the Borrower by any Lender Party.
Section 8.1.3. Approvals. Any material license, consent, authorization, registration or approval at any time necessary to enable the Borrower or any Principal Subsidiary to conduct its business shall be revoked, withdrawn or otherwise cease to be in full force and effect, unless the same would not have a Material Adverse Effect.
Section 8.1.4. Non-Performance of Certain Covenants and Obligations. The Borrower shall default in the due performance and observance of any of the covenants set forth in Section 6.2.4, 6.2.9 or 6.2.10.
Section 8.1.5. Judgments. Any judgment or order for the payment of money in excess of $100,000,000 shall be rendered against the Borrower or any of the Principal Subsidiaries by a court of competent jurisdiction and the Borrower or such Principal Subsidiary shall have failed to satisfy such judgment and either:
(a) enforcement proceedings in respect of any material assets of the Borrower or such Principal Subsidiary shall have been commenced by any creditor upon such judgment or order and shall not have been stayed or enjoined within five Business Days after the commencement of such enforcement proceedings; or
(b) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.
Section 8.2. Mandatory Prepayment. If any Prepayment Event shall occur and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower (a) require the Borrower to prepay in full on the date of such notice all principal of and interest on the Advances and all other Obligations (and, in such event, the Borrower agrees to so pay the full unpaid amount of each Advance and all accrued and unpaid interest thereon and all other Obligations) and (b) terminate the Commitments (if not theretofore terminated); provided that the foregoing shall not relieve any Lender of its obligation to make Advances pursuant to Section 2.2(b) or Section 2.3(c); provided, further, that with respect to any Prepayment Event that is an Extended Lender Prepayment Event, such direction shall be provided only by the Required Extended Lenders.
ARTICLE IX
ACTIONS IN RESPECT OF THE LETTERS OF CREDIT
Section 9.1. Actions in Respect of the Letters of Credit. If any Commitment Termination Event shall have occurred and be continuing, the Administrative Agent may with the consent, or shall at the request, of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 7.3 or 8.2 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, (a) pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent’s office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding or (b) make such other arrangements in respect of the outstanding Letters of Credit as shall be acceptable to the Required Lenders and not more disadvantageous to the Borrower than clause (a); provided, however, that if any Event of Default described in clauses (b) through (d) of Section 7.1.6 shall occur with respect to the Borrower, an amount equal to the aggregate Available Amount of all outstanding Letters of Credit shall be immediately due and payable to the Administrative Agent for the account of the Lender Parties without notice to or demand upon the Borrower, which are expressly waived by the Borrower, to be held in the L/C Cash Collateral Account. If at any time a Commitment Termination Event is continuing the Administrative Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit, to the extent funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the Issuing Banks to
the extent permitted by applicable law. After all such Letters of Credit shall have expired or been fully drawn upon and all other obligations of the Borrower hereunder and under the Notes shall have been paid in full, the balance, if any, in such L/C Cash Collateral Account shall be returned to the Borrower.
ARTICLE X
THE AGENTS
Section 10.1. Actions. Each of the Lender Parties hereby irrevocably appoints JPMorgan to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent and the Lender Parties, and the Borrower shall not have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
Section 10.2. Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender Party and may exercise the same as though it were not the Administrative Agent, and the term “Lender Party” or “Lender Parties” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lender Parties.
Section 10.3. Lender Indemnification. (a) Each Lender hereby severally indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative Agent (to the extent not reimbursed by the Borrower) from and against such Lender’s Ratable Share of any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel) that be incurred by or asserted or awarded against, the Administrative Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document or any action taken or omitted by the Administrative Agent under this Agreement, the Notes or any other Loan Document; provided that no Lender shall be liable for the payment of any portion of such claims, damages, losses, liabilities and expenses which have resulted from the Administrative Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket and documented expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any such indemnified costs, this Section applies whether any such investigation, litigation or proceeding is brought by the Administrative Agent, any Lender or a third party.
(b) Each Lender hereby severally indemnifies the Issuing Banks (to the extent not promptly reimbursed by the Borrower) from and against such Lender’s Ratable Share of any and all claims, damages, losses, liabilities and expenses of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any such Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Issuing Bank hereunder or in connection herewith; provided, however, that no Lender (in such capacity) shall be liable for any portion of such claims, damages, losses, liabilities and expenses resulting from such Issuing Bank’s gross negligence or willful misconduct.
(c) The failure of any Lender to reimburse the Administrative Agent or any Issuing Bank promptly upon demand for its Ratable Share of any amount required to be paid by the Lenders to the Administrative Agent as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Administrative Agent or any Issuing Bank for its Ratable Share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Administrative Agent or any Issuing Bank for such other Lender’s Ratable Share of such amount. Without prejudice to the survival of any other agreement of any Lender hereunder, the agreement and obligations of each Lender contained in this Section 10.3 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. Each of the Administrative Agent and each Issuing Bank agrees to promptly return to the Lenders their respective Ratable Shares of any amounts paid under this Section 10.3 that are subsequently reimbursed by the Borrower.
Section 10.4. Exculpation. (a) The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
(i) shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default or Prepayment Event has occurred and is continuing;
(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any debtor relief law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any debtor relief law; and
(iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
(b) The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.1 and 7.3), or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of
competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Event of Default or Prepayment Event unless and until notice describing such Event of Default or Prepayment Event is given to the Administrative Agent in writing by the Borrower, a Lender Party or an Issuing Bank.
(c) The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
Section 10.5. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) reasonably believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and reasonably believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of an Advance, or the Issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to such Lender or Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or Issuing Bank prior to the making of such Advance or the Issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Nothing in this Section 10.5 shall limit the exclusion for gross negligence or willful misconduct referred to in Section 10.3.
Section 10.6. Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facility established hereby as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents; provided, however, that the foregoing release of the Administrative Agent shall not apply with respect to negligence or misconduct of any Affiliates, directors, officers or employees of the Administrative Agent.
Section 10.7. Resignation of Administrative Agent. (a) The Administrative Agent may at any time give notice of its resignation to the Lender Parties and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower, to appoint a successor, which shall be a commercial banking institution having a
combined capital and surplus of at least $500,000,000 (or the equivalent in other currencies). If no such successor shall have been so appointed by the Required Lenders with the consent of the Borrower and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lender Parties, appoint a successor Administrative Agent meeting the qualifications set forth above, subject to the consent of such proposed successor Administrative Agent to such appointment. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b) Anything herein to the contrary notwithstanding, if at any time the Required Lenders determine that the Person serving as Administrative Agent is (without taking into account any provision in the definition of “Defaulting Lender” requiring notice from the Administrative Agent or any other party) a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders (determined after giving effect to Section 11.1) may by notice to the Borrower and such Person remove such Person as Administrative Agent and, with the consent of the Borrower, appoint a replacement Administrative Agent hereunder. Such removal will, to the fullest extent permitted by applicable law, be effective on the earlier of (i) the date a replacement Administrative Agent is appointed and (ii) the date 30 days after the giving of such notice by the Required Lenders (regardless of whether a replacement Administrative Agent has been appointed).
(c) With effect from the Resignation Effective Date (1) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender Party directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent, and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Sections 11.3 and 11.4 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.
Section 10.8. Non-Reliance on Administrative Agent and Other Lenders. Each Lender Party acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section 10.9. No Other Duties. Anything herein to the contrary notwithstanding, none of the Arrangers or Agents listed on the cover page hereof shall have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender, a Swing Line Bank or an Issuing Bank hereunder.
Section 10.10. Copies, etc. The Administrative Agent shall give prompt notice to each Lender Party of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lender Parties by the Borrower). The Administrative Agent will distribute to each Lender Party each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lender Parties by the Administrative Agent in accordance with the terms of this Agreement.
Section 10.11. Agency Fee. The Borrower agrees to pay to the Administrative Agent for its own account an annual agency fee in an amount, and at such times, heretofore agreed to in writing between the Borrower and the Administrative Agent.
Section 10.12. Lender ERISA Matters. Each Lender represents and warrants as of the date hereof to the Administrative Agent and each Arranger and their respective Affiliates, and not, for the avoidance of doubt, for the benefit of the Borrower, that such Lender is not and will not be (i) an employee benefit plan subject to Title I of ERISA, (ii) a plan or account subject to Section 4975 of the Code; (iii) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code that is using “plan assets” of any such plans or accounts to fund or hold Advances or perform its obligations under this Agreement; or (iv) a “governmental plan” within the meaning of ERISA.
Section 10.13. Certain Erroneous Payments.
(a) Each Lender Party hereby agrees that (x) if the Administrative Agent notifies such Lender Party that the Administrative Agent has determined in its sole discretion that any funds received by such Lender Party from the Administrative Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such Lender Party (whether or not known to such Lender Party), and demands the return of such Payment (or a portion thereof), such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender Party to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender Party shall not assert, and hereby waives, as to the Administrative Agent, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Payments received, including without limitation any defense based on “discharge for value” or any similar doctrine. A notice of the Administrative Agent to any Lender Party under this Section 10.13 shall be conclusive, absent manifest error.
(b) Each Lender Party hereby further agrees that if it receives a Payment from the Administrative Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on
notice, in each such case, that an error may have been made with respect to such Payment. Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender Party shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender Party to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(c) The Borrower hereby agrees that (x) in the event an erroneous Payment (or portion thereof) are not recovered from any Lender Party that has received such Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such Lender Party with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower, except, in each case, to the extent the Administrative Agent or any of its Affiliates receives funds from (or at the direction of) the Borrower in respect of any such Payment or such Payment is made with or on account of the proceeds of a payment made by (or at the direction of) the Borrower to the Administrative Agent or any of its affiliates in accordance with the terms of this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided that no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender;
(b) modify this Section 11.1 or change the definition of “Required Lenders” shall be made without the consent of each Lender;
(c) increase the Commitment(s) of any Lender, reduce any fees described in Section 2.4 payable to any Lender or extend the Termination Date with respect to any Lender shall be made without the consent of such Lender;
(d) extend the due date for, or reduce the amount of, any scheduled repayment or prepayment of principal of or interest on any Advance or fees (or reduce the principal amount of or rate of interest on any Advance) applicable to any Lender shall be made without the consent of such Lender;
(e) extend the termination date of a Letter of Credit beyond the latest Termination Date without the consent of each Lender whose Revolving Credit Commitment expires on such Termination Date;
(f) affect adversely the interests, rights or obligations of the Administrative Agent in its capacity as such shall be made without consent of the Administrative Agent;
(g) affect adversely the interests, rights or obligations of the Swing Line Bank in its capacity as such shall be made without consent of the Swing Line Bank; or
(h) affect adversely the interests, rights or obligations of any Issuing Bank in its capacity as such shall be made without consent of such Issuing Bank;
No failure or delay on the part of the Administrative Agent or any Lender Party in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent or any Lender Party under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.
If any Lender Party is a Non-Consenting Lender, the Borrower shall be entitled at any time to replace such Lender Party with another financial institution willing to take such assignment and reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank; provided that (i) each such assignment shall be either an assignment of all of the rights and obligations of the assigning Lender Party under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender Party under this Agreement, (ii) such assignment shall not conflict with applicable law and (iii) no Non-Consenting Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Non-Consenting Lender shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Non-Consenting Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Non-Consenting Lender under this Agreement.
Section 11.2. Notices. (a) All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile or by electronic mail and addressed, delivered or transmitted to such party at its address, or facsimile number, or e-mail address, as follows:
(i) if to the Borrower or the Administrative Agent, at its address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule III hereto; and
(ii) if to a Lender, to it at its address (or facsimile number or e-mail address), set forth in its Administrative Questionnaire, or at such other address, or facsimile number, or e-mail address as may be designated by such party in a notice to the other parties;
provided that notices, information, documents and other materials that the Borrower is required to deliver hereunder may be delivered to the Administrative Agent and the Lender Parties as specified in Section 11.2(b). Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received.
(b) So long as JPMorgan is the Administrative Agent, the Borrower may provide to the Administrative Agent all information, documents and other materials that it furnishes to the Administrative Agent hereunder or any other Loan Document (and any guaranties, security agreements and other agreements relating thereto), including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing Borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due hereunder or any other Loan Document prior to the scheduled date therefor, (iii) provides notice of any Default, Event of Default or Prepayment Event or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of the Agreement and/or any Borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to marsea.medori@chase.com and covenant.compliance@jpmchase.com (or any other address as the Administrative Agent may specify in writing to the Borrower); provided that any Communication requested pursuant to Section 6.1.1(g) shall be in a format acceptable to the Borrower and the Administrative Agent.
(1) The Borrower agrees that the Administrative Agent may make such items included in the Communications as the Borrower may specifically agree available to the Lender Parties by posting such notices, at the option of the Borrower, on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “Platform”). Although the primary web portal is secured with a dual firewall and a User ID/Password Authorization System and the Platform is secured through a single user per deal authorization method whereby each user may access the Platform only on a deal-by-deal basis, the Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform.
(2) The Administrative Agent agrees that the receipt of Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of such Communications to the Administrative Agent for purposes hereunder and any other Loan Document (and any guaranties, security agreements and other agreements relating thereto).
(c) Each Lender Party agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such Communications to such Lender Party for purposes of this Agreement. Each Lender Party agrees (i) to notify the Administrative Agent in writing (including by electronic communication) of such Lender Party’s e-mail address to which a Notice may be sent by electronic transmission on or before the date such Lender Party becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address for such Lender Party) and (ii) that any Notice may be sent to such e-mail address.
(d) Patriot Act. Each Lender Party hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Act”)), that it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender Party to identify the Borrower in accordance with the Act.
Section 11.3. Payment of Costs and Expenses. The Borrower agrees to pay on demand all reasonable and documented out-of-pocket expenses of the Administrative Agent (including the reasonable and documented fees and out-of-pocket expenses of one counsel to the Administrative Agent and the Lender Parties) in connection with the preparation, execution and delivery of, and any amendments, waivers, consents, supplements or other modifications to, this Agreement or any other Loan Document. The Borrower further agrees to pay, and to save the Administrative Agent and the Lender Parties harmless from all liability for, any stamp, recording, documentary or other similar taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or any other Loan Documents. The Borrower also agrees to reimburse the Administrative Agent and each Lender Party upon demand for all reasonable and documented out-of-pocket expenses (including reasonable and documented attorneys’ fees and legal expenses) incurred by the Administrative Agent or such Lender Party in connection with (x) the negotiation of any restructuring or “work-out”, whether or not consummated, of any Obligations and (y) the enforcement of any Obligations.
Section 11.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender Party and the extension of the Commitments, the Borrower hereby indemnifies and holds harmless the Administrative Agent, each Lender Party and each of their respective Affiliates and their respective officers, advisors, directors, employees, partners and controlling persons (collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable and documented fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), in each case arising out of or in connection with or by reason of this Agreement, the Notes or the other Loan Documents or the transactions contemplated hereby or thereby or any actual or proposed use of the proceeds of the Advances, including but not limited to the proceeds of any Letters of Credit (collectively, the “Indemnified Liabilities”), except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct or the material breach by such Indemnified Party of its obligations under this Agreement or any other Loan Document. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, any of its directors, security holders or creditors, an Indemnified Party or any other person or an Indemnified Party is otherwise a party thereto. Each Indemnified Party shall (a) furnish the Borrower with prompt notice of any action, suit or other claim covered by this Section 11.4, (b) not agree to any settlement or compromise of any such action, suit or claim without the Borrower’s prior consent, (c) shall cooperate fully in the Borrower’s defense of any such action, suit or other claim (provided that the Borrower shall reimburse such Indemnified Party for its reasonable and documented out-of-pocket expenses incurred pursuant hereto) and (d) at the Borrower’s request, permit the Borrower to assume control of the defense of any such claim, other than regulatory, supervisory or similar investigations, provided that (i) the Borrower acknowledges in writing its obligations to indemnify the Indemnified Party in accordance with the terms herein in connection with such claims, (ii) the Borrower shall keep the Indemnified Party fully informed with respect to the conduct of the defense of such claim, (iii) the Borrower
shall consult in good faith with the Indemnified Party (from time to time and before taking any material decision) about the conduct of the defense of such claim, (iv) the Borrower shall conduct the defense of such claim properly and diligently taking into account its own interests and those of the Indemnified Party, (v) the Borrower shall employ counsel reasonably acceptable to the Indemnified Party and at the Borrower’s expense, and (vi) the Borrower shall not enter into a settlement with respect to such claim unless either (A) such settlement involves only the payment of a monetary sum, does not include any performance by or an admission of liability or responsibility on the part of the Indemnified Party, and contains a provision unconditionally releasing the Indemnified Party and each other indemnified party from, and holding all such Persons harmless, against, all liability in respect of claims by any releasing party or (B) the Indemnified Party provides written consent to such settlement (such consent not to be unreasonably withheld or delayed). Notwithstanding the Borrower’s election to assume the defense of such action, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such action and the Borrower shall bear the fees, costs and expenses of such separate counsel if (1) the use of counsel chosen by the Borrower to represent the Indemnified Party would present such counsel with an actual or potential conflict of interest, (2) the actual or potential defendants in, or targets of, any such action include both the Borrower and the Indemnified Party, and the Indemnified Party shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Borrower and determined that it is necessary to employ separate counsel in order to pursue such defenses (in which case the Borrower shall not have the right to assume the defense of such action on the Indemnified Party’s behalf), (3) the Borrower shall not have employed counsel reasonably acceptable to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of the institution of such action, or (4) the Borrower authorizes the Indemnified Party to employ separate counsel at the Borrower’s expense. If any Person shall not comply with the foregoing with respect to any claim, the sole result shall be that the Borrower shall not have any liability to such Person in respect of such claim under this Section 11.4. The Borrower acknowledges that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Borrower or any of its security holders or creditors for or in connection with the transactions contemplated hereby, except to the extent such liability is determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct or the material breach by such Indemnified Party of its obligations under this Agreement or any other Loan Document. In no event, however, shall any Indemnified Party be liable on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings). If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
Section 11.5. Survival. The obligations of the Borrower under Sections 3.3, 3.4, 3.5, 3.6, 3.7, 11.3 and 11.4, and the obligations of the Lender Parties under Section 10.3, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrower in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document.
Section 11.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 11.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof.
Section 11.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and each Lender Party (or notice thereof satisfactory to the Administrative Agent and the Borrower) shall have been received by the Administrative Agent and the Borrower (or, in the case of any Lender Party, receipt of signature pages transmitted by facsimile) and notice thereof shall have been given by the Administrative Agent to the Borrower and each Lender Party.
Section 11.9. Governing Law; Entire Agreement. THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF LAWS OF ANOTHER JURISDICTION. This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.
Section 11.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided that:
(a) except to the extent permitted under Section 6.2.6, the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lender Parties are subject to Section 11.11.
Section 11.11. Sale and Transfer of Advances and Note; Participations in Advances. Each Lender Party may assign, or sell participations in, its Advances and Commitment(s) to one or more other Persons in accordance with this Section 11.11.
Section 11.11.1. Assignments. Any Lender Party may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Advances at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(a) Minimum Amounts.
(i) in the case of an assignment of the entire remaining amount of the assigning Lender Party’s Commitments and/or the Advances at the time owing to it or in the case of an assignment to a Lender Party or an Affiliate of a Lender Party, no minimum amount need be assigned; and
(ii) in any case not described in paragraph (a)(i) of this Section, the aggregate amount of the Commitment (which for this purpose includes Advances outstanding thereunder) or, if the applicable Commitment is not then in effect, the
principal outstanding balance of the Advances of the assigning Lender Party subject to each such assignment (determined as of the date the Lender Assignment Agreement with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Lender Assignment Agreement, as of the Trade Date) shall not be less than $25,000,000, unless each of the Administrative Agent and, so long as no Event of Default under Sections 7.1.1, 7.1.4(a) or 7.1.6 has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
(b) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender Party’s rights and obligations under this Agreement with respect to the Advance or the Commitments assigned.
(c) Required Consents. No consent shall be required for any assignment except to the extent required by paragraph (a)(ii) of this Section and, in addition:
(i) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default under Sections 7.1.1, 7.1.4(a) or 7.1.6 has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender Party, an Affiliate of a Lender Party or to any Federal Reserve Bank as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 10 Business Days after having received notice thereof; provided further, that in the case of an assignment to a Lender Party or an Affiliate of a Lender Party, so long as no Event of Default or a Prepayment Event has occurred and is continuing at the time of such assignment, such assignment shall be made in consultation with the Borrower;
(ii) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of the Commitments if such assignment is to a Person that is not (i) a Lender Party with, prior to the effectiveness of the assignment, a Commitment in respect of Revolving Credit Commitments, the Letter of Credit Facility or the Swing Line Facility or (ii) an Affiliate of such Lender Party, unless such assignment is to any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank; and
(iii) the consent of each Issuing Bank and the Swing Line Bank (such consents not to be unreasonably withheld or delayed) shall be required for any assignment in respect of Revolving Credit Commitments unless such assignment is to an Affiliate of a Lender Party or any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank.
(d) Lender Assignment Agreement. The parties to each assignment shall execute and deliver to the Administrative Agent a Lender Assignment Agreement, together with a processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment; provided, further, no processing and recordation fee shall be required upon any assignment to an Affiliate of a Lender Party or any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as
collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank. The assignee, if it is not a Lender Party, shall deliver to the Administrative Agent an Administrative Questionnaire.
(e) Acceptable Lender. Except for assignments to any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank, no assignment shall be made to any Person that is not an Acceptable Lender.
(f) No Assignment to Certain Persons. No such assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of their respective Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (f).
(g) No Assignment to Natural Persons. No such assignment shall be made to a natural Person or any holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person.
(h) Certain Pledges. Notwithstanding anything to the contrary contained herein, any Lender Party may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender Party, including any pledge or assignment to secure obligations to a Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority; provided that no such pledge or assignment shall release such Lender Party from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender Party as a party hereto.
(i) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable Ratable Share of Advances previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, each Issuing Bank, the Swing Line Bank and each other Lender Party hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full Ratable Share of all Advances and participations in Letters of Credit and Swing Line Advances in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 11.11.3, from and after the effective date specified in each Lender Assignment Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Lender Assignment Agreement, have the rights and obligations of a Lender Party under this Agreement, and the assigning Lender Party thereunder shall, to the extent of the interest assigned by such Lender Assignment Agreement, be released from its obligations under this Agreement (and, in the case of a Lender Assignment Agreement covering
all of the assigning Lender Party’s rights and obligations under this Agreement, such Lender Party shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.3, 3.4, 3.5, 3.7, 3.9, 10.2, 11.3, 11.4 and 11.16 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender Party’s having been a Defaulting Lender. Any assignment or transfer by a Lender Party of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender Party of a participation in such rights and obligations in accordance with Section 11.11.2. Notwithstanding the foregoing, in no event shall the Borrower be required to pay to any assignee any amount under Sections 3.3, 3.4, 3.5, 3.6 and 3.7 that is greater than the amount which it would have been required to pay at the time of the relevant assignment had no such assignment been made.
Section 11.11.2. Participations. Any Lender Party may at any time sell to one or more commercial banks or other financial institutions (each of such commercial banks and other financial institutions being herein called a “Participant”) participating interests in any of its Advances, its Commitment, or other interests of such Lender Party hereunder without the consent of the Borrower, the Administrative Agent, the Issuing Bank or Swing Line Bank; provided that:
(a) no participation contemplated in this Section 11.11.2 shall relieve such Lender Party from its Commitment(s) or its other obligations hereunder;
(b) such Lender Party shall remain solely responsible for the performance of its Commitment(s) and such other obligations;
(c) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender Party in connection with such Lender Party’s rights and obligations under this Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such Lender Party, shall be entitled to require such Lender Party to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender Party may agree with any Participant that such Lender Party will not, without such Participant’s consent, take any actions of the type described in clause (c) or (d) of Section 11.1;
(e) the Borrower shall not be required to pay any amount under Sections 3.3, 3.4, 3.5, 3.6 and 3.7 that is greater than the amount which it would have been required to pay had no participating interest been sold; and
(f) each Lender Party that sells a participation under this Section 11.11.2 shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest on) each of the Participant’s interest in the Lender Party’s Advances, Commitments or other interests hereunder (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender may treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes hereunder.
The Borrower acknowledges and agrees that each Participant, for purposes of Sections 3.3, 3.4, 3.5, 3.6 and clause (g) of 6.1.1, shall be considered a Lender Party.
Section 11.11.3. Register. The Administrative Agent, acting as agent for the Borrower, shall maintain at its address referred to in Section 11.2 a copy of each
Added Lender Agreement and each Lender Assignment Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment(s) of, and principal amount of the Advances owing to, each Lender Party from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender Party at any reasonable time and from time to time upon reasonable prior notice.
Section 11.12. Other Transactions. Nothing contained herein shall preclude the Administrative Agent or any Lender Party from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person.
Section 11.13. Forum Selection and Consent to Jurisdiction. (a) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST ANY OTHER PARTY IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK SITTING IN NEW YORK COUNTY, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE EXTENT THAT THE BORROWER, THE ADMINISTRATIVE AGENT OR ANY LENDER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER, THE ADMINISTRATIVE AGENT AND SUCH LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (a) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
Section 11.14. Process Agent. If at any time the Borrower ceases to have a place of business in the United States, the Borrower shall appoint an agent for service of process (reasonably satisfactory to the Administrative Agent) located in New York City and shall furnish to the Administrative Agent evidence that such agent shall have accepted such appointment for a period of time ending no earlier than one year after the latest Termination Date then in effect.
Section 11.15. Judgment. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at JPMorgan’s principal office in New York at 11:00 A.M. (New York time) on the Business Day preceding that on which final judgment is given.
(b) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in a Committed Currency into Dollars, the parties agree to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase such Committed Currency with Dollars at JPMorgan’s principal office in New York at 11:00 A.M. (New York time) on the Business Day preceding that on which final judgment is given.
(c) The obligation of the Borrower in respect of any sum due from it in any currency (the “Primary Currency”) to any Lender Party or the Administrative Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender Party or the Administrative Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender Party or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency; if the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender Party or the Administrative Agent (as the case may be) in the applicable Primary Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender Party or the Administrative Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum due to any Lender Party or the Administrative Agent (as the case may be) in the applicable Primary Currency, such Lender Party or the Administrative Agent (as the case may be) agrees to remit to the Borrower such excess.
Section 11.16. No Liability of the Issuing Banks. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither an Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; (d) any error, omission, interruption, loss or delay in transmission; (e) delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder); (f) any error in interpretation of technical terms; (g) any error in translation or any consequence arising from causes beyond the control of the respective Issuing Bank or (h) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by such Issuing Bank’s willful misconduct or gross negligence (as finally determined by a court of competent jurisdiction). In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; provided that nothing herein shall be deemed to excuse such Issuing Bank if it acts with gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction) in accepting such documents.
Section 11.17. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE LENDER PARTIES AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OTHER PARTY ENTERING INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT.
Section 11.18. Confidentiality. Each of the Administrative Agent and the Lender Parties agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners); (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or actual or prospective counterparty to any swap or derivative transaction relating to the Borrower; (g) with the consent of the Borrower; (h) to any credit insurance provider that is subject to an agreement containing provisions substantially the same as those of this Section with respect to the Information; (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section, or (y) becomes available to any Lender Party or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower; or (j) to bank market-data collectors and other similar bank trade publications in connection with this Agreement, the other Loan Documents and the Commitments and Advances provided hereunder, Information consisting of deal terms and other Information customarily found in such publications.
For purposes of this Section, “Information” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to any Lender Party on a nonconfidential basis prior to disclosure by the Borrower or any of its Subsidiaries. Any Person
required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Section 11.19. No Fiduciary Relationship. The Borrower acknowledges that the Lender Parties have no fiduciary relationship with, or fiduciary duty to, the Borrower arising out of or in connection with this Agreement or the other Loan Documents, and the relationship between each Lender Party and the Borrower is solely that of creditor and debtor. This Agreement and the other Loan Documents do not create a joint venture among the parties hereto. The Borrower acknowledges that the Arrangers and each Lender Party may have economic interests that conflict with those of the Borrower, its stockholders and/or its Affiliates.
Section 11.20. Electronic Execution of Assignments and Certain Other Documents. The words “execute,” “execution,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including, without limitation, any Lender Assignment Agreement, amendment or other modification, Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing, waiver and consent) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it.
Section 11.21. Contractual Recognition of Bail-In. Notwithstanding any other term of any Loan Document or any other agreement, arrangement or understanding between the parties to this Agreement, each such party acknowledges and accepts that any liability of any party to this Agreement to any other party to this Agreement under or in connection with the Loan Documents may be subject to Bail-In Action by the relevant Resolution Authority (as defined below) and acknowledges and accepts to be bound by the effect of:
(a) any Bail-In Action in relation to any such liability, including (without limitation):
(i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;
(ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and
(iii) a cancellation of any such liability; and
(b) a variation of any term of any Loan Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
As used herein:
“Article 55 BRRD” means Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms.
“Bail-In Action” means the exercise of any Write-down and Conversion Powers (as defined below).
“Bail-In Legislation” means:
(a) in relation to an EEA Member Country (as defined below) which has implemented, or which at any time implements, Article 55 BRRD, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule (as defined below) from time to time;
(b) in relation to any state other than such an EEA Member Country and the United Kingdom, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation; and
(c) in relation to the United Kingdom, the UK Bail-In Legislation (as defined below).
“EEA Member Country” means any Member State of the European Union, Iceland, Liechtenstein and Norway.
“EU Bail-In Legislation Schedule” means the document described as such and published by the Loan Market Association (or any successor person) from time to time.
“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers.
“UK Bail-In Legislation” means Part I of the United Kingdom Banking Act 2009 and any other law or regulation applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (otherwise than through liquidation, administration or other insolvency proceedings).
“Write-down and Conversion Powers” means:
(a) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule;
(b) in relation to any other applicable Bail-In Legislation other than the UK Bail-In Legislation:
(i) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and
(ii) any similar or analogous powers under that Bail-In Legislation; and
(c) in relation to the UK Bail-In Legislation, any powers under the UK Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under the UK Bail-In Legislation that are related to or ancillary to any of those powers.
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SCHEDULE I
ROYAL CARIBBEAN CRUISES LTD. CREDIT AGREEMENT
| Name of Lender | Non-Extended Revolving Credit Commitment | Extended Revolving Credit Commitment | Swing Line Sublimit Commitment | Letter of Credit Sublimit Commitment | Non-Extended Revolving Credit Advances | Extended Revolving Credit Advances |
|---|---|---|---|---|---|---|
| JPMorgan Chase Bank, N.A. | - | $88,000,000.00 | $150,000,000.00 | $167,377,733.73 | - | $85,760,000.00 |
| Truist Bank | - | $178,000,000.00 | - | - | - | $173,469,090.91 |
| Sumitomo Mitsui Banking Corporation | - | $138,000,000.00 | - | - | - | $134,487,272.73 |
| Bank of America, N.A. | - | $88,000,000.00 | - | - | - | $85,760,000.00 |
| Citibank N.A. | - | $88,000,000.00 | - | - | - | $85,760,000.00 |
| Fifth Third Bank, National Association | - | $88,000,000.00 | - | - | - | $85,760,000.00 |
| Mizuho Bank, Ltd. | - | $88,000,000.00 | - | - | - | $85,760,000.00 |
| The Bank of Nova Scotia | - | $88,000,000.00 | - | $7,622,266.27 | - | $85,760,000.00 |
| DNB Capital LLC | - | $53,500,000.00 | - | - | - | $52,138,181.82 |
| Société Générale | - | $53,500,000.00 | - | - | - | $52,138,181.82 |
| Morgan Stanley Senior Funding, Inc. | - | $51,400,000.00 | - | - | - | $50,091,636.36 |
| BNP Paribas | - | $40,000,000.00 | - | - | - | $38,981,818.18 |
| Commerzbank AG, New York Branch | - | $40,000,000.00 | - | - | - | $38,981,818.18 |
| Regions Bank | - | $40,000,000.00 | - | - | - | $38,981,818.18 |
| CIBC Bank USA | - | $20,000,000.00 | - | - | - | $19,490,909.09 |
| DZ Bank AG Deutsche Zentral-Genossenschaftsbank, New York Branch | - | $20,000,000.00 | - | - | - | $19,490,909.09 |
| Goldman Sachs Bank USA | - | $20,000,000.00 | - | - | - | $19,490,909.09 |
| Landesbank Hessen-Thüringen Girozentrale, New York Branch | - | $20,000,000.00 | - | - | - | $19,490,909.09 |
| Barclays Bank PLC - Cayman Branch | $133,000,000.00 | - | - | - | $129,614,545.45 | - |
Schedule I-1
| Banc of America Credit Products, Inc. | $124,000,000.00 | - | - | - | $120,843,636.36 | - |
|---|---|---|---|---|---|---|
| HSBC Bank, PLC | $85,896,000.00 | - | - | - | $83,709,556.36 | - |
| Citigroup Financial Products Inc. | $72,500,000.00 | - | - | - | $70,654,545.45 | - |
| Intesa Sanpaolo S.P.A., New York Branch | $53,500,000.00 | - | - | - | $52,138,181.82 | - |
| The Toronto-Dominion Bank, New York Branch | $53,500,000.00 | - | - | - | $52,138,181.82 | - |
| Banco Santander, S.A. | $38,176,000.00 | - | - | - | $37,204,247.27 | - |
| Barclays Bank PLC | $38,176,000.00 | - | - | - | $37,204,247.27 | - |
| Wells Fargo Bank, National Association | $38,176,000.00 | - | - | - | $37,204,247.27 | - |
| MUFG Bank, Ltd. | $20,000,000.00 | - | - | - | $19,490,909.09 | - |
| Bayerische Landesbank, New York Branch | $19,088,000.00 | - | - | - | $18,602,123.64 | - |
| First Horizon Bank | $19,088,000.00 | - | - | - | $18,602,123.64 | - |
| Chang Hwa Commercial Bank, Ltd., New York Branch | $15,000,000.00 | - | - | - | $14,618,181.82 | - |
| Standard Chartered Bank | $12,500,000.00 | - | - | - | $12,181,818.19 | - |
| Total: | $722,600,000.00 | $1,202,400,000.00 | $150,000,000.00 | $175,000,000.00 | $704,206,545.45 | $1,171,793,454.54 |
Schedule I-2
SCHEDULE II
DISCLOSURE SCHEDULE
Item 5.9 (b): Vessels
| Vessel | Owner | Flag |
|---|---|---|
| Grandeur of the Seas | Grandeur of the Seas Inc. | Bahamas |
| Rhapsody of the Seas | Rhapsody of the Seas Inc. | Bahamas |
| Enchantment of the Seas | Enchantment of the Seas Inc. | Bahamas |
| Vision of the Seas | Vision of the Seas Inc. | Bahamas |
| Voyager of the Seas | Voyager of the Seas Inc. | Bahamas |
| Mariner of the Seas | Mariner of the Seas Inc. | Bahamas |
| Celebrity Millennium | Millennium Inc. | Malta |
| Explorer of the Seas | Explorer of the Seas Inc. | Bahamas |
| Celebrity Infinity | Infinity Inc. | Malta |
| Radiance of the Seas | Radiance of the Seas Inc. | Bahamas |
| Celebrity Summit | Summit Inc. | Malta |
| Adventure of the Seas | Adventure of the Seas Inc. | Bahamas |
| Navigator of the Seas | Navigator of the Seas Inc. | Bahamas |
| Celebrity Constellation | Constellation Inc. | Malta |
| Serenade of the Seas | Serenade of the Seas Inc. | Bahamas |
| Jewel of the Seas | Jewel of the Seas Inc. | Bahamas |
| Celebrity Xpedition | Oceanadventures S.A. | Ecuador |
| Freedom of the Seas | Freedom of the Seas Inc. | Bahamas |
| Azamara Journey | Azamara Journey Inc. | Malta |
| Azamara Quest | Azamara Quest Inc. | Malta |
| Liberty of the Seas | Liberty of the Seas Inc. | Bahamas |
| Independence of the Seas | Independence of the Seas Inc. | Bahamas |
| Celebrity Solstice | Celebrity Solstice Inc. | Malta |
| Celebrity Equinox | Celebrity Equinox Inc. | Malta |
| Oasis of the Seas | Oasis of the Seas Inc. | Bahamas |
| Celebrity Eclipse | Celebrity Eclipse Inc. | Malta |
Schedule II-1
| Allure of the Seas | Allure of the Seas Inc. | Bahamas |
|---|---|---|
| Celebrity Silhouette | Celebrity Silhouette Inc. | Malta |
| Celebrity Reflection | Celebrity Reflection Inc. | Malta |
| Quantum of the Seas | Quantum of the Seas Inc. | Bahamas |
| Brilliance of the Seas | Brilliance of the Seas Shipping Inc. | Bahamas |
| Anthem of the Seas | Anthem of the Seas Inc. | Bahamas |
| Celebrity Xploration | Oceanadventures S.A. | Ecuador |
| Ovation of the Seas | Ovation of the Seas Inc. | Bahamas |
| Harmony of the Seas | Harmony of the Seas Inc. | Bahamas |
| Symphony of the Seas | Symphony of the Seas Inc. | Bahamas |
| Celebrity Edge | Celebrity Edge Inc. | Malta |
| Silver Cloud | Silver Cloud Shipping Co. Ltd. | Bahamas |
| Silver Wind | Silver Wind Shipping Ltd. | Bahamas |
| Silver Shadow | Silver Shadow Shipping Co. Ltd. | Bahamas |
| Silver Spirit | Silver Spirit Shipping Co. Ltd. | Bahamas |
| Silver Muse | Silver Muse Shipping Co. Ltd. | Bahamas |
| Spectrum of the Seas | Spectrum of the Seas Inc. | Bahamas |
| Celebrity Flora | Islas Galápagos Turismo y Vapores C.A. | Ecuador |
| Celebrity Apex | Celebrity Apex Inc. | Malta |
| Silver Origin<br><br>Wonder of the Seas<br><br>Celebrity Beyond | Canodros CL<br><br>Wonder of the Seas LLC<br><br>Celebrity Beyond LLC | Ecuador<br><br>Bahamas<br><br>Malta |
| Odyssey of the Seas | Odyssey of the Seas Inc. | Bahamas |
| Silver Moon | Silversea New Build Seven Ltd. | Bahamas |
| Silver Endeavour | Silver Endeavor Shipping Co. Ltd. | Bahamas |
Item 5.10: Existing Principal Subsidiaries
| Name of the Subsidiary | Jurisdiction of Organization |
|---|---|
| Jewel of the Seas Inc. | Liberia |
Schedule II-2
| Majesty of the Seas Inc. | Liberia |
|---|---|
| Grandeur of the Seas Inc. | Liberia |
| Enchantment of the Seas Inc. | Liberia |
| Rhapsody of the Seas Inc. | Liberia |
| Vision of the Seas Inc. | Liberia |
| Voyager of the Seas Inc. | Liberia |
| Explorer of the Seas Inc. | Liberia |
| Radiance of the Seas Inc. | Liberia |
| Adventure of the Seas Inc. | Liberia |
| Navigator of the Seas Inc. | Liberia |
| Serenade of the Seas Inc. | Liberia |
| Mariner of the Seas Inc. | Liberia |
| Millennium Inc. | Liberia |
| Infinity Inc. | Liberia |
| Summit Inc. | Liberia |
| Constellation Inc. | Liberia |
| Islas Galápagos Turismo y Vapores C.A. | Ecuador |
| Freedom of the Seas Inc. | Liberia |
| Azamara Journey Inc. | Liberia |
| Azamara Quest Inc. | Liberia |
| RCL Zenith LLC | Liberia |
| Nordic Empress Shipping Inc. | Liberia |
| Liberty of the Seas Inc. | Liberia |
| Independence of the Seas Inc. | Liberia |
| Celebrity Solstice Inc. | Liberia |
| Oasis of the Seas Inc. | Liberia |
| Celebrity Eclipse Inc. | Liberia |
| Celebrity Equinox Inc. | Liberia |
| RCL Horizon LLC | Liberia |
| RCL Sovereign LLC | Liberia |
| Allure of the Seas Inc. | Liberia |
| Celebrity Silhouette Inc. | Liberia |
| Celebrity Reflection Inc. | Liberia |
| RCL Monarch LLC | Liberia |
| Quantum of the Seas Inc. | Liberia |
| Brilliance of the Seas Shipping Inc. | Liberia |
| Anthem of the Seas Inc. | Liberia |
| Oceanadventures S.A. | Ecuador |
| Ovation of the Seas Inc. | Liberia |
| Harmony of the Seas Inc. | Liberia |
| Symphony of the Seas Inc. | Liberia |
Schedule II-3
| Celebrity Edge Inc. | Liberia |
|---|---|
| Azamara Pursuit Inc. | Liberia |
| Silver Cloud Shipping Co. Ltd. | Bahamas |
| Silver Wind Shipping Ltd. | Bahamas |
| Silver Shadow Shipping Co. Ltd. | Bahamas |
| Silver Spirit Shipping Co. Ltd. | Bahamas |
| Silver Muse Shipping Co. Ltd. | Bahamas |
| Canodros CL | Ecuador |
Item 6.2.2: Existing Indebtedness of Silversea
(a) The obligations of the Borrower or its Subsidiaries in connection with those certain Bareboat Charterparties with respect to (i) the vessel SILVER EXPLORER dated July 22, 2011, between Silversea Cruises Ltd. and Hammonia Adventure and Cruise Shipping Company Ltd. and (ii) the vessel SILVER WHISPER dated March 15, 2012, between Whisper S.p.A. and various lessors, and the replacement, extension, renewal or amendment of each of the foregoing without increase in the amount or change in any direct or contingent obligor of such obligations, (the “Existing Silversea Leases”);
(b) Indebtedness arising pursuant to that certain Bareboat Charterparty dated May 17, 2018, by and between Hai Xing 1702 Limited and Silversea New Build Eight Ltd., as such agreement may be amended from time to time; and
(c) Indebtedness secured by Liens of the type described in Item 6.2.3 of the Disclosure Schedule.
Item 6.2.3: Existing Liens of Silversea
(a) Liens securing the $620 million in principal amount of 7.25% senior secured notes due 2025 issued by Silversea Cruise Finance Ltd. pursuant that that Indenture dated as of January 30, 2017;
(b) Liens on the vessels SILVER WHISPER and SILVER EXPLORER existing as of the Effective Date and securing the Existing Silversea Leases (and any Lien on such vessels securing any refinancing of the Existing Silversea Leases, so long as such Vessel was subject to a Lien securing the Indebtedness being refinanced immediately prior to such refinancing);
(c) Liens on the Vessel with Hull 6280 currently being built at Fincantieri S.p.A. and arising pursuant to that certain Bareboat Charterparty dated May 17, 2018, by and between Hai Xing 1702 Limited and Silversea New Build Eight Ltd., as such agreement may be amended from time to time (and any Lien on such vessel securing any refinancing of such bareboat charterparty); and
(d) Liens securing Indebtedness of the type described in Item 6.2.2 of the Disclosure Schedule.
Schedule II-4
SCHEDULE III
NOTICES
If to the Borrower:
Royal Caribbean Cruises Ltd. Attention: Antje Gibson, Vice President and Treasurer 1050 Caribbean Way Miami, FL 33132-2096 Phone: (305) 539-6440 Facsimile: (305) 539-0562 E-mail: agibson@rccl.com
If to the Administrative Agent:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Phone No: +1-302-634-1928
Fax No: 12012443629@tls.ldsprod.com
Email: marsea.medori@chase.com
Agency Withholding Tax Inquiries:
Email: agency.tax.reporting@jpmorgan.com
Agency Compliance/Financials/Intralinks:
Email: covenant.compliance@jpmchase.com
If to the Swingline Lender:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Phone No: +1-302-634-1928
Fax No: 12012443629@tls.ldsprod.com
Email: marsea.medori@chase.com
If to the Issuing Banks:
JPMorgan Chase Bank, N.A.
10420 Highland Manor Dr. 4th Floor
Tampa, FL 33610
Attention: Standby LC Unit
Tel: 800-364-1969
Fax: 856-294-5267
Email: GTS.Client.Services@jpmchase.com
Schedule III-1
With a copy to:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Phone No: +1-302-634-1928
Fax No: 12012443629@tls.ldsprod.com
Email: marsea.medori@chase.com
The Bank of Nova Scotia
Attention: Corporate Lending Loan Ops
150 King Street West, 6th Floor
Toronto, ON, Canada, M5H 1J9
Fax : 212-225-5709
Email: CorporateLending.LoanOps@scotiabank.com
If to the Collateral Agent:
JPMorgan Chase & Co.
CIB DMO WLO
Mail code NY1-C413
4 CMC, Brooklyn, NY, 11245-0001
United States
Email: ib.collateral.services@jpmchase.com
Schedule III-2
SCHEDULE IV
BENEFICIARY PARTIES
| Other Facility Obligation | Beneficiary Party | |
|---|---|---|
| 1. | Credit Agreement, as amended and restated on October 12, 2017, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and JPMORGAN CHASE BANK, N.A, as administrative agent (as successor to NORDEA BANK ABP, NEW YORK BRANCH, as administrative agent) | JPMORGAN CHASE BANK, N.A., as administrative agent (as successor to NORDEA BANK ABP, NEW YORK BRANCH, as administrative agent) |
| 2. | Term Loan Agreement, dated as of April 5, 2019, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and BANK OF AMERICA, N.A., as administrative agent | BANK OF AMERICA, N.A., as administrative agent |
| 3. | Credit Agreement, dated as of May 11, 2010, among FALMOUTH JAMAICA LAND COMPANY LIMITED, a Jamaican corporation, ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, and THE BANK OF NOVA SCOTIA, as lender | THE BANK OF NOVA SCOTIA |
| 4. | Credit Agreement, dated as of February 2, 2018, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED NEW YORK BRANCH, as administrative agent | INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED NEW YORK BRANCH, as administrative agent |
Schedule IV-1
| 5. | Credit Agreement, dated as of November 16, 2017, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), as administrative agent | SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), as administrative agent |
|---|---|---|
| 6. | Term Loan Agreement, as amended and restated on December 3, 2019, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and SUMITOMO MITSUI BANKING CORPORATION, as administrative agent | SUMITOMO MITSUI BANKING CORPORATION, as administrative agent |
| 7. | Credit Agreement, dated as of June 7, 2019, among SILVERSEA CRUISE HOLDING LTD., a private limited liability company incorporated under the laws of the Commonwealth of the Bahamas, ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and NORDEA BANK ABP, NEW YORK BRANCH, as administrative agent | NORDEA BANK ABP, NEW YORK BRANCH, as administrative agent |
Schedule IV-2
| 8. | Guarantee, dated as of July 18, 2016, by ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, in favor of the Beneficiaries (as defined therein) | MIAMI-DADE COUNTY, as Ground Lessor<br><br>SMBC LEASING AND FINANCE, INC., as Lessor, Administrative Agent, Lead Arranger and Bookrunner and Borrower<br><br>MIAMI CRUISE TERMINAL A LLC, as Lessee and Construction Agent<br><br>SUMITOMO MITSUI BANKING CORPORATION, as Collateral Agent and Lender<br><br>BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Lender<br><br>NORDDEUTSCHE LANDESBANK GIROZENNTRALE, as Lender<br><br>FIFTH THIRD BANK, as Lender<br><br>SOCIETE GENERALE, as Lender<br><br>STONEGATE BANK, as Lender<br><br>CAPITAL BANK CORPORATION, as Lender<br><br>Each of the foregoing’s successors and permitted assigns. |
|---|---|---|
| 9. | Any card acceptance agreement, merchant services bank card agreement, global merchant agreement, merchant services agreement, or other similar agreement in connection with card-related services that exists as of the Waiver Effective Date. | Any counterparty to such agreement. |
Schedule IV-3
Document
Exhibit 10.73
CREDIT AGREEMENT,
as amended and restated on October 12, 2017, as amended on May 24, 2019, as amended on May 7, 2020, as amended on July 28, 2020, as amended on February 12, 2021, as amended on March 30, 2021,
as amended on July 21, 2022, and
as amended on January 12, 2023,
among
ROYAL CARIBBEAN CRUISES LTD., as the Borrower,
and
CITIGROUP GLOBAL MARKETS LIMITED, NORDEA BANK ABP, NEW YORK BRANCH, BBVA SECURITIES INC., DNB MARKETS, INC., FIFTH THIRD BANK, NATIONAL ASSOCIATION, HSBC SECURITIES (USA) INC., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, MIZUHO BANK, LTD., SUNTRUST ROBINSON HUMPHREY, INC. and THE BANK OF NOVA SCOTIA,
as Joint Lead Arrangers and Joint Bookrunners
and
JPMORGAN CHASE BANK, N.A. as Administrative Agent
and
CITIGROUP GLOBAL MARKETS LIMITED and NORDEA BANK ABP, NEW YORK BRANCH
as Syndication Agents
and
BBVA SECURITIES INC., DNB BANK ASA, NEW YORK BRANCH, FIFTH THIRD BANK, NATIONAL ASSOCIATION, HSBC SECURITIES (USA) INC., BANK OF AMERICA, N.A., MIZUHO BANK, LTD., SUNTRUST BANK, THE BANK OF NOVA SCOTIA, BNP PARIBAS, INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, NEW YORK BRANCH, JPMORGAN CHASE BANK, N.A., SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) and SUMITOMO MITSUI BANKING CORPORATION
as Documentation Agents
TABLE OF CONTENTS
| Article IDEFINITIONS AND ACCOUNTING TERMS | |
|---|---|
| Section 1.1Defined Terms | 1 |
| Section 1.2Use of Defined Terms; Other Definitional Provisions | 29 |
| Section 1.3Cross-References | 29 |
| Section 1.4Accounting and Financial Determinations | 30 |
| Article IICOMMITMENTS, BORROWING PROCEDURES AND NOTES | |
| Section 2.1The Advances and Letters of Credit | 30 |
| Section 2.2Making the Advances | 32 |
| Section 2.3Issuance of and Drawings and Reimbursement Under Letters of Credit | 35 |
| Section 2.4Fees | 38 |
| Section 2.5Termination or Reduction of the Commitments | 38 |
| Section 2.6Repayment of Advances and Letter of Credit Drawings | 39 |
| Section 2.7Interest on Advances | 41 |
| Section 2.8Interest Rate Determination | 42 |
| Section 2.9Optional Conversion of Revolving Credit Advances | 42 |
| Section 2.10Prepayments of Advances | 42 |
| Section 2.11Payments and Computations | 44 |
| Section 2.12Sharing of Payments, Etc | 46 |
| Section 2.13Evidence of Debt | 46 |
| Section 2.14Increase in Aggregate Commitments | 47 |
| Section 2.15Defaulting Lenders | 49 |
| Section 2.16Extension of Termination Date | 51 |
| Section 2.17Other Interest Rate Provisions | 53 |
| Section 2.17.1Inability to Determine Rates | 53 |
| Section 2.17.2Illegality | 54 |
| Section 2.17.3Benchmark Replacement Setting | 54 |
| Article IIICERTAIN OTHER PROVISIONS | |
| Section 3.1[Intentionally Omitted] | 56 |
| Section 3.2[Intentionally Omitted]. | 56 |
| Section 3.3Increased Costs, etc. | 56 |
| Section 3.4Funding Losses | 58 |
| Section 3.5Increased Capital Costs | 58 |
| Section 3.6Taxes | 59 |
i
| Section 3.7Reserve Costs | 61 |
|---|---|
| Section 3.8Replacement Lenders, etc. | 62 |
| Section 3.9Setoff | 62 |
| Section 3.10Use of Proceeds | 63 |
| Article IVCONDITIONS TO BORROWING | |
| Section 4.1Effectiveness | 63 |
| Section 4.2All Borrowings and Issuances | 64 |
| Section 4.3Determinations Under Section 4.1 | 65 |
| Article VREPRESENTATIONS AND WARRANTIES | |
| Section 5.1Organization, etc. | 65 |
| Section 5.2Due Authorization, Non-Contravention, etc. | 65 |
| Section 5.3Government Approval, Regulation, etc. | 66 |
| Section 5.4Compliance with Environmental Laws | 66 |
| Section 5.5Validity, etc. | 66 |
| Section 5.6Financial Information | 66 |
| Section 5.7No Default, Event of Default or Prepayment Event | 67 |
| Section 5.8Litigation | 67 |
| Section 5.9Vessels | 67 |
| Section 5.10Subsidiaries | 67 |
| Section 5.11Obligations rank pari passu | 67 |
| Section 5.12No Filing, etc. Required | 67 |
| Section 5.13No Immunity | 67 |
| Section 5.14Pension Plans | 68 |
| Section 5.15Investment Company Act | 68 |
| Section 5.16Regulation U | 68 |
| Section 5.17Accuracy of Information | 68 |
| Section 5.18Compliance with Laws | 68 |
| Section 5.19ERISA | 69 |
| Section 5.20EEA Financial Institution | 69 |
| Article VICOVENANTS | |
| Section 6.1Affirmative Covenants | 69 |
| Section 6.1.1Financial Information, Reports, Notices, etc | 69 |
| Section 6.1.2Approvals and Other Consents | 71 |
| Section 6.1.3Compliance with Laws, etc. | 71 |
| Section 6.1.4[Intentionally omitted] | 72 |
| Section 6.1.5Insurance | 72 |
ii
| Section 6.1.6Books and Records | 72 |
|---|---|
| Section 6.2Negative Covenants | 72 |
| Section 6.2.1Business Activities | 72 |
| Section 6.2.2Indebtedness | 72 |
| Section 6.2.3Liens | 73 |
| Section 6.2.4Financial Condition | 75 |
| Section 6.2.5[Intentionally omitted] | 76 |
| Section 6.2.6Consolidation, Merger, etc | 76 |
| Section 6.2.7Asset Dispositions, etc | 77 |
| Section 6.2.8Use of Proceeds | 77 |
| Section 6.2.9Minimum Liquidity | 77 |
| Section 6.2.10Additional Undertakings | 77 |
| Section 6.2.11Designated Indebtedness | 78 |
| Article VIIEVENTS OF DEFAULT | |
| Section 7.1Listing of Events of Default | 80 |
| Section 7.1.1Non-Payment of Obligations | 80 |
| Section 7.1.2Breach of Warranty | 80 |
| Section 7.1.3Non-Performance of Certain Covenants and Obligations | 80 |
| Section 7.1.4Default on Other Indebtedness | 80 |
| Section 7.1.5Pension Plans | 81 |
| Section 7.1.6Bankruptcy, Insolvency, etc | 82 |
| Section 7.1.7Guarantees | 82 |
| Section 7.2Action if Bankruptcy | 82 |
| Section 7.3Action if Other Event of Default | 83 |
| Article VIIIPREPAYMENT EVENTS | |
| Section 8.1Listing of Prepayment Events | 83 |
| Section 8.1.1Change of Control | 83 |
| Section 8.1.2Unenforceability | 83 |
| Section 8.1.3Approvals | 83 |
| Section 8.1.4Non-Performance of Certain Covenants and Obligations | 83 |
| Section 8.1.5Judgments | 83 |
| Section 8.2Mandatory Prepayment | 84 |
| Article IXACTIONS IN RESPECT OF THE LETTERS OF CREDIT | |
| Section 9.1Actions in Respect of the Letters of Credit | 84 |
iii
| Article XTHE AGENTS | |
|---|---|
| Section 10.1Actions | 85 |
| Section 10.2Rights as a Lender | 85 |
| Section 10.3Lender Indemnification | 85 |
| Section 10.4Exculpation | 86 |
| Section 10.5Reliance by Administrative Agent | 87 |
| Section 10.6Delegation of Duties | 88 |
| Section 10.7Resignation of Administrative Agent | 88 |
| Section 10.8Non-Reliance on Administrative Agent and Other Lenders | 89 |
| Section 10.9No Other Duties | 89 |
| Section 10.10Copies, etc. | 89 |
| Section 10.11Agency Fee | 90 |
| Section 10.12Lender ERISA Matters | 90 |
| Section 10.13Certain Erroneous Payments | 90 |
| Article XIMISCELLANEOUS PROVISIONS | |
| Section 11.1Waivers, Amendments, etc. | 90 |
| Section 11.2Notices | 92 |
| Section 11.3Payment of Costs and Expenses | 93 |
| Section 11.4Indemnification | 94 |
| Section 11.5Survival | 95 |
| Section 11.6Severability | 95 |
| Section 11.7Headings | 96 |
| Section 11.8Execution in Counterparts, Effectiveness, etc. | 96 |
| Section 11.9Governing Law; Entire Agreement | 96 |
| Section 11.10Successors and Assigns | 96 |
| Section 11.11Sale and Transfer of Advances and Note; Participations in Advances | 96 |
| Section 11.11.1Assignments | 96 |
| Section 11.11.2Participations | 99 |
| Section 11.11.3Register | 100 |
| Section 11.12Other Transactions | 100 |
| Section 11.13Forum Selection and Consent to Jurisdiction | 101 |
| Section 11.14Process Agent | 102 |
| Section 11.15Judgment | 102 |
| Section 11.16No Liability of the Issuing Banks | 102 |
| Section 11.17Waiver of Jury Trial | 103 |
| Section 11.18Confidentiality | 103 |
iv
| Section 11.19No Fiduciary Relationship | 104 |
|---|---|
| Section 11.20Electronic Execution of Assignments and Certain Other Documents | 104 |
| Section 11.21Contractual Recognition of Bail-In | 104 |
v
SCHEDULES
SCHEDULE I Second Extension Amendment Effective Date Advances and Commitments
SCHEDULE II Disclosure Schedule
SCHEDULE III Notices
SCHEDULE IV Beneficiary Parties
EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Borrowing Request (Revolving Credit Borrowings)
Exhibit B-2 Form of Borrowing Request (Swing Line Borrowings)
Exhibit C Form of Interest Period Notice
Exhibit D Form of Lender Assignment Agreement
Exhibit E Form of Commitment Increase Agreement
Exhibit F Form of Added Lender Agreement
Exhibit G Form of Guaranty
Exhibit H Form of Subordinated Guaranty
Exhibit I Form of Customer Deposit Report
Exhibit J Form of Liquidity Projections
vi
CREDIT AGREEMENT
This CREDIT AGREEMENT, as amended and restated on October 12, 2017 (as amended on May 24, 2019, May 7, 2020, July 28, 2020, February 12, 2021, March 30, 2021, July 21, 2022 and January 12, 2023), is among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the “Borrower”), the various financial institutions as are or shall become parties hereto as Lenders (and their respective successors or assigns, collectively, the “Lender Parties”) and the Administrative Agent (as defined below).
WHEREAS, the Borrower has obtained Commitments from the Lender Parties pursuant to which Advances have been and will be made to the Borrower and Letters of Credit will be issued for the account of the Borrower and its Subsidiaries, in a maximum aggregate principal amount and Available Amount together at any one time outstanding not to exceed (x) $36,800,000.00, from time to time prior to the Termination Date with respect to Non-Extended Commitments and (y) $1,073,400,000.00 from time to time prior to the Termination Date with respect to Extended Commitments, in each case, subject to increase or reduction in accordance with the terms of this Agreement; and
WHEREAS, the Lender Parties are willing, on the terms and subject to the conditions hereinafter set forth (including Article IV), to extend Advances to, and, in the case of the Issuing Banks, to issue Letters of Credit for the account of, the Borrower; and
WHEREAS, the proceeds of such Advances made on the Effective Date were used for refinancing the Existing Credit Facility and, on and after the Effective Date, have been and will be used for general corporate purposes, including capital expenditures and acquisition financing, of the Borrower and its Subsidiaries.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, when capitalized, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):
“2021 Extension Amendment” means that certain Amendment to Credit Agreement, dated as of March 30, 2021, by and among the Borrower, the Administrative Agent and the Lenders party thereto.
“2022 Extension Amendment” means that certain Amendment to Credit Agreement and Appointment of Successor Administrative Agent, dated as of January 12, 2023, by and among the Borrower, Nordea, JPMorgan and the Lenders party thereto.
“2.875% Convertible Debt” means the aggregate amount of debt securities issued by the Borrower pursuant to the 2.875% Convertible Notes Indenture which are, in accordance with the provisions of the 2.875% Convertible Notes Indenture, converted, or to be converted, into equity securities of the Borrower on the 2.875% Maturity Date.
“2.875% Convertible Notes Indenture” means that certain Indenture, dated as of October 16, 2020 (as partially refinanced by the $1,150,000,000 6.00% convertible senior notes due 2025 issued under that certain Indenture, dated as of August 5, 2022, and as further amended,
supplemented, extended, refinanced, replaced and/or otherwise modified from time to time), in respect of the $575,000,000 2.875% convertible senior notes due 2023, by and among the Borrower, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee.
“2.875% Maturity Date” has the meaning given to the term “Maturity Date” in the 2.875% Convertible Notes Indenture (and being, as of July 21, 2022, November 15, 2023).
“4.25% Convertible Debt” means the aggregate amount of debt securities issued by the Borrower pursuant to the 4.25% Convertible Notes Indenture which are, in accordance with the provisions of the 4.25% Convertible Notes Indenture, converted, or to be converted, into equity securities of the Borrower on the 4.25% Maturity Date.
“4.25% Convertible Notes Indenture” means that certain Indenture, dated as of June 9, 2020 (as partially refinanced by the $1,150,000,000 6.00% convertible senior notes due 2025 issued under that certain Indenture, dated as of August 5, 2022, and as further amended, supplemented, extended, refinanced, replaced and/or otherwise modified from time to time), in respect of the $1,150,000,000 4.250% convertible senior notes due 2023, by and among the Borrower, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee.
“4.25% Maturity Date” has the meaning given to the term “Maturity Date” in the 4.25% Convertible Notes Indenture (and being, as of July 21, 2022, June 15, 2023).
“ABR” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus ½ of 1% and (c) the Adjusted Term SOFR Rate for a one month Interest Period as published two U.S. Government Securities Business Days prior to such day (or if such day is not a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business Day) plus 1%; provided that for the purpose of this definition, the Adjusted Term SOFR Rate for any day shall be based on the Term SOFR Reference Rate at approximately 5:00 a.m. Chicago time on such day (or any amended publication time for the Term SOFR Reference Rate, as specified by the Term SOFR Administrator in the Term SOFR Reference Rate methodology). Any change in the ABR due to a change in the Prime Rate, the Federal Funds Rate or the Adjusted Term SOFR Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Rate or the Adjusted Term SOFR Rate, respectively. If the ABR is being used as an alternate rate of interest pursuant to Section 2.17.1 (for the avoidance of doubt, only until the Benchmark Replacement has been determined pursuant to Section 2.7.3, then the ABR shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the ABR as determined pursuant to the foregoing would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.
“ABR Advances” means an Advance that bears interest based on the ABR.
“ABR Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Acceptable Lender” means a commercial banking institution with a bank rating by Moody’s/S&P of Baa1 and BBB+ or above.
“Accumulated Other Comprehensive Income (Loss)” means at any date the Borrower’s accumulated other comprehensive income (loss) on such date, determined in accordance with GAAP.
“Added Lender” is defined in Section 2.14(a).
“Added Lender Agreement” means an Added Lender Agreement substantially in the form of Exhibit F.
“Adjusted Daily Simple RFR” means, for purposes of any calculation, the rate per annum equal to the Daily Simple RFR; provided that if the Adjusted Daily Simple RFR as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Adjusted EURIBOR Rate” means, for purposes of any calculation, the rate per annum equal to (a) the EURIBOR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate; provided that if the Adjusted EURIBOR Rate as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Adjusted Term SOFR” means, for purposes of any calculation, the rate per annum equal to (a) Term SOFR for such calculation plus (b) the Term SOFR Adjustment; provided that if Adjusted Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
“Administrative Agent” means (a) at all times prior to the Second Extension Amendment Effective Date, Nordea and (b) at all times on and after the Second Extension Amendment Effective Date, JPMorgan, and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent, and as shall have accepted such appointment, pursuant to Section 10.7.
“Administrative Agent’s Account” means (a) in the case of Advances denominated in Dollars, the account of the Agent maintained by the Administrative Agent at JPMorgan at its office at JPMorgan Chase Bank, N.A. – wiring instructions: ABA# 021 000 021, Account No. 9008113381H5521, Attention: Loan & Agency, Reference: Royal Caribbean 01/2023, (b) in the case of Advances denominated in any Committed Currency, the account of the Administrative Agent designated in writing from time to time by the Administrative Agent to the Borrower and the Lender Parties for such purpose and (c) in any such case, such other account of the Administrative Agent as is designated in writing from time to time by the Administrative Agent to the Borrower and the Lender Parties for such purpose.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“Advance” means a Revolving Credit Advance or a Swing Line Advance.
“Affiliate” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
“Agents” means (a) the Administrative Agent and (b) the Lenders listed as the syndication agents and documentation agents on the cover page hereof in their respective capacities as agents under Article X, together with their respective successors (if any) in such capacity.
“Agreed Currency” means Dollars and each Committed Currency.
“Agreement” means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time further amended, supplemented, amended and
restated (including by the 2021 Extension Amendment and the 2022 Extension Amendment), or otherwise modified and in effect on such date.
“Annualized Net Cash from Operating Activities” means, with respect to any calculation of net cash from operating activities for any period:
(a) in the case of the period of four consecutive Fiscal Quarters ending with the first Fiscal Quarter ending after the last day of the Waiver Period (and, if applicable, with respect to the period of four consecutive Fiscal Quarters ending with the Fiscal Quarter for which compliance with the covenants set forth in Section 6.2.4 is tested for purposes of determining whether a Covenant Modification Date has occurred), the product of (i) net cash from operating activities for such Fiscal Quarter and (ii) four,
(b) in the case of the period of four consecutive Fiscal Quarters ending with the second Fiscal Quarter ending after the last day of the Waiver Period, the product of (i) the sum of net cash from operating activities for such Fiscal Quarter and the immediately preceding Fiscal Quarter and (ii) two, and
(c) in the case of the period of four consecutive Fiscal Quarters ending with the third Fiscal Quarter ending after the last day of the Waiver Period, the product of (i) the sum of net cash from operating activities for such Fiscal Quarter and the two immediately preceding Fiscal Quarters and (ii) four-thirds,
in each case determined in accordance with GAAP as shown in the Borrower’s consolidated statements of cash flows for such period.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977, as amended.
“Applicable Jurisdiction” means the jurisdiction or jurisdictions under which the Borrower is organized, domiciled or resident or from which any of its business activities are conducted or in which any of its properties are located and which has jurisdiction over the subject matter being addressed.
“Applicable Margin” means as of any date, a percentage per annum determined by reference to the Senior Debt Rating in effect on such date as set forth below:
| Senior Debt Rating S&P/Moody’s | Applicable Margin for <br>ABR <br>Non-Extended Advances | Applicable Margin for <br>ABR <br>Extended Advances (other than Swing Line Advances) | Applicable Margin for <br>SOFR, EURIBOR and RFR<br>Non-Extended Advances | Applicable Margin for <br>SOFR, EURIBOR and RFR<br>Extended Advances and Swing Line Advances |
|---|---|---|---|---|
| Level 1<br>A- or A3 <br>(or higher) | 0.000% | 0.145% | 0.795% | 1.145% |
| Level 2<br>BBB+ or Baa1 | 0.000% | 0.250% | 0.900% | 1.250% |
| Level 3<br>BBB or Baa2 | 0.000% | 0.350% | 1.000% | 1.350% |
| Level 4<br>BBB- or Baa3 | 0.100% | 0.450% | 1.100% | 1.450% |
| Level 5<br>BB+ or Ba1<br>(or lower) | 0.700% | 1.050% | 1.700% | 2.050% |
“Applicable Percentage” means, as of any date a percentage per annum determined by reference to the Senior Debt Rating in effect on such date as set forth below:
| Senior Debt Rating<br>S&P/Moody’s | Applicable Percentage for Non-Extended Commitments | Applicable Percentage for Extended Revolving Credit Commitments |
|---|---|---|
| Level 1<br>A- or A3 (or higher) | 0.080% | |
| Level 2<br>BBB+ or Baa1 | 0.100% | |
| Level 3<br>BBB or Baa2 | 0.125% | |
| Level 4<br>BBB- or Baa3 | 0.150% | |
| Level 5<br>BB+ or Ba1 (or lower) | 0.300% | 0.200% |
“Arrangers” means the joint lead arrangers listed on the cover page to this Agreement.
“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an
interest period pursuant to this Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.17.3(d).
“Benchmark” means, initially, the (i) the Adjusted Daily Simple RFR for Advances denominated in Sterling, (ii) the Term SOFR Reference Rate for Advances denominated in Dollars and (iii) the Adjusted EURIBOR Rate for Advances denominated in Euros; provided that if a Benchmark Transition Event has occurred with respect to the applicable Relevant Rate or the then-current Benchmark for such Agreed Currency, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.17.3(a).
“Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment; provided that, if such Benchmark Replacement as so determined would be less than the Floor, such Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities at such time.
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(b) in the case of clause (c) of the definition of “Benchmark Transition Event”, the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any
Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the F.R.S. Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(c) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.17.3 and (b) ending at the time that a Benchmark
Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.17.3.
“Beneficiary Party” means the Administrative Agent and each agent, trustee or other representative for each agreement listed on Schedule IV hereto, as such agreement or any of the obligations thereunder may be amended, restated, supplemented, refinanced or otherwise modified from time to time, so long as such amendment, restatement, supplement, refinancing or other modification does not increase the aggregate principal amount of Indebtedness or other monetary obligations thereunder to an amount that is more than the aggregate principal amount of commitments, Indebtedness and other monetary obligations outstanding thereunder as of the Waiver Effective Date plus the amount of any uncommitted incremental facilities available thereunder as of the Waiver Effective Date plus the amount of unpaid accrued interest and premium thereon and underwriting discounts, fees, commissions and expenses, associated with such amendment, restatement, supplement, refinancing or other modification.
“Borrower” is defined in the preamble.
“Borrowing” means a Revolving Credit Borrowing or a Swing Line Borrowing.
“Business Day” means, any day (other than a Saturday or a Sunday) on which banks are open for business in New York City; provided that, in addition to the foregoing, a Business Day shall be (a) in relation to Advances denominated in Euros and in relation to the calculation or computation of EURIBOR, any day which is a TARGET Day, (b) in relation to RFR Advances and any interest rate settings, fundings, disbursements, settlements or payments of any such RFR Advances, or any other dealings of such Advances referencing SONIA, any such day that is only a RFR Business Day and (c) in relation to Advances referencing the Adjusted Term SOFR Rate and any interest rate settings, fundings, disbursements, settlements or payments of any such Advances referencing Adjusted Term SOFR or any other dealings of such Advances referencing Adjusted Term SOFR, any such day that is a U.S. Government Securities Business Day.
“Capital Lease Obligations” means obligations of the Borrower or any Subsidiary of the Borrower under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases.
“Capitalization” means, as at any date, the sum of (a) Net Debt on such date, plus (b) Stockholders’ Equity on such date.
“Capitalized Lease Liabilities” means the principal portion of all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
“Cash Equivalents” means all amounts other than cash that are included in the “cash and cash equivalents” shown on the Borrower’s balance sheet prepared in accordance with GAAP.
“CBR Spread” means the Applicable Margin applicable to any Advance that is replaced by an Advance bearing interest at the Central Bank Rate pursuant to Section 2.17.
“Central Bank Rate” means, the greater of (I)(A) for any Advance denominated in (a) Sterling, the Bank of England (or any successor thereto)’s “Bank Rate” as published by the Bank of England (or any successor thereto) from time to time and (b) Euro, one of the following three rates as may be selected by the Administrative Agent in its reasonable discretion: (1) the fixed rate for the main refinancing operations of the European Central Bank (or any successor thereto),
or, if that rate is not published, the minimum bid rate for the main refinancing operations of the European Central Bank (or any successor thereto), each as published by the European Central Bank (or any successor thereto) from time to time, (2) the rate for the marginal lending facility of the European Central Bank (or any successor thereto), as published by the European Central Bank (or any successor thereto) from time to time or (3) the rate for the deposit facility of the central banking system of the Participating Member States, as published by the European Central Bank (or any successor thereto) from time to time and (II) the Floor.
“Change of Control” means an event or series of events by which (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 50% or more of the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or (b) during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body.
“Closing Date” is defined in Section 4.1.
“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.
“Commitment” means a Revolving Credit Commitment, a Letter of Credit Commitment or a Swing Line Commitment.
“Commitment Increase” is defined in Section 2.14.
“Commitment Termination Event” means:
(a) any Event of Default described in clauses (b) through (d) of Section 7.1.6 shall occur with respect to the Borrower;
(b) the occurrence and continuance of any Event of Default (other than as described in clause (a) above) and the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated; or
(c) the occurrence and continuance of a Prepayment Event and the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated.
“Committed Currencies” means Sterling and Euros.
“Conforming Changes” means, with respect to either the use or administration of Adjusted Term SOFR, Adjusted Daily Simple RFR or the Adjusted EURIBOR Rate or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “ABR,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,”, the definition of “Target Day”, the definition of “RFR Business Day”, the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 2.17.1 and other technical, administrative or operational matters) that the Administrative Agent, in consultation with the Borrower, decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent, in consultation with the Borrower, decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent, in consultation with the Borrower, decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Consenting Lender” is defined in Section 2.16(b).
“Controlled Group” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
“Convert”, “Conversion” and “Converted” each refers to a conversion of Revolving Credit Advances of one Type into Revolving Credit Advances of the other Type pursuant to Section 2.9.
“Covenant Modification Date” means the first date after January 1, 2022 as so designated in a written notice, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, to the Administrative Agent as the “Covenant Modification Date”; provided that such notice shall provide reasonably detailed calculations, in form and substance reasonably satisfactory to the Administrative Agent, demonstrating compliance with the covenants set forth in Section 6.2.4 of this Agreement as of the most recently ended Fiscal Quarter for which financial statements were required to be delivered pursuant to Section 6.1.1 of this Agreement.
“Daily Simple RFR” means, for any day (an “RFR Interest Day”), an interest rate per annum equal to, for any RFR Advance denominated in Sterling, SONIA for the day that is 5 RFR Business Days prior to (A) if such RFR Interest Day is a RFR Business Day, such RFR Interest Day or (B) if such RFR Interest Day is not a RFR Business Day, the RFR Business Day immediately preceding such RFR Interest Day.
“Declining Lender” has the meaning specified in Section 2.16(b).
“Default” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.
“Defaulting Lender” means, subject to Section 2.15(d), at any time, any Lender that, at such time (a) has failed to (i) fund all or any portion of its Advances within two Business Days of the date such Advances were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, any Issuing Bank, any Swing Line Bank or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Advances) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent or any Issuing Bank or Swing Line Bank in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any debtor relief law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a governmental authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such governmental authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.15(d)) upon delivery of written notice of such determination to the Borrower, each Issuing Bank, each Swing Line Bank and each Lender.
“Designated Assets” means the Vessels known on the Waiver Effective Date as (i) Symphony of the Seas, (ii) Oasis of the Seas, (iii) Harmony of the Seas, (iv) Spectrum of the Seas, (v) Quantum of the Seas, (vi) Ovation of the Seas and (vii) Anthem of the Seas (it being understood that such Vessels shall remain “Designated Assets” regardless of any change in name or ownership after the Waiver Effective Date).
“Designated Holdco Subsidiaries” means one or more Subsidiaries of the Borrower that directly own any of the equity interests issued by any Subsidiary of the Borrower that owns any Designated Assets.
“Designated Indebtedness” means any Indebtedness that is incurred by (a) the Borrower and guaranteed by one or more Designated Holdco Subsidiaries or (b) one or more Designated Holdco Subsidiaries. For the avoidance of doubt, Designated Indebtedness shall not include (x) any Indebtedness under any Permitted Secured Facility or (y) issuances of unsecured commercial paper incurred in the ordinary course of business of the Borrower and its Subsidiaries.
“Designated Release Event” means any event or other circumstance that results in all Designated Indebtedness created, incurred or assumed after the Waiver Effective Date no longer remaining outstanding (whether as a result of repayment, redemption or otherwise).
“Disclosure Schedule” means the Disclosure Schedule attached hereto as Schedule II.
“Dollar” and the sign “$” mean lawful money of the United States.
“Dollar Equivalent” means, for any amount, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in an Committed Currency, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of Dollars with the Committed Currency last provided (either by publication or otherwise provided to the Administrative Agent) by Reuters on the Business Day (New York City time) immediately preceding the date of determination or if such service ceases to be available or ceases to provide a rate of exchange for the purchase of Dollars with the Committed Currency, as provided by such other publicly available information service which provides that rate of exchange at such time in place of Reuters chosen by the Administrative Agent in its sole discretion (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems appropriate in its reasonable discretion) and (c) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems appropriate in its reasonable discretion.
“Effective Date” means October 12, 2017.
“Environmental Laws” means all applicable federal, state, local or foreign statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to the protection of the environment.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.
“EURIBOR Advance” means an Advance that bears interest at a rate based on the Adjusted EURIBOR Rate.
“EURIBOR Rate” means, with respect to any Borrowing denominated in Euros and for any Interest Period, the EURIBOR Screen Rate, two TARGET Days prior to the commencement of such Interest Period.
“EURIBOR Screen Rate” means the euro interbank offered rate administered by the European Money Markets Institute (or any other person which takes over the administration of that rate) for any Interest Period displayed (before any correction, recalculation or republication by the administrator) on page EURIBOR01 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters as published at approximately 11:00 a.m. Brussels time two TARGET Days prior to the commencement of such Interest Period. If such page or service ceases to be available, the Administrative Agent may specify another page or service displaying the relevant rate after consultation with the Borrower.
“Euro” or “€” means the lawful currency of the European Union as constituted by the Treaty of Rome which established the European Community, as such treaty may be amended from time to time and as referred to in the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.
“Event of Default” is defined in Section 7.1.
“Existing Credit Facility” means the Credit Agreement, dated as of November 19, 2010 (as amended and restated by the Assignment and Amendment to the Credit Agreement, dated as of August 23, 2013 and as further amended by the Amendment No. 1 to Amended and Restated Credit Agreement, dated as of July 10, 2015) among the Borrower, the lenders parties thereto and Nordea Bank Finland plc, New York Branch, as administrative agent.
“Existing Principal Subsidiaries” means each Subsidiary of the Borrower that is a Principal Subsidiary on the Effective Date.
“Extended Advance” means an Extended Revolving Credit Advance or a Swing Line Advance. As of the Second Extension Amendment Effective Date, the Extended Advances are entirely comprised of Extended Revolving Credit Advances.
“Extended Commitment” means an Extended Revolving Credit Commitment, a Letter of Credit Commitment or a Swing Line Commitment.
“Extended Lender” means an “Extended Lender” (as defined in the 2022 Extension Amendment).
“Extended Lender Event of Default” means any Event of Default arising from the breach of Section 6.2.9 of this Agreement.
“Extended Lender Prepayment Event” means any Prepayment Event arising from the breach of Section 6.2.9 of this Agreement.
“Extended Revolving Credit Advance” means (a) a Revolving Credit Advance held by an Extended Lender or a Lender to whom such a Revolving Credit Advance was assigned pursuant to the terms of this Agreement or (b) a Revolving Credit Advance made with respect to a Non-Extended Commitment that was converted into an Extended Revolving Credit Commitment pursuant to Section 2.14. As of the Second Extension Amendment Effective Date and after giving effect to the prepayments and commitment reductions that occurred on such date, the aggregate principal amount of Extended Revolving Credit Advances is $839,329,726.06.
“Extended Revolving Credit Commitment” means (a) a Revolving Credit Commitment held by an Extended Lender or a Lender to whom such a Revolving Credit Commitment was assigned pursuant to the terms of this Agreement or (b) a Revolving Credit Commitment held by a Lender that has converted its Non-Extended Commitment into an Extended Revolving Credit Commitment pursuant to Section 2.14. As of the Second Extension Amendment Effective Date and after giving effect to the prepayments and commitment reductions that occurred on such date, the aggregate principal amount of Extended Revolving Credit Commitments is $1,073,400,000.00.
“Extension Date” is defined in Section 2.16.
“FATCA” means Sections 1471 through 1474 of the Code, as in effect at the date hereof (or any amended or successor version that is substantively comparable), any current or future regulations promulgated thereunder or official interpretations thereof, any agreements entered
into pursuant to section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or official practices adopted pursuant to any published intergovernmental agreement entered into in connection with the implementation of such sections of the Code, any published intergovernmental agreement entered into in connection with the implementation of such Sections of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such published intergovernmental agreements.
“Federal Funds Rate” means, for any day, the greater of (a) the rate calculated by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the Federal funds effective rate and (b) the Floor.
“First Priority Guaranty” is defined in Section 6.2.11(b).
“First Waiver Extension Date” means July 28, 2020.
“Fiscal Quarter” means any quarter of a Fiscal Year.
“Fiscal Year” means any annual fiscal reporting period of the Borrower.
“Fixed Charge Coverage Ratio” means, as of the end of any Fiscal Quarter, the ratio computed for the period of four consecutive Fiscal Quarters ending on the close of such Fiscal Quarter of:
(a) (i) net cash from operating activities (determined in accordance with GAAP) for such period; or
(ii) for each of the first three Fiscal Quarters ending after the last day of the Waiver Period (and, for purposes of determining whether a Covenant Modification Date has occurred, the Fiscal Quarter most recently ended prior to the proposed Covenant Modification Date for which financial statements were required to be delivered pursuant to Section 6.1.1 of this Agreement), Annualized Net Cash from Operating Activities for such period,
in each case as shown in the Borrower’s consolidated statements of cash flows for such period, to
(b) the sum of:
(i) dividends actually paid by the Borrower during such period (including, without limitation, dividends in respect of preferred stock of the Borrower); plus
(ii) scheduled cash payments of principal of all debt less New Financings (determined in accordance with GAAP, but in any event including Capitalized Lease Liabilities),
in each case, of the Borrower and its Subsidiaries for such period.
“Floor” means a rate of interest equal to 0.00%.
“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any successor thereto.
“GAAP” is defined in Section 1.4.
“Government-related Obligations” means obligations of the Borrower or any Subsidiary of the Borrower under, or Indebtedness incurred by the Borrower or any Subsidiary of the Borrower to satisfy obligations under, any governmental requirement imposed by any Applicable Jurisdiction that must be complied with to enable the Borrower and its Subsidiaries to continue their business in such Applicable Jurisdiction, excluding, in any event, any taxes imposed on the Borrower or any Subsidiary of the Borrower.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Guarantors” means those certain Subsidiaries of the Borrower that guarantee the Obligations from time to time.
“Hedging Instruments” means options, caps, floors, collars, swaps, forwards, futures and any other agreements, options or instruments substantially similar thereto or any series or combination thereof used to hedge interest, foreign currency and commodity exposures.
“herein”, “hereof”, “hereto”, “hereunder” and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document.
“IFRS” is defined in Section 1.4.
“Increased Commitment Date” is defined in Section 2.14(b).
“Increasing Lenders” is defined in Section 2.14(a).
“Indebtedness” means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than (i) trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 180 days of the date the respective goods are delivered or the respective services are rendered and (ii) any purchase price adjustment, earnout or deferred payment of a similar nature incurred in connection with an acquisition (but only to the extent that no payment has at the time accrued pursuant to such purchase price adjustment, earnout or deferred payment obligation); (c) Indebtedness of others secured by a Lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) guarantees by such Person of Indebtedness of others, up to the amount of Indebtedness so guaranteed by such
Person; (g) obligations of such Person in respect of surety bonds and similar obligations; and (h) liabilities arising under Hedging Instruments.
“Indemnified Liabilities” is defined in Section 11.4.
“Indemnified Parties” is defined in Section 11.4.
“Interest Period” means, for each SOFR Advance or EURIBOR Advance comprising part of the same Revolving Credit Borrowing, the period commencing on the date of such SOFR Advance or EURIBOR Advance, as applicable, or the date of the Conversion of any ABR Advance into such SOFR Advance or EURIBOR Advance, as applicable, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, and subject to clause (c) of this definition, such longer period as the Borrower and the Lenders may agree, as the Borrower may select, upon notice delivered in accordance with Article II of this Agreement in substantially the form of Exhibit C hereto (such notice delivered in accordance with this definition, an “Interest Period Notice”); provided, however, that:
(a) the Borrower may not select any Interest Period for Non-Extended Advances that ends after the latest Termination Date then in effect with respect to such Non-Extended Advances, and the Borrower may not select any Interest Period for Extended Advances that ends after the latest Termination Date then in effect with respect to such Extended Advances;
(b) Interest Periods commencing on the same date for SOFR Advances or EURIBOR Advances comprising part of the same Revolving Credit Borrowing shall be of the same duration (without limiting the ability of the Borrower to have more than one Borrowing on the same date);
(c) the Borrower shall not be entitled to select an Interest Period having duration of longer than twelve months unless, by 2:00 P.M. (New York City time) on (x) in the case of EURIBOR Advances denominated in Euros, the third Business Day prior to the first day of such Interest Period or (y) in the case of SOFR Advances denominated in Dollars, the second Business Day prior to the first day of such Interest Period, each Lender notifies the Administrative Agent that such Lender will be providing funding for such Revolving Credit Borrowing with such Interest Period (the failure of any Lender to so respond by such time being deemed for all purposes of this Agreement as an objection by such Lender to the requested duration of such Interest Period); provided that, if any or all of the Lenders object to the requested duration of such Interest Period, the duration of the Interest Period for such Revolving Credit Borrowing shall be one, two, three, six or twelve months, as specified by the Borrower in the applicable Notice of Revolving Credit Borrowing as the desired alternative to such requested Interest Period;
(d) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if in the case of an Interest Period of longer than seven days such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day;
(e) whenever the first day of any Interest Period of longer than seven days occurs on a day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month; and
(f) the Borrower may not select an Interest Period of seven days more than twelve times in any calendar year.
“Interest Period Notice” has the meaning assigned to such term in the definition of “Interest Period”.
“Issuance” with respect to any Letter of Credit means the issuance, amendment, renewal or extension of such Letter of Credit.
“Issuing Bank” means (a) a Lender Party listed on Schedule I hereto with a Letter of Credit Commitment, (b) any other Lender acceptable to the Borrower in its discretion so long as such Lender expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its lending office (which information shall be recorded by the Administrative Agent in the Register), or (c) or any office, branch, subsidiary or Affiliate of the forgoing, in the case of each of the forgoing clauses (a) through (c), for so long as such Issuing Bank or Lender, as the case may be, shall have a Letter of Credit Commitment.
“L/C Cash Collateral Account” means an interest bearing cash collateral account to be established and maintained by the Administrative Agent, over which the Administrative Agent (for the benefit of the Issuing Banks) shall have sole dominion and control, upon terms as may be satisfactory to the Administrative Agent.
“L/C Exposure” means, at any time, the sum of (a) the aggregate Available Amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all disbursements under Letters of Credit that have not yet been reimbursed by or on behalf of the Borrower at such time. The L/C Exposure of any Lender at any time shall be its Ratable Share of the total L/C Exposure at such time, as may be adjusted in accordance with Section 2.15(a)(i).
“L/C Related Documents” is defined in Section 2.6(b)(i).
“Lender” means each Lender Party listed on Schedule I hereto with a Revolving Credit Commitment, each Added Lender and their respective successors and assigns.
“Lender Assignment Agreement” means a Lender Assignment Agreement substantially in the form of Exhibit D.
“Lender Parties” is defined in the preamble. Unless the context otherwise requires, the term “Lender Parties” includes the Issuing Banks and the Swing Line Bank.
“Letter of Credit” is defined in Section 2.1(b).
“Letter of Credit Agreement” is defined in Section 2.3(a).
“Letter of Credit Commitment” means, with respect to each Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower and its Subsidiaries in (a) the Dollar amount set forth opposite the Issuing Bank’s name on Schedule I hereto under the caption “Letter of Credit Commitment”, (b) if such Issuing Bank has become a Lender hereunder pursuant to an Added Lender Agreement, the Dollar amount set forth in such Added Lender Agreement or (c) if such Issuing Bank has entered into one or more Lender
Assignment Agreements, the Dollar amount set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 11.11.3 as such Issuing Bank’s “Letter of Credit Commitment”, in each case as such amount may be reduced prior to such time pursuant to Section 2.5 or increased pursuant to Section 2.14; provided, however, (i) the Letter of Credit Commitment of Nordea shall, upon the permanent cancellation of any Nordea Letter of Credit, automatically decrease by the face amount of such Nordea Letter of Credit and (ii) the Letter of Credit Commitment of JPM shall, at such time, automatically increase by such amount; provided, further, that in no event shall the Letter of Credit Commitment of JPM exceed the maximum amount of the Letter of Credit Facility.
“Letter of Credit Facility” means, at any time, an amount equal to the least of (a) the aggregate amount of the Issuing Banks’ Letter of Credit Commitments at such time, (b) $175,000,000 and (c) the aggregate amount of the Revolving Credit Commitments, as such amount may be reduced at or prior to such time pursuant to Section 2.5.
“Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever.
“Loan Document” means this Agreement, the First Priority Guaranty (if then in effect pursuant to the terms hereof), the Subordinated Guaranty (if then in effect pursuant to the terms hereof), the Notes, if any, each amendment to this Agreement and any other document designated by the Borrower and the Administrative Agent as a Loan Document.
“Material Adverse Effect” means a material adverse effect on (a) the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender Party under the Loan Documents or (c) the ability of the Borrower to perform its payment Obligations under the Loan Documents.
“Material Litigation” is defined in Section 5.8.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
“Net Debt” means, at any time, the aggregate outstanding principal amount of all debt (including, without limitation, Capitalized Lease Liabilities) of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) less the sum of (without duplication);
(a) all cash on hand of the Borrower and its Subsidiaries; plus
(b) all Cash Equivalents;
provided that for purposes of determining the Net Debt to Capitalization Ratio for all periods commencing after October 1, 2022, the 2.875% Convertible Debt and the 4.25% Convertible Debt shall be deemed not to be debt.
“Net Debt to Capitalization Ratio” means, as at any date, the ratio of (a) Net Debt on such date to (b) Capitalization on such date.
“New Financings” means proceeds from:
(a) borrowed money (whether by loan or issuance and sale of debt securities), including drawings under this Agreement and any other revolving credit facilities, and
(b) the issuance and sale of equity securities.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (i) requires the approval of all or all affected Lenders in accordance with the terms of Section 11.1 and (ii) has been approved by the Required Lenders.
“Non-Defaulting Lenders” is defined in Section 2.15(a).
“Non-Extended Advance” means a Revolving Credit Advance that is not an Extended Revolving Credit Advance. As of the Second Extension Amendment Effective Date, the aggregate principal amount of Non-Extended Advances is $28,775,231.89.
“Non-Extended Commitment” means a Revolving Credit Commitment that is not an Extended Revolving Credit Commitment. As of the Second Extension Amendment Effective Date, the aggregate principal amount of Non-Extended Commitments is $36,800,000.00 and the Non-Extended Commitment of each Lender is set forth on Schedule I hereto.
“Nordea” is defined in the preamble.
“Nordea Letters of Credit” means the Letters of Credit issued by Nordea as Issuing Bank and outstanding as of the Second Extension Amendment Effective Date.
“Note” means a promissory note of the Borrower payable to any Lender, delivered pursuant to a request made under Section 2.13 in substantially the form of Exhibit A hereto or such other form as the Administrative Agent and the Borrower reasonably agree, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender.
“Notice” is defined in Section 11.2(c).
“Notice Date” has the meaning specified in Section 2.16(b).
“Notice of Issuance” is defined in Section 2.3(a).
“Notice of Revolving Credit Borrowing” is defined in Section 2.2(a).
“Notice of Swing Line Borrowing” is defined in Section 2.2(b).
“Obligations” means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement and the Notes.
“Organic Document” means, relative to the Borrower, its articles of incorporation (inclusive of any articles of amendment to its articles of incorporation) and its by-laws.
“Other Beneficiary Party” means each agent, trustee or other representative (other than a Beneficiary Party) for any agreement which evidences any obligation of the Borrower or any of its Subsidiaries (other than any unsecured debt securities or any Permitted Secured Facility) outstanding on the Waiver Effective Date, in each case, as such agreement or any of the obligations thereunder may be amended, restated, supplemented, refinanced or otherwise modified from time to time, so long as such amendment, restatement, refinancing or other modification does not increase the aggregate principal amount of obligations thereunder to an amount that is more than the obligations outstanding thereunder as of the Waiver Effective Date plus the amount of any uncommitted incremental facilities available thereunder as of the Waiver Effective Date plus the amount of unpaid accrued interest and premium thereon and underwriting
discounts, fees, commissions and expenses, associated with such amendment, restatement, supplement, refinancing or other modification.
“Other Revolving Facility” means that certain Amended and Restated Credit Agreement, dated as of April 5, 2019, among the Borrower, the various financial institutions party thereto, as lenders, and JPMorgan, as successor administrative agent to The Bank of Nova Scotia, in each case as may be amended, amended and restated, supplemented, extended, refinanced, replaced and/or otherwise modified from time to time.
“Participant” is defined in Section 11.11.2.
“Participant Register” is defined in Section 11.11.2(f).
“Participating Member State” means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
“Payment” is defined in Section 10.13(a).
“Payment Notice” is defined in Section 10.13(b).
“Payment Office” means, for any Committed Currency, such office of JPMorgan as shall be from time to time selected by the Administrative Agent and notified by the Administrative Agent to the Borrower and the Lender Parties.
“Pension Plan” means a “pension plan”, as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.
“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR.”
“Permitted Early Refinancing” means any permanent termination of Non-Extended Commitments or any prepayment of outstanding Non-Extended Advances to the extent such prepayment (a) accompanies the permanent termination of the Non-Extended Commitments in respect of such Non-Extended Advances and (b) is applied to all then outstanding Non-Extended Advances on a pro rata basis and (c) is funded substantially concurrently with the receipt of the proceeds of indebtedness that is not prohibited by this Agreement from being incurred.
“Permitted Secured Facility” means (a) the Secured Indenture or (b) any other Indebtedness incurred by the Borrower or its Subsidiaries that is (i) permitted under Section 6.2.3 of this Agreement, (ii) secured solely by Permitted Secured Facility Collateral and (iii) guaranteed only by the Secured Facility Guarantors, as amended, restated, supplemented or otherwise modified from time to time (but always subject to the limitations in clause (b)).
“Permitted Secured Facility Collateral” means (a) any and all assets that constitute (or purport to constitute) Collateral (as defined in the Secured Indenture) as of March 30, 2021 and (b) any other asset of the Borrower that is subject to a lien to secure obligations under any Permitted Secured Facility (which, for the avoidance of doubt, shall not include any Designated Assets or Priority Assets).
“Person” means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity.
“Prepayment Event” is defined in Section 8.1.
“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the F.R.S. Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the F.R.S. Board (as determined by the Administrative Agent). Any change in the Prime Rate shall take effect at the opening of business on the day such change is publicly announced or quoted as being effective.
“Principal Subsidiary” means any Subsidiary of the Borrower that owns a Vessel.
“Priority Assets” means the Vessels known on the Waiver Effective Date as (i) Azamara Quest, (ii) Azamara Pursuit, (iii) Azamara Journey, (iv) Celebrity Edge, (v) Celebrity Apex, (vi) Celebrity Flora, (vii) Celebrity Xpedition, (viii) Celebrity Xperience, (ix) Celebrity Xploration, (x) Monarch, (xi) Horizon and (xii) Sovereign (it being understood that such Vessels shall remain “Priority Assets” regardless of any change in name or ownership after the Waiver Effective Date).
“Priority Holdco Subsidiaries” means (a) RCL Cruises Ltd. or any other Subsidiaries of the Borrower that directly own all of the equity interests in (i) RCL TUI Cruises German Verwaltungs GmbH and (ii) RCL TUI Cruises German Holding GmbH & Co. KG and (b) one or more Subsidiaries that directly own any of the equity interests issued by any other Subsidiary of the Borrower that owns any Priority Asset. For the avoidance of doubt, Priority Holdco Subsidiaries shall not include any Principal Subsidiary.
“Priority Release Event” means any event or other circumstance that results in no Permitted Secured Facility remaining outstanding (whether as a result of repayment, redemption or otherwise).
“Ratable Share” of any amount means, with respect to any Lender at any time, the product of such amount times a fraction, the numerator of which is the amount of such Lender’s Revolving Credit Commitment at such time (or, if the Revolving Credit Commitments shall have been terminated, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the aggregate amount of all Revolving Credit Commitments at such time (or, if the Revolving Credit Commitments shall have been terminated, the aggregate amount of all Revolving Credit Commitments as in effect immediately prior to such termination); provided that in the case of Section 2.15 when a Defaulting Lender shall exist, “Ratable Share” shall mean the percentage of the total Revolving Credit Commitments (disregarding any Defaulting Lender’s Revolving Credit Commitments) represented by such Lender’s Revolving Credit Commitment.
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such Benchmark is the Term SOFR Rate, 5:00 a.m. (Chicago time) on the day that is two U.S. Government Securities Business Days preceding the date of such setting, (2) if such Benchmark is EURIBOR Rate, 11:00 a.m. Brussels time two TARGET Days preceding the date of such setting, (3) if such Benchmark is SONIA, then four RFR Business Days prior to such setting, or (4) if such Benchmark is none of the Term SOFR Rate, the EURIBOR Rate or SONIA, the time determined by the Administrative Agent in its reasonable discretion.
“Register” is defined in Section 11.11.3.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors (including lawyers and accountants) and representatives of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means (i) with respect to a Benchmark Replacement in respect of Advances denominated in Dollars, the F.R.S. Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the F.R.S. Board and/or the Federal Reserve Bank of New York or, in each case, any successor thereto, (ii) with respect to a Benchmark Replacement in respect of Advances denominated in Sterling, the Bank of England, or a committee officially endorsed or convened by the Bank of England or, in each case, any successor thereto and (iii) with respect to a Benchmark Replacement in respect of Advances denominated in Euros, the European Central Bank, or a committee officially endorsed or convened by the European Central Bank or, in each case, any successor thereto.
“Relevant Rate” means (i) with respect to any Borrowing denominated in Dollars, the Adjusted Term SOFR Rate, (ii) with respect to any Borrowing denominated in Euros, the Adjusted EURIBOR Rate or (iii) with respect to any Borrowing denominated in Sterling, the Adjusted Daily Simple RFR.
“Relevant Screen Rate” means (i) with respect to any Borrowing denominated in Dollars, the Term SOFR Reference Rate and (ii) with respect to any Borrowing denominated in Euros, the EURIBOR Screen Rate.
“Required Extended Lenders” means, at any time, Extended Lenders that, in the aggregate, hold more than 50% of the aggregate unpaid principal amount (based on the Dollar Equivalent at such time) of the Extended Advances or, if no such principal amount is then outstanding, Extended Lenders that in the aggregate have more than 50% of the Extended Revolving Credit Commitments; provided that if any Extended Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Extended Lenders at such time the Extended Revolving Credit Commitments and Extended Advances of such Lender at such time.
“Required Lenders” means, at any time, Lenders that, in the aggregate, hold more than 50% of the aggregate unpaid principal amount (based on the Dollar Equivalent at such time) of the Revolving Credit Advances or, if no such principal amount is then outstanding, Lenders that in the aggregate have more than 50% of the Revolving Credit Commitments; provided that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time the Revolving Credit Commitments of such Lender at such time.
“Resignation Effective Date” is defined in Section 10.7(a).
“Revaluation Date” means (a) with respect to any Advance denominated in any Committed Currency, each of the following: (i) the date of the Borrowing of such Advance and (ii) (A) with respect to any SOFR Advance or any EURIBOR Advance, each date of a conversion into or continuation of such Advance pursuant to the terms of this Agreement and (B) with respect to any RFR Advance, each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such Advance (or, if there is no such numerically corresponding day in such month, then the last day of such month) and (b) with respect to any Letter of Credit denominated in a Committed Currency, each of the following: (i) the date on which such Letter of Credit is issued, (ii) the first Business Day of each calendar
month and (iii) the date of any amendment of such Letter of Credit that has the effect of increasing the face amount thereof.
“Revolving Credit Advance” means an advance by a Lender to the Borrower as part of a Revolving Credit Borrowing and refers to an ABR Advance, a SOFR Advance, a EURIBOR Advance or an RFR Advance (each of which shall be a “Type” of Revolving Credit Advance).
“Revolving Credit Borrowing” means a borrowing consisting of Extended Revolving Credit Advances or Non-Extended Advances, in each case, of the same Type and, if applicable, having the same Interest Period, made by each of the relevant Lenders.
“Revolving Credit Borrowing Minimum” means, in respect of Revolving Credit Advances denominated in Dollars, $5,000,000, in respect of Revolving Credit Advances denominated in Sterling, £5,000,000 and, in respect of Revolving Credit Advances denominated in Euros, €5,000,000.
“Revolving Credit Borrowing Multiple” means, in respect of Revolving Credit Advances denominated in Dollars, $1,000,000 in respect of Revolving Credit Advances denominated in Sterling, £1,000,000 and, in respect of Revolving Credit Advances denominated in Euros, €1,000,000.
“Revolving Credit Commitment” means as to any Lender (a) the Dollar amount set forth opposite such Lender’s name on Schedule I hereto as such Lender’s “Revolving Credit Commitment” or (b) if such Lender has become a Lender hereunder pursuant to an Added Lender Agreement, the Dollar amount set forth in such Added Lender Agreement or (c) if such Lender has entered into a Lender Assignment Agreement, the Dollar amount set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 11.11.3, as such amount may be reduced pursuant to Section 2.5 or increased pursuant to Section 2.14.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Credit Advances and its L/C Exposure and Swing Line Exposure at such time.
“RFR” means SONIA.
“RFR Advance” means an Advance that bears interest at a rate based on the Adjusted Daily Simple RFR.
“RFR Business Day” means, any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which banks are closed for general business in London.
“RFR Interest Day” has the meaning specified in the definition of “Daily Simple RFR”.
“S&P” means S&P Global Ratings and any successor thereto.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of the Second Extension Amendment Effective Date, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, the Crimea Region of Ukraine, Cuba, Iran, North Korea and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, Global Affairs Canada or by the United Nations Security Council, the European Union or any European Union member state, His
Majesty’s Treasury of the United Kingdom or any Person 50% or more owned or otherwise controlled by any such Person or Persons, as applicable under relevant Sanctions, or (b) any Person that is the target of blocking Sanctions, even if not appearing on any Sanctions-related list (e.g., the governments of Sanctioned Countries or the government of Venezuela) or (c) any Person located, organized or resident in a Sanctioned Country.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, Canada or (b) the United Nations Security Council, the European Union, any European Union member state or His Majesty’s Treasury of the United Kingdom.
“Second Extension Amendment Effective Date” means January 12, 2023.
“Secured Facility Guarantors” means those certain Subsidiaries of the Borrower that guarantee the Secured Indenture as of the Second Extension Amendment Effective Date and any of their respective Subsidiaries.
“Secured Indenture” means that certain Indenture dated as of May 19, 2020 among the Borrower, certain subsidiaries of the Borrower, and The Bank of New York Mellon Trust Company, N.A., as trustee and security agent, as in effect on the First Waiver Extension Date.
“Senior Debt Rating” means, as of any date, (a) the implied senior debt rating of the Borrower for debt pari passu in right of payment and in right of collateral security with the Obligations as given by Moody’s and S&P or (b) in the event the Borrower receives an actual unsecured senior debt rating (apart from an implied rating) from Moody’s and/or S&P, such actual rating or ratings, as the case may be (and in such case the Senior Debt Rating shall not be determined by reference to any implied senior debt rating from either agency). For purposes of the foregoing, (i) if only one of S&P and Moody’s shall have in effect a Senior Debt Rating, the Applicable Margin and the Applicable Percentage shall be determined by reference to the available rating; (ii) if neither S&P nor Moody’s shall have in effect a Senior Debt Rating, the Applicable Margin and the Applicable Percentage will be set in accordance with Level 5 under the definition of “Applicable Margin” or “Applicable Percentage”, as the case may be, unless (A) within 21 days of being notified by the Administrative Agent that both Moody’s and S&P have ceased to give a Senior Debt Rating, the Borrower has obtained from at least one of such agencies a private implied rating for its senior debt or (B) having failed to obtain such private rating within such 21-day period, the Borrower and the Lenders shall have agreed within a further 15-day period (during which period the Borrower and the Agents shall consult in good faith to find an alternative method of providing an implied rating of the Borrower’s senior debt) on an alternative rating method, which agreed alternative shall apply for the purposes of this Agreement; (iii) if the ratings established by S&P and Moody’s shall fall within different levels, the Applicable Margin and the Applicable Percentage shall be based upon the higher rating unless such ratings differ by two or more levels, in which case the applicable level will be deemed to be one level below the higher of such levels; (iv) if any rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (v) if S&P or Moody’s shall change the basis on which ratings are established, each reference to the Senior Debt Rating announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Advance” means an Advance that bears interest at a rate based on Adjusted Term SOFR, other than pursuant to clause (c) of the definition of “ABR”.
“SONIA” means, with respect to any Business Day, a rate per annum equal to the Sterling Overnight Index Average for such Business Day published by the SONIA Administrator on the SONIA Administrator’s Website on the immediately succeeding Business Day.
“SONIA Administrator” means the Bank of England (or any successor administrator of the Sterling Overnight Index Average).
“SONIA Administrator’s Website” means the Bank of England’s website, currently at http://www.bankofengland.co.uk, or any successor source for the Sterling Overnight Index Average identified as such by the SONIA Administrator from time to time.
“Specified Designated Holdco Subsidiaries” means those certain Designated Holdco Subsidiaries that are obligors with respect to any Designated Indebtedness.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the F.R.S. Board to which the Administrative Agent is subject with respect to the Adjusted EURIBOR Rate, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D) or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Advances. Such reserve percentage shall include those imposed pursuant to Regulation D. Advances for which the associated Benchmark is adjusted by reference to the Statutory Reserve Rate (per the related definition of such Benchmark) shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“Sterling” means the lawful currency of the United Kingdom of Great Britain and Northern Ireland.
“Stockholders’ Equity” means, as at any date, the Borrower’s stockholders’ equity on such date, excluding Accumulated Other Comprehensive Income (Loss), determined in accordance with GAAP; provided that:
for purposes of calculating compliance with the financial covenants contained in Section 6.2.4, for all periods commencing after October 1, 2022, the amount of the 4.25% Convertible Debt and 2.875% Convertible Debt will be accounted for as equity and accordingly shall be added to Stockholders’ Equity; provided that, for the Fiscal Quarter ended March 31, 2023, the amount of the 4.25% Convertible Debt shall be deemed to be $1,150,000,000 minus (i) the amount of the 4.25% Convertible Debt that the Borrower has elected to settle in cash (rather than equity) in accordance with Section 14.02 of the 4.25% Convertible Notes Indenture and (ii) the value of any new equity securities issued by the Borrower in replacement or settlement in equity securities of any 4.25% Convertible Debt; provided, further, that, on and after (x) the 4.25% Maturity Date, only the amount of 4.25% Convertible Debt actually converted into equity
securities and (y) the 2.875% Maturity Date, only the amount of 2.875% Convertible Debt actually converted to equity securities, shall, in each case, be added to Stockholders’ Equity; and
(a) any non-cash charge to Stockholders’ Equity resulting (directly or indirectly) from a change after the Effective Date in GAAP or in the interpretation thereof shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such charge shall be added back to Stockholders’ Equity;
(b) (i) any non-cash write-off to Stockholders’ Equity with respect to the Fiscal Year ended December 31, 2020 and (ii) any non-cash write-off to goodwill with respect to any Fiscal Year commencing after December 31, 2020, shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such write-offs shall be added back to Stockholders’ Equity;
(c) any non-cash write-off to Stockholders’ Equity with respect to the Fiscal Year ended December 31, 2021 or December 31, 2022 (excluding any such write-offs to goodwill with respect to either such Fiscal Year) shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such write-off shall be added back to Stockholders’ Equity; provided that the aggregate amount of such write-offs added back to Stockholders’ Equity pursuant to this clause (c) shall not exceed the greater of (i) 10.0% of the total assets of the Borrower and its Subsidiaries taken as a whole as determined in accordance with GAAP as at the last day of the most recently ended Fiscal Quarter and (ii) $3,000,000,000;
(d) “net loss attributable to Royal Caribbean Cruises Ltd.” (but excluding any net loss associated with an impairment or write-off added back pursuant to clause (b) or (c) above), determined in accordance with GAAP as shown in the Borrower’s consolidated statement of comprehensive (loss) income, attributable to the Fiscal Years ended December 31, 2021 or December 31, 2022 (excluding, for the avoidance of doubt, any such amount attributable to goodwill or write-offs with respect the Fiscal Year ended December 31, 2020) shall be added back to Stockholders’ Equity; provided that the aggregate amount added back to Stockholders’ Equity pursuant to clause (c) above and this clause (d) shall not exceed $4,500,000,000; and
(e) the impact on the computation of Stockholders’ Equity of one-time expenses (including, without limitation, prepayment penalties) related to the refinancing of secured or guaranteed Indebtedness of the Borrower or its Subsidiaries in respect of any Fiscal Quarter commencing after March 31, 2020 shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such expenses shall be added back to Stockholders’ Equity.
For the avoidance of doubt, no item added back to Stockholders’ Equity pursuant to clause (b), clause (c), clause (d) or clause (e) shall also be added back pursuant to any other such clause.
“Subordinated Guaranty” is defined in Section 6.2.11(c).
“Subsidiary” means, with respect to any Person, any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person.
“Swing Line Advance” means an advance made by the Swing Line Bank pursuant to Section 2.1(c) or any Lender pursuant to Section 2.2(b).
“Swing Line Bank” means JPMorgan.
“Swing Line Borrowing” means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank.
“Swing Line Commitment” means the amount set forth opposite the Swing Line Bank’s name on Schedule I hereto, as such amount may be reduced pursuant to Section 2.5.
“Swing Line Exposure” means, at any time, the aggregate principal amount of all Swing Line Advances outstanding at such time. The Swing Line Exposure of any Lender at any time shall be its Ratable Share of the total Swing Line Exposure at such time, as may be adjusted in accordance with Section 2.15(a)(i).
“Swing Line Facility” is defined in Section 2.1(c).
“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.
“TARGET Day” means any day on which TARGET2 (or, if such payment system ceases to be operative, such other payment system, if any, determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in Euro.
“Taxes” is defined in Section 3.6.
“Term SOFR” means (a) for any calculation with respect to a SOFR Advance, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 P.M. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and (b) for any calculation with respect to an ABR Advance on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “ABR Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 P.M. (New York City time) on any ABR Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such
first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such ABR Term SOFR Determination Day.
“Term SOFR Adjustment” means a percentage equal to 0.10% per annum.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Termination Date” means (i) with respect to the Non-Extended Commitments and the Non-Extended Advances, the earliest of (a) April 12, 2024, subject to the extension thereof pursuant to Section 2.16, (b) the date of termination in whole of the Non-Extended Commitments pursuant to Section 2.5 and (c) the date on which any Commitment Termination Event occurs; provided, however, that the Termination Date with respect to any Non-Extended Advance and Non-Extended Commitment of any Lender that does not consent to any requested extension pursuant to Section 2.16 shall be the Termination Date in effect with respect to such Non-Extended Advance and Non-Extended Commitment immediately prior to the applicable Extension Date for all purposes of this Agreement, and (ii) with respect to the Extended Commitments and the Extended Advances, the earliest of (a) April 12, 2025, subject to the extension thereof pursuant to Section 2.16, (b) the date of termination in whole of the Extended Commitments pursuant to Section 2.5 and (c) the date on which any Commitment Termination Event occurs; provided, however, that the Termination Date with respect to any Extended Advance and Extended Commitment of any Lender that does not consent to any requested extension pursuant to Section 2.16 shall be the Termination Date in effect with respect to such Extended Advance and Extended Commitment immediately prior to the applicable Extension Date for all purposes of this Agreement; provided, further, in each case, if such date is not a Business Day, the Termination Date shall be the next preceding Business Day.
“Type” when used in reference to any Advance or Borrowing, refers to whether the rate of interest on such Advance, or on the Advances comprising such Borrowing, is determined by reference to Adjusted Term SOFR, ABR, the Adjusted EURIBOR Rate or the Adjusted Daily Simple RFR.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unissued Letter of Credit Commitment” means, with respect to any Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower or any of its Subsidiaries in an amount equal to the excess of (a) the amount of its Letter of Credit Commitment over (b) the aggregate Available Amount of all Letters of Credit issued by such Issuing Bank.
“United States” or “U.S.” means the United States of America, its fifty States and the District of Columbia.
“Unsecured Indenture” means that certain Indenture dated as of June 9, 2020 among the Borrower, RCI Holdings LLC, and The Bank of New York Mellon Trust Company, N.A., as trustee, as in effect on the First Waiver Extension Date.
“Unused Commitment” means, with respect to each Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Advances made by such Lender (in its capacity as a Lender, and not as a Swing
Line Bank) and outstanding at such time, plus (ii) such Lender’s Ratable Share of (A) the aggregate Available Amount of all the Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Advances made by each Issuing Bank pursuant to Section 2.3(c) that have not been ratably funded by such Lender and outstanding at such time and (C) the aggregate principal amount of all Swing Line Advances then outstanding.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“Vessel” means a passenger cruise vessel owned by the Borrower or one of its Subsidiaries.
“Waiver Effective Date” means May 7, 2020.
“Waiver Period” means the period commencing on the Waiver Effective Date and ending on the earlier of (i) September 30, 2022 and (ii) the Covenant Modification Date.
Section 1.2 Use of Defined Terms; Other Definitional Provisions. (a)Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall, when capitalized, have such meanings when used in the Disclosure Schedule and in each Note, Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing, Notice of Issuance, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document.
(b) Any reference herein to a merger, transfer, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability company (or the unwinding of such a division or allocation), as if it were a merger, transfer, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, as applicable, to, of or with a separate Person. Any division of a limited liability company shall constitute a separate Person hereunder (and each division of any limited liability company that is a Subsidiary, joint venture or any other like term shall also constitute such a Person or entity).
Section 1.3 Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.
Section 1.4 Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 6.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with United States generally accepted accounting principles (“GAAP”) consistently applied (or, if not consistently applied, accompanied by details of the inconsistencies); provided that if the Borrower elects to apply or is required to apply International Financial Reporting Standards (“IFRS”) accounting principles in lieu of GAAP, upon any such election and notice to the Administrative Agent, references herein to GAAP shall thereafter be construed to mean IFRS (except as otherwise provided in this Agreement); provided, further, that if, as a result of (i) any change in GAAP or IFRS or in the interpretation thereof or (ii) the application by the Borrower of IFRS in lieu of GAAP, in each case, after the
date of the financial statements referred to in Section 5.6, there is a change in the manner of determining any of the items referred to herein that are to be determined by reference to GAAP, and the effect of such change would (in the reasonable opinion of the Borrower or the Administrative Agent) be such as to affect the basis or efficacy of the covenants contained in Section 6.2.4 in ascertaining the financial condition of the Borrower or the consolidated financial condition of the Borrower and its Subsidiaries and the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate such change occurring after the date hereof in GAAP or the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), then such item shall for the purposes of such Sections of this Agreement continue to be determined in accordance with GAAP relating thereto as GAAP were applied immediately prior to such change in GAAP or in the interpretation thereof until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding the foregoing, all obligations of any person that are or would be characterized as operating lease obligations in accordance with GAAP as in effect on December 31, 2018 (whether or not such operating lease obligations were in effect on such date) shall continue to be accounted for as operating lease obligations for purposes of this Agreement regardless of any change in GAAP following December 31, 2018 that would otherwise require such obligations to be recharacterized (on a prospective or retroactive basis or otherwise) as capitalized leases; provided that, for clarification purposes, operating leases recorded as liabilities on the balance sheet due to a change in accounting treatment, or otherwise, shall for all purposes not be treated as Indebtedness, Capital Lease Obligations or Capitalized Lease Liabilities.
Section 1.5 Exchange Rates. The Administrative Agent or the applicable Issuing Bank, as applicable, shall determine the Dollar Equivalent amounts of EURIBOR Advances or RFR Advances or Letter of Credit extensions denominated in Committed Currencies. Such Dollar Equivalent amounts shall become effective as of such Revaluation Date and shall be the Dollar Equivalent of such amounts until the next Revaluation Date to occur. Except for purposes of financial statements delivered by the Borrower hereunder or calculating financial covenants hereunder or except as otherwise provided herein, the applicable amount of any Agreed Currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as so determined by the Administrative Agent or the applicable Issuing Bank, as applicable.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
Section 2.1 The Advances and Letters of Credit. (a) Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Credit Advances to the Borrower from time to time on any Business Day during the period from the Closing Date until the Termination Date applicable to such Lender in an amount (based in respect of any Revolving Credit Advances to be denominated in a Committed Currency by reference to the Dollar Equivalent thereof determined on the date of delivery of the applicable Notice of Revolving Credit Borrowing) not to exceed such Lender’s Unused Commitment. Each Revolving Credit Borrowing shall be in an amount not less than the Revolving Credit Borrowing Minimum or the Revolving Credit Borrowing Multiple in excess thereof and shall consist of Revolving Credit Advances of the same Type and in the same currency made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. Within the limits of each Lender’s Revolving Credit Commitment, the Borrower may borrow under this Section 2.1(a), prepay pursuant to Section 2.10 and reborrow under this Section 2.1(a) (it being understood that (i) Non-Extended Advances may not be prepaid pursuant to Section 2.10 unless the outstanding principal amount of Extended Advances is zero before giving effect to such prepayment and (ii) until the Termination Date with respect to the Non-Extended Commitments,
the Borrower may not borrow Extended Advances if there are unused Non-Extended Commitments available at such time).
(b) Letters of Credit. Each Issuing Bank agrees, on the terms and conditions hereinafter set forth, in reliance upon the agreements of the Lenders set forth in this Agreement, to issue letters of credit (each, a “Letter of Credit”) denominated in Dollars or a Committed Currency for the account of the Borrower and its Subsidiaries from time to time on any Business Day during the period from the Closing Date until 30 days before the latest Termination Date in effect at the date of issuance thereof in an aggregate Available Amount (based in respect of any Letters of Credit to be denominated in a Committed Currency by reference to the Dollar Equivalent thereof determined on the date of delivery of the applicable Notice of Issuance) (i) for all Letters of Credit issued by each Issuing Bank not to exceed at any time the lesser of (x) the Letter of Credit Facility at such time and (y) such Issuing Bank’s Letter of Credit Commitment at such time and (ii) for each such Letter of Credit not to exceed an amount equal to the Unused Commitments of the Lenders at such time; provided that no Letter of Credit shall have an expiration date later than five Business Days prior to the Termination Date of Lenders having Commitments in an amount equal to or exceeding the available undrawn amount of all Letters of Credit after giving effect to the issuance of such Letter of Credit. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than five Business Days before the latest Termination Date. Within the limits referred to above, the Borrower may from time to time request the Issuance of Letters of Credit under this Section 2.1(b). Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the Dollar Equivalent of the stated amount of such Letter of Credit available to be drawn at such time; provided that with respect to any Letter of Credit that, by its terms, provides for one or more automatic increases in the available amount thereof, the amount of such Letter of Credit shall be deemed to be the Dollar Equivalent of the maximum amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum amount is available to be drawn at such time.
(c) The Swing Line Advances. The Swing Line Bank agrees, on the terms and conditions hereinafter set forth, to make Swing Line Advances denominated in Dollars to the Borrower from time to time on any Business Day during the period from the Closing Date until the Termination Date applicable to the Swing Line Bank in an aggregate principal amount (i) for all Swing Line Advances made by the Swing Line Bank not to exceed at any time the lesser of (x) $150,000,000 (the “Swing Line Facility”) and (y) the Swing Line Bank’s Swing Line Commitment at such time and (ii) in an amount for each such Advance not to exceed the Unused Commitments of the Lenders on such Business Day. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $1,000,000 or an integral multiple thereof. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Section 2.1(c), prepay pursuant to Section 2.10 and reborrow under this Section 2.1(c).
Section 2.2 Making the Advances. (a) Except as otherwise provided in Section 2.2(b) or Section 2.3(c), each Revolving Credit Borrowing shall be made on notice, given not later than (w) 11:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of SOFR Advances, (x) 12:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of EURIBOR Advances, (y) 12:00 P.M. (New York City time) on the fifth RFR Business Day prior to the date of the proposed Revolving Credit
Borrowing in the case of a Revolving Credit Borrowing consisting of RFR Advances or (z) 11:00 A.M. (New York City time) on the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of ABR Advances, by the Borrower to the Administrative Agent by telecopier or other electronic transmission, which shall give to each Lender prompt notice (in the case of a proposed Revolving Credit Borrowing consisting of ABR Advances, by 12:00 P.M. (New York City time)) thereof by telecopier or other electronic transmission. Each such notice of a Revolving Credit Borrowing (a “Notice of Revolving Credit Borrowing”) shall be by telephone, confirmed promptly in writing, telecopier or other electronic transmission in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Revolving Credit Borrowing and portion of the Advances comprising such Revolving Credit Borrowing that will be Extended Revolving Credit Advances and/or Non-Extended Advances, (ii) Type of Advances comprising such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of a Revolving Credit Borrowing consisting of SOFR Advances or EURIBOR Advances, initial Interest Period and currency for each such Revolving Credit Advance. Each applicable Lender shall, before 11:00 A.M. (New York City time) on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of SOFR Advances or EURIBOR Advances, before 1:00 P.M. (New York City time) on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of ABR Advances and before 11:00 A.M. (London time) on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of RFR Advances, make available for the account of its lending office to the Administrative Agent at the applicable Administrative Agent’s Account, in same day funds, such Lender’s ratable portion of such Revolving Credit Borrowing. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Section 4.2 the Administrative Agent will make such funds available to the Borrower at the account of the Borrower specified in the applicable Notice of Revolving Credit Borrowing; provided, however, that, if such borrowing is denominated in Dollars, the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances made by the Swing Line Bank and by any other Lender and outstanding on the date of such Revolving Credit Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Swing Line Bank and such other Lenders for repayment of such Swing Line Advances.
(b) Each Swing Line Borrowing shall be made on notice, given not later than 1:00 P.M. (New York City time) on the date of the proposed Swing Line Borrowing by the Borrower to the Swing Line Bank and the Administrative Agent, of which the Administrative Agent shall give prompt notice to the Lenders. Each such notice of a Swing Line Borrowing (a “Notice of Swing Line Borrowing”) shall be by telephone, confirmed promptly in writing, telecopier or other electronic transmission in substantially the form of Exhibit B-2 hereto, specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the tenth day after the requested date of such Borrowing). The Swing Line Bank shall, before 4:00 P.M. (New York City time) on the date of such Swing Line Borrowing, make the Swing Line Borrowing available to the Administrative Agent at the Administrative Agent’s Account, in same day funds. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Section 4.2, the Administrative Agent will make such funds available to the Borrower at the account of the Borrower specified in the applicable Notice of Swing Line Borrowing. Upon written demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent, each other Lender will purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Lender, such other Lender’s Ratable Share (after giving effect to the reallocation provisions of this subsection) of such outstanding Swing Line Advance, by making available for the account of its lending office to the Administrative Agent for the account
of the Swing Line Bank, by deposit to the Administrative Agent’s Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Ratable Share (after giving effect to the reallocation provisions of this subsection) of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank, provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Swing Line Bank to any other Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, this Agreement, the Notes or the Borrower. If and to the extent that any Lender shall not have so made the amount of such Swing Line Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date such Lender is required to have made such amount available to the Administrative Agent until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. If the Termination Date shall have occurred in respect of any Revolving Credit Commitments at a time when any other Revolving Credit Commitments are in effect with a later Termination Date, then on the earliest occurring Termination Date all then-outstanding Swing Line Advances shall be repaid in full (and there shall be no adjustment to the participations in such Swing Line Advances as a result of the occurrence of such earliest Termination Date); provided, however, that if on the occurrence of such earliest Termination Date (after giving effect to any repayments of Revolving Credit Advances and any reallocation of Letter of Credit participations as contemplated in Section 2.3(b)), there shall exist sufficient unutilized Revolving Credit Commitments so that the respective outstanding Swing Line Advances could be incurred pursuant to such Revolving Credit Commitments which will remain in effect after the occurrence of such earliest Termination Date, then there shall be an automatic adjustment on such date of the risk participations of each Lender holding such unutilized Revolving Credit Commitments and such outstanding Swing Line Advances shall be deemed to have been incurred solely pursuant to such relevant Revolving Commitments of such unutilized Revolving Credit Commitments and such Swing Line Advances shall not be so required to be repaid in full on such earliest Termination Date.
(c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select SOFR Advances for any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is less than the Revolving Credit Borrowing Minimum or if the obligation of the Lenders to make SOFR Advances shall then be suspended pursuant to Section 2.8 or 3.1 and (ii) the SOFR Advances may not be outstanding as part of more than 15 separate Revolving Credit Borrowings.
(d) Each Notice of Revolving Credit Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Revolving Credit Borrowing that the related Notice of Revolving Credit Borrowing specifies is to be comprised of SOFR Advances, the Borrower shall indemnify each applicable Lender in accordance with Section 3.4.
(e) Unless the Administrative Agent shall have received notice from an applicable Lender or the Swing Line Bank prior to the time of any Revolving Credit Borrowing or Swing Line Borrowing, as the case may be, that such Lender or the Swing Line Bank will not make available to the Administrative Agent such Lender’s or the Swing Line Bank’s ratable portion of such Revolving Credit Borrowing or Swing Line Borrowing, as the case may be, the Administrative Agent may assume that such Lender or the Swing Line Bank has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) or (b) of this Section 2.2, as applicable, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender or the Swing Line Bank shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Advances comprising such Borrowing and (ii) in the case of such Lender or the Swing Line Bank, (A) the Federal Funds Rate in the case of Advances denominated in Dollars or (B) the cost of funds incurred by the Administrative Agent in respect of such amount in the case of Advances denominated in Committed Currencies. If such Lender or the Swing Line Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s or the Swing Line Bank’s Advance as part of such Borrowing for purposes of this Agreement.
(f) The failure of any Lender to make the Revolving Credit Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Credit Advance to be made by such other Lender on the date of any Revolving Credit Borrowing.
(g) If any Lender shall default in its obligations under Section 2.1, the Agents shall, at the request of the Borrower, use reasonable efforts to find a bank or other financial institution acceptable to the Borrower and reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank to replace such Lender on terms acceptable to the Borrower and to have such bank or other financial institution replace such Lender.
(h) Each Lender may, if it so elects, fulfill its obligation to make or continue Advances hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such Advance; provided that such Advance shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such Advance shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility.
(i) Subject to Section 2.17, each Borrowing shall be comprised (i) in the case of Borrowings in Dollars, entirely of ABR Advances or SOFR Advances, (ii) in the case of Borrowings in Sterling, entirely of RFR Advances and (iii) in the case of Borrowings in Euro, entirely EURIBOR Advances, as the Borrower may request in accordance herewith. Each Swingline Loan shall be an ABR Advance.
Section 2.3 Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. (i) Each Letter of Credit shall be issued upon notice, given not
later than 11:00 A.M. (New York City time) on the fifth Business Day prior to the date of the proposed Issuance of such Letter of Credit (or on such shorter notice as the applicable Issuing Bank may agree), by the Borrower to any Issuing Bank, and such Issuing Bank shall give the Administrative Agent, prompt notice thereof. Each such notice by the Borrower of Issuance of a Letter of Credit (a “Notice of Issuance”) shall be by telecopier, other electronic transmission or telephone, confirmed immediately in writing, specifying therein the requested (A) date of such Issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, such Letter of Credit shall be issued pursuant to such application and agreement for letter of credit as such Issuing Bank and the Borrower shall agree for use in connection with such requested Letter of Credit (a “Letter of Credit Agreement”). If the requested form of such Letter of Credit is acceptable to such Issuing Bank in its reasonable discretion (it being understood that any such form shall have only explicit documentary conditions to draw and shall not include discretionary conditions), such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Section 4.2, make such Letter of Credit available to the Borrower at its office referred to in Section 11.2 or as otherwise agreed with the Borrower in connection with such Issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern.
(b) Participations. By the Issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing or decreasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, such Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Ratable Share (after giving effect to the reallocation provisions of this subsection) of the Available Amount of such Letter of Credit. The Borrower hereby agrees to each such participation. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of such Issuing Bank, such Lender’s Ratable Share (after giving effect to the reallocation provisions of this subsection) of each drawing made under a Letter of Credit funded by such Issuing Bank and not reimbursed by the Borrower on the date made, or of any reimbursement payment required to be refunded to the Borrower for any reason, which amount will be advanced, and deemed to be an Advance to the Borrower hereunder, regardless of the satisfaction of the conditions set forth in Section 4.2. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Credit Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender further acknowledges and agrees that its participation in each Letter of Credit will be automatically adjusted to reflect such Lender’s Ratable Share of the Available Amount of such Letter of Credit at each time such Lender’s Revolving Credit Commitment is amended pursuant to a Commitment Increase in accordance with Section 2.14, an assignment in accordance with Section 11.11.1 or otherwise pursuant to this Agreement. If the Termination Date in respect of any Revolving Credit Commitments occurs prior to the expiration of any Letter of Credit, then (i) if, on the date that is five Business Days prior to such Termination Date, other Revolving Credit Commitments in respect of which the Termination Date shall not have occurred are then in effect, such Letters of Credit shall automatically, on such fifth Business Day prior to such Termination Date, be deemed to have been issued (including for purposes of the obligations of the Lenders to purchase participations therein and to make Advances and payments in respect thereof pursuant to this Agreement) under (and ratably participated
in by Lenders pursuant to) such other Revolving Credit Commitments up to an aggregate amount not to exceed the aggregate principal amount of the unutilized amount of such other Revolving Credit Commitments at such time (it being understood that no partial face amount of any Letter of Credit may be so reallocated) and (ii) to the extent not reallocated pursuant to immediately preceding clause (i), the Borrower shall cash collateralize or backstop any such Letter of Credit on the earlier of (x) the date during such five Business Day period that the Administrative Agent requests such cash collateralization or backstopping and (y) such Termination Date. Except to the extent of reallocations of participations described in this Section 2.3(b) the occurrence of a Termination Date with respect to a given Revolving Credit Commitment shall have no effect upon (and shall not diminish) the percentage participations of the Lenders in any Letter of Credit issued before such Termination Date.
(c) Drawing and Reimbursement. The payment by an Issuing Bank of a draft drawn under any Letter of Credit which is not reimbursed by the Borrower on the date made shall constitute for all purposes of this Agreement the making by any such Issuing Bank of an Advance, which, in the case of a Letter of Credit denominated in Dollars, shall be a ABR Advance in the amount of such draft, and, in the case of a Letter of Credit denominated in a Committed Currency, shall be a ABR Advance in an amount equal to the Dollar Equivalent of such Committed Currency determined on the date of such drawing, without regard to whether the making of such an Advance would exceed such Issuing Bank’s Unused Commitment. Each Issuing Bank shall give prompt notice of each drawing under any Letter of Credit issued by it to the Borrower and the Administrative Agent. Upon written demand by such Issuing Bank, with a copy of such demand to the Administrative Agent and the Borrower, each Lender shall pay to the Administrative Agent such Lender’s Ratable Share (after giving effect to the reallocation provisions of Section 2.3(b)) of such outstanding Advance pursuant to Section 2.3(b). Each Lender acknowledges and agrees that its obligation to make Advances pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Credit Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Promptly after receipt thereof, the Administrative Agent shall transfer such funds to such Issuing Bank. Each Lender agrees to fund its Ratable Share (after giving effect to the reallocation provisions of Section 2.3(b)) of an outstanding Advance on (i) the Business Day on which demand therefor is made by such Issuing Bank, provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day, or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. If and to the extent that any Lender shall not have so made the amount of such Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by any such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of any such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute an Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Advance made by such Issuing Bank shall be reduced by such amount on such Business Day.
(d) Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Administrative Agent and the Borrower on the fifth Business Day of each month a written report summarizing Issuance and expiration dates of Letters of Credit issued by
such Issuing Bank during the preceding month and drawings during such month under all Letters of Credit and (B) to the Administrative Agent and the Borrower on the fifth Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank. The Administrative Agent shall furnish copies of such reports to the Lenders reasonably promptly after receipt thereof.
(e) Failure to Make Advances. The failure of any Lender to make the Advance to be made by it on the date specified in Section 2.3(c) shall not relieve any other Lender of its obligation hereunder to make its Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on such date.
(f) No Obligation. An Issuing Bank shall not be under any obligation to issue any Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any law applicable to such Issuing Bank shall prohibit, or require that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Second Extension Amendment Effective Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense that was not applicable on the Second Extension Amendment Effective Date and that such Issuing Bank in good faith deems material to it; or
(ii) the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank applicable to letters of credit generally.
(g) Letters of Credit Issued for Account of Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder supports any obligations of, or is for the account of, a Subsidiary, or states that a Subsidiary is the “account party,” “applicant,” “customer,” “instructing party,” or the like of or for such Letter of Credit, and without derogating from any rights of the applicable Issuing Bank (whether arising by contract, at law, in equity or otherwise) against such Subsidiary in respect of such Letter of Credit, the Borrower (i) shall reimburse, indemnify and compensate the applicable Issuing Bank hereunder for such Letter of Credit (including to reimburse any and all drawings thereunder) as if such Letter of Credit had been issued solely for the account of the Borrower and (ii) irrevocably waives any and all defenses that might otherwise be available to it as a guarantor or surety of any or all of the obligations of such Subsidiary in respect of such Letter of Credit. The Borrower hereby acknowledges that the issuance of such Letters of Credit for its Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.
Section 2.4 Fees. (a) Facility Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee on the aggregate amount of such Lender’s Revolving Credit Commitment from the Effective Date in the case of each Lender party hereto
on the Effective Date and from the effective date specified in the Added Lender Agreement or in the Lender Assignment Agreement pursuant to which it became a Lender in the case of each other Lender until the Termination Date applicable to such Lender at a rate per annum equal to the relevant Applicable Percentage in effect from time to time, which shall accrue quarterly through the last day of each March, June, September and December, commencing December 31, 2017, and on the Termination Date applicable to such Lender, and which shall be payable in arrears within fifteen (15) days of the end of such quarter; provided that no Defaulting Lender shall be entitled to receive any facility fee in respect of its Revolving Credit Commitment for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay such fee that otherwise would have been required to have been paid to that Defaulting Lender), other than a facility fee, as described above, on the aggregate principal amount of Advances funded by such Defaulting Lender outstanding from time to time.
(b) Letter of Credit Fees. (i) The Borrower shall pay to the Administrative Agent for the account of each Lender a commission on such Lender’s Ratable Share (after giving effect to the reallocation provisions of Section 2.3(b)) of the average daily aggregate Available Amount of all Letters of Credit issued for the account of the Borrower or any of its Subsidiaries and outstanding from time to time at a rate per annum equal to the Applicable Margin for SOFR Advances made by such Lender in effect from time to time during such calendar quarter, payable in arrears quarterly on the last day of each March, June, September and December, commencing with the quarter ended December 31, 2017, and on the Termination Date applicable to such Lender; provided that no Defaulting Lender shall be entitled to receive any commission in respect of Letters of Credit for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay such commission to that Defaulting Lender but shall pay such commission as set forth in Section 2.15);
(ii) The Borrower shall pay to each Issuing Bank, for its own account, a fronting fee in an amount agreed between the Borrower and such Issuing Bank and such other issuance fees, transfer fees and other fees and charges in connection with the Issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree.
Section 2.5 Termination or Reduction of the Commitments.
(a) Ratable Termination or Reduction. The Borrower shall have the right, upon at least three Business Days’ notice to the Administrative Agent, to terminate in whole or permanently reduce ratably (except with respect to a Permitted Early Refinancing, the reduction of Revolving Credit Commitments contemplated by the 2021 Extension Amendment and with respect to any other reduction or termination of Extended Commitments) in part the Unused Commitments or the Unissued Letter of Credit Commitments of the Lenders; provided that (except with respect to a Permitted Early Refinancing) no termination or reduction of Non-Extended Commitments shall be made pursuant to this Section 2.5 unless the Extended Commitments have been (or are concurrently being) terminated in full; provided, further, that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b) Termination of Defaulting Lender. The Borrower shall be entitled at any time to (i) terminate the Unused Commitment of any Lender that is a Defaulting Lender (determined after giving effect to any reallocation of such Defaulting Lender’s L/C Exposure and Swing Line Exposure, as provided in Section 2.15) (the “Defaulted Commitments”) upon prior notice of not less than one Business Day to the Administrative Agent (which shall promptly notify the Lenders thereof), and/or
(ii) replace all of the Commitments or the Defaulted Commitments of any Lender that is a Defaulting Lender with Commitments of another financial institution reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank, provided that (x) each such assignment shall be either an assignment of all of the rights and obligations of the Defaulting Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the Defaulting Lender under this Agreement with respect to all of the Commitments or the Defaulted Commitments, as the case may be, and (y) concurrently with such assignment, either the Borrower or one or more assignees shall pay for the account of such Defaulting Lender an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Defaulting Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Defaulting Lender under this Agreement. In either such event, the provisions of Section 2.15(e) shall apply to all amounts thereafter paid by the Borrower or such assignees for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, facility fees, Letter of Credit commissions or other amounts), provided that (i) no Default and no Prepayment Event shall have occurred and be continuing and (ii) such termination or assignment shall not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, each Issuing Bank, the Swing Line Bank or any Lender may have against such Defaulting Lender.
Section 2.6 Repayment of Advances and Letter of Credit Drawings. (a) Revolving Credit Advances. The Borrower shall repay to the Administrative Agent for the account of each Lender on the relevant Termination Date applicable to such Lender the aggregate principal amount of the Non-Extended Advances and Extended Revolving Credit Advances, as applicable, made by such Lender and then outstanding.
(b) Letter of Credit Drawings. The obligations of the Borrower to reimburse amounts drawn under any Letter of Credit issued for the account of the Borrower or any of its Subsidiaries as provided in Section 2.3(c) shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, any Letter of Credit Agreement and any other agreement or instrument under all circumstances, including, without limitation, the following circumstances (it being understood that any such payment by the Borrower is without prejudice to, and does not constitute a waiver of, any rights the Borrower might have or might acquire as a result of the payment by any Issuing Bank of any draft or the reimbursement by the Borrower thereof):
(i) any lack of validity or enforceability of this Agreement, any Note, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “L/C Related Documents”);
(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank, the Administrative Agent, any Lender or any other
Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction;
(iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not comply with the terms of such Letter of Credit;
(vi) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the obligations of the Borrower in respect of the L/C Related Documents; or
(vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor.
(c) Swing Line Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Swing Line Bank and each other Lender which has made a Swing Line Advance the outstanding principal amount of each Swing Line Advance made to it by each of them on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than ten days after the requested date of such Borrowing) and the Termination Date applicable to the Swing Line Bank.
Section 2.7 Interest on Advances. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance made to it and owing to each Lender or the Swing Line Bank, as the case may be, from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(i) ABR Advances. During such periods as such Advance is a ABR Advance, a rate per annum equal at all times to the result of (x) the ABR in effect from time to time plus (y) the Applicable Margin for the applicable ABR Advances in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such ABR Advance shall be Converted or paid in full.
(ii) SOFR Advances. During such periods as such Advance is a SOFR Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the result of (x) the Adjusted Term SOFR for such Interest Period for such SOFR Advance plus (y) the Applicable Margin for the applicable SOFR Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such SOFR Advance shall be Converted or paid in full.
(iii) Swing Line Advances. A rate per annum equal at all times to the result of (x) the Federal Funds Rate in effect from time to time plus (y) the Applicable Margin for Swing Line Advances in effect from time to time, in each case payable in arrears on the date such Swing Line Advance shall be paid in full.
(iv) EURIBOR Advances. During such periods as such Advance is a EURIBOR Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the result of (x) the Adjusted EURIBOR Rate for such Interest Period plus (y) the Applicable Margin for the applicable EURIBOR Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such EURIBOR Advance shall be Converted or paid in full.
(v) RFR Advances. During such periods as such Advance is a RFR Advance a rate per annum equal at all times to the result of (x) the Adjusted Daily Simple RFR plus (y) the Applicable Margin for such RFR Advance in effect from time to time, payable in arrears quarterly on the last day of each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such Advance (or, if there is no such numerically corresponding day in such month, then the last day of such month) and on the date such RFR Advance shall be Converted or paid in full.
(b) Default Interest. After the date any principal amount of any Advance is due and payable (whether on the applicable Termination Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on ABR Advances pursuant to clause (a)(i) above (as certified by the Administrative Agent to the Borrower (which certification shall be conclusive in the absence of manifest error)).
Section 2.8 Interest Rate Determination. (a) If the Borrower shall fail to select the duration of any Interest Period for any SOFR Advances or EURIBOR Advances, as applicable, in accordance with the provisions contained in the definition of “Interest Period” in Section 1.1, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances shall, on such last day, automatically be continued as an Advance with an Interest Period having a duration of one month.
(b) In connection with the use or administration of Term SOFR, the Administrative Agent will have the right, in consultation with the Borrower, to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.
Section 2.9 Optional Conversion of Revolving Credit Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent in substantially the form of Exhibit C not later than 11:00 A.M. (New York City time) on the second Business Day prior to
the date of the proposed Conversion and subject to the provisions of Sections 2.8 and 3.1, Convert all Revolving Credit Advances denominated in Dollars of one Type comprising the same Borrowing into Revolving Credit Advances denominated in Dollars of the other Type; provided, however, that any Conversion of SOFR Advances into ABR Advances shall be made only on the last day of an Interest Period for such SOFR Advances, as applicable, any Conversion of ABR Advances into SOFR Advances shall be in an amount not less than the minimum amount specified in Section 2.2(c) and no Conversion of any Revolving Credit Advances shall result in more separate Revolving Credit Borrowings than permitted under Section 2.2(c). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Dollar denominated Revolving Credit Advances to be Converted, and (iii) if such Conversion is into SOFR Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower.
Section 2.10 Prepayments of Advances. (a) Optional. The Borrower may, upon notice at least three Business Days prior to the date of such prepayment, in the case of EURIBOR Advances, at least two Business Days prior to the date of such prepayment, in the case of SOFR Advances, at least three Business Days prior to the date of such prepayment, in the case of RFR Advances at least five RFR Business Days prior to the date of such prepayment and not later than 11:00 A.M. (New York City time) on the date of such prepayment, in the case of ABR Advances or Swing Line Advances, to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advances comprising part of the same Borrowing in whole or (except with respect to a Permitted Early Refinancing) ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (A) each partial prepayment of SOFR Advances shall be in an aggregate principal amount of not less than the Revolving Credit Borrowing Minimum or a Revolving Credit Borrowing Multiple in excess thereof and in the event of any such prepayment of a SOFR Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 3.4 and (B) each partial prepayment of Swing Line Advances shall be in an aggregate principal amount of not less than $1,000,000. Notwithstanding the foregoing, the Borrower shall not be permitted to prepay Non-Extended Advances pursuant to this Section 2.10 unless the outstanding principal amount of Extended Advances is zero before giving effect to such prepayment (except with respect to a Permitted Early Refinancing).
(b) Mandatory. (i) If, on the last day of any calendar month, the Administrative Agent notifies the Borrower that, on any interest payment date, the sum of (A) the aggregate principal amount of all Extended Advances denominated in Dollars plus the aggregate Available Amount of all Letters of Credit denominated in Dollars then outstanding and attributable to the Extended Revolving Credit Commitments plus (B) the Dollar Equivalent (determined on the third Business Day prior to such interest payment date) of the aggregate principal amount of all Extended Advances denominated in Committed Currencies plus the Available Amount of all Letters of Credit denominated in Committed Currencies then outstanding and attributable to the Extended Revolving Credit Commitments exceeds 105% of the aggregate Extended Revolving Credit Commitments of the Lenders on such date, the Borrower shall, as soon as practicable and in any event within five Business Days after receipt of such notice, prepay the outstanding principal amount of any Extended Advances owing by the Borrower in an aggregate amount sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Extended Revolving Credit Commitments of the Lenders on such date. Each prepayment made pursuant to this Section 2.10(b)(i) shall be made together with any interest accrued to the date of such prepayment on the principal amounts prepaid and, in the case of any prepayment of a SOFR Advance on a date other than the last day of an Interest Period or at its maturity, any additional amounts which the Borrower shall be
obligated to reimburse to the Lenders in respect thereof pursuant to Section 3.4. The Administrative Agent shall give prompt notice of any prepayment required under this Section 2.10(b)(i) to the Borrower and the Lenders with Extended Revolving Credit Commitments.
(ii) If, on the last day of any calendar month, the Administrative Agent notifies the Borrower that, on any interest payment date, the sum of (A) the aggregate principal amount of all Non-Extended Advances denominated in Dollars plus the aggregate Available Amount of all Letters of Credit denominated in Dollars then outstanding and attributable to the Non-Extended Commitments plus (B) the Dollar Equivalent (determined on the third Business Day prior to such interest payment date) of the aggregate principal amount of all Non-Extended Advances denominated in Committed Currencies plus the Available Amount of all Letters of Credit denominated in Committed Currencies then outstanding and attributable to the Non-Extended Commitments exceeds 105% of the aggregate Non-Extended Commitments of the Lenders on such date, the Borrower shall, as soon as practicable and in any event within five Business Days after receipt of such notice, prepay the outstanding principal amount of any Non-Extended Advances owing by the Borrower in an aggregate amount sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Non-Extended Commitments of the Lenders on such date. Each prepayment made pursuant to this Section 2.10(b)(ii) shall be made together with any interest accrued to the date of such prepayment on the principal amounts prepaid and, in the case of any prepayment of a SOFR Advance on a date other than the last day of an Interest Period or at its maturity, any additional amounts which the Borrower shall be obligated to reimburse to the Lenders in respect thereof pursuant to Section 3.4. The Administrative Agent shall give prompt notice of any prepayment required under this Section 2.10(b)(ii) to the Borrower and the Lenders with Non-Extended Commitments.
Section 2.11 Payments and Computations. (a) The Borrower shall make each payment hereunder (except with respect to principal of, interest on, and other amounts relating to, Advances denominated in a Committed Currency), irrespective of any right of counterclaim or set-off, not later than 11:00 A.M. (New York City time) on the day when due in Dollars to the Administrative Agent at the applicable Administrative Agent’s Account in same day funds. The Borrower shall make each payment hereunder with respect to principal of, interest on, and other amounts relating to, Advances denominated in a Committed Currency, irrespective of any right of counterclaim or set-off, not later than 11:00 A.M. (at the Payment Office for such Committed Currency) on the day when due in such Committed Currency to the Administrative Agent, by deposit of such funds to the applicable Administrative Agent’s Account in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest, fees or commissions ratably (other than amounts payable pursuant to Section 2.4(b)(ii), 3.3, 3.4, 3.5, 3.6 or 3.7) to the applicable Lenders for the account of their respective lending offices, and like funds relating to the payment of any other amount payable to any Lender Party to such Lender Party for the account of its lending office, in each case to be applied in accordance with the terms of this Agreement. Upon any Added Lender becoming a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.14, and upon the Administrative Agent’s receipt of such Lender’s Added Lender Agreement and recording of the information contained therein in the Register, from and after the applicable Increased Commitment Date, the Administrative Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assumed thereby to the Added Lender. Upon its acceptance of a Lender Assignment Agreement and recording of the information contained therein in the Register pursuant to Section 11.11.3, from and after the effective date specified in such Lender Assignment Agreement, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Lender Assignment Agreement shall
make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b) All interest, fees and Letter of Credit commissions hereunder shall be computed on the basis of a year of 360 days (or in the case of interest computed by reference to the ABR at times when the ABR is based on the Prime Rate, such interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year)), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on any Advance shall be computed on a daily basis based upon the outstanding principal amount of such Advance as of the applicable date of determination. The applicable ABR, Adjusted Term SOFR or the Adjusted EURIBOR Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day; provided, however, that, if such extension would cause payment of interest on or principal of SOFR Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day and provided, further, that any such adjustment to the payment date shall in each case be made in the computation of payment of interest, fee or commission, as the case may be.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders and/or Issuing Banks hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders and/or Issuing Banks, as the case may be, the amount due.
(e) To the extent that the Administrative Agent receives funds for application to the amounts owing by the Borrower under or in respect of this Agreement or any Note in currencies other than the currency or currencies required to enable the Administrative Agent to distribute funds to the Lender Parties in accordance with the terms of this Section 2.11, the Administrative Agent, to the extent permitted by applicable law, shall be entitled to convert or exchange such funds into Dollars or into a Committed Currency or from Dollars to a Committed Currency or from a Committed Currency to Dollars, as the case may be, to the extent necessary to enable the Administrative Agent to distribute such funds in accordance with the terms of this Section 2.11; provided that the Borrower and each of the Lender Parties hereby agree that the Administrative Agent shall not be liable or responsible for any loss, cost or expense suffered by the Borrower or such Lender Party as a result of any conversion or exchange of currencies affected pursuant to this Section 2.11(e) or as a result of the failure of the Administrative Agent to effect any such conversion or exchange; and provided further that the Borrower agrees, to the extent permitted by applicable law, to indemnify the Administrative Agent and each Lender Party, and hold the Administrative Agent and each Lender Party harmless, for any and all losses, costs and expenses incurred by the Administrative Agent or any Lender Party for any conversion or exchange of currencies (or the failure to convert or exchange any currencies) in accordance with this Section 2.11(e).
Section 2.12 Sharing of Payments, Etc If any Lender Party shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than (v) as payment of an Advance made by an
Issuing Bank pursuant to the first sentence of Section 2.3(c), (w) as a payment of a Swing Line Advance made by the Swing Line Bank that has not been participated to the other Lender Parties pursuant to Section 2.2(b), (x) pursuant to Section 3.3, 3.4, 3.5, 3.6 or 3.7, (y) any payments made in accordance with the express terms of this Agreement at any time that a Defaulting Lender exists or in accordance with Section 2.10 and (z) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Commitments or Advances in accordance with Section 2.15, Section 11.11.1 or Section 11.11.2) in excess of its Ratable Share of payments on account of the relevant Revolving Credit Advances obtained by all the applicable Lender Parties, such Lender Party shall forthwith purchase from the other applicable Lender Parties such participations in the Revolving Credit Advances owing to them as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each Lender Party shall be rescinded and such Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such recovery together with an amount equal to such Lender Party’s ratable share (according to the proportion of (i) the amount of such Lender Party’s required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing a participation from another Lender Party pursuant to this Section 2.12 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such participation.
Section 2.13 Evidence of Debt.
(a) Each Lender Party shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender Party resulting from each Advance owing to such Lender Party from time to time, including the amounts of principal and interest payable and paid to such Lender Party from time to time hereunder in respect of Advances. The Borrower agrees that upon notice by any Lender to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Note payable to such Lender in a principal amount up to the Revolving Credit Commitment of such Lender.
(b) The Register maintained by the Administrative Agent pursuant to Section 11.11.3 shall include a control account, and a subsidiary account for each Lender Party, in which accounts (taken together) shall be recorded (i) the date, currency and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Added Lender Agreement and each Lender Assignment Agreement delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender Party hereunder and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender Party’s share thereof.
(c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender Party in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower
to, in the case of the Register, each Lender Party and, in the case of such account or accounts, such Lender Party, under this Agreement, absent manifest error.
Section 2.14 Increase in Aggregate Commitments. (a) The Borrower shall have the right prior to the latest Termination Date then in effect, by notice to the Administrative Agent, to effectuate from time to time an increase in the aggregate Extended Revolving Credit Commitments under this Agreement with the consent of the Issuing Banks and the Swing Line Bank (such consent not to be unreasonably withheld or delayed) (i) by adding to this Agreement one or more commercial banks or financial institutions reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank (who shall, upon completion of the requirements of this Section 2.14 constitute “Lenders” hereunder) (an “Added Lender”), or (ii) by allowing one or more Lenders in their sole discretion to increase their respective Extended Revolving Credit Commitments hereunder or convert their respective Non-Extended Commitments hereunder into Extended Revolving Credit Commitments (each an “Increasing Lender”), so that such added and increased Extended Revolving Credit Commitments shall equal the increase in the Extended Revolving Credit Commitments effectuated pursuant to this Section 2.14; provided that (i) no added Extended Revolving Credit Commitment shall be less than $10,000,000, (ii) no increase in or added Extended Revolving Credit Commitments pursuant to this Section 2.14 shall result in aggregate Revolving Credit Commitments exceeding $1,650,000,000, and (iii) no Lender’s Revolving Credit Commitment shall be increased or converted under this Section 2.14 without the consent of such Lender. The Borrower shall deliver to the Administrative Agent on or before the effective date of any increase in the Extended Revolving Credit Commitments of each of the following items with respect to each Added Lender and Increasing Lender:
(i) a written notice of the Borrower’s intention to increase the aggregate Extended Revolving Credit Commitments pursuant to this Section 2.14, which shall specify each Added Lender and the amount of such Added Lender’s Extended Revolving Credit Commitment (if any), each Increasing Lender and the amount of the increase in or conversion of such Increasing Lender’s Revolving Credit Commitment (if any), and such other information as is reasonably requested by the Administrative Agent;
(ii) documents in the form of Exhibit E or Exhibit F, as applicable, executed and delivered by each Added Lender and each Increasing Lender, pursuant to which such Lender becomes a party hereto or increases or converts its Revolving Credit Commitment, as the case may be; and
(iii) if requested by the applicable Lender, Notes or replacement Notes, as the case may be, executed and delivered by the Borrower.
(b) Upon receipt of any notice referred to in clause (a)(i) above, the Administrative Agent shall promptly notify each Lender thereof. Upon execution and delivery of such documents (the “Increased Commitment Date”) and satisfaction of the conditions set forth in clause (c) below, such new Lender shall constitute a “Lender” hereunder with an Extended Revolving Credit Commitment as specified therein, or such Increasing Lender’s Extended Revolving Credit Commitment shall increase (or be converted from a Non-Extended Commitment) as specified therein, as the case may be. Immediately upon the effectiveness of the addition of such Added Lender or the increase in (or conversion to) the Extended Revolving Credit Commitment of such Increasing Lender under this Section 2.14, (i) the respective Ratable Shares of the applicable Lenders shall be deemed modified as appropriate to correspond to such changed aggregate Revolving Credit Commitments, and (ii) if there are at such time outstanding any Extended Advances, each Lender whose Ratable Share has been decreased as a result of the increase in the aggregate Extended Revolving Credit Commitments shall be
deemed to have assigned, without recourse, to each Added Lender and Increasing Lender such portion of such Lender’s Extended Advances as shall be necessary to effectuate such adjustment in Ratable Shares. Each Increasing Lender and Added Lender (A) shall be deemed to have assumed such portion of such Extended Advances and (B) shall fund to each other applicable Lender on the Increased Commitment Date the amount of Extended Advances assigned by it to such Lender.
(c) Conditions to Effectiveness of Increases. Notwithstanding the foregoing, the increase of or conversion into Extended Revolving Credit Commitments pursuant to this Section shall not be effective with respect to any Lender unless:
(i) no Default or Prepayment Event or event which with notice or lapse of time or both would become a Prepayment Event shall have occurred and be continuing on the date of such increase and after giving effect thereto; and
(ii) the representations and warranties contained in this Agreement (excluding, however, those contained in the last sentence of Section 5.6) are true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct) on and as of the date of such extension and after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
Section 2.15 Defaulting Lenders. (a) If any L/C Exposure or Swing Line Exposure exists at the time a Lender becomes a Defaulting Lender, and the Commitments have not been terminated in accordance with Section 7.3, then:
(i) so long as no Default and no Prepayment Event shall have occurred and be continuing, all or any part of the L/C Exposure or Swing Line Exposure of such Defaulting Lender shall be reallocated among the Lenders that are not Defaulting Lenders (“Non-Defaulting Lenders”) in accordance with their respective Ratable Shares (disregarding any Defaulting Lender’s Revolving Credit Commitment and after giving effect to the reallocation provisions of Sections 2.2(b) and 2.3(b)) but only to the extent that each Non-Defaulting Lender’s total Revolving Credit Exposure does not exceed the Commitment of such Non-Defaulting Lender as in effect at the time of such reallocation. Subject to Section 11.21, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within three Business Days following notice by any Issuing Bank or the Swing Line Bank, first (x) cover the exposure of the Swing Line Bank to such Defaulting Lender’s Swing Line Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) by prepaying Swing Line Advances in an amount sufficient to permit such reallocation to be effected completely or providing cash collateral or a letter of credit to the Swing Line Bank, and second (y) cover the exposure of such Issuing Bank to such Defaulting Lender’s L/C Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) by prepaying Revolving Credit Advances in an amount sufficient to permit such reallocation to be effected completely or providing cash collateral or a letter of credit to such Issuing Bank; provided that in each case of clauses (x) and (y) above, such cash collateral or letter of credit shall be released promptly upon the earliest of, (A) so long as no Default and no Prepayment Event shall have occurred and be continuing, the reallocation of the
Defaulting Lender’s L/C Exposure and Swing Line Exposure among Non-Defaulting Lenders in accordance with clause (i) above, (B) the termination of the Defaulting Lender status of the applicable Lender or (C) the existence of excess cash collateral or letter of credit coverage (in which case, the amount equal to such excess cash collateral or letter of credit coverage shall be released);
(iii) if the L/C Exposure of any Non-Defaulting Lender is reallocated pursuant to this Section 2.15(a), then the fees payable to such Non-Defaulting Lender pursuant to Section 2.4(b)(i) shall be adjusted in accordance with such Non-Defaulting Lender’s Ratable Share of the total L/C Exposure (after giving effect to the reallocation provisions of Section 2.3(b)); and
(iv) if any Defaulting Lender’s L/C Exposure is neither cash collateralized nor reallocated pursuant to Section 2.15(a), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all letter of credit fees payable under Section 2.4(b)(i) with respect to such Defaulting Lender’s Ratable Share of the total L/C Exposure shall be payable to the Issuing Bank until such Defaulting Lender’s L/C Exposure is cash collateralized, backed by a letter of credit and/or reallocated.
(b) So long as any Lender is a Defaulting Lender, no Issuing Bank shall be required to issue, amend or increase any Letter of Credit, and no Swing Line Bank shall be required to make any Swing Line Advance, unless the Issuing Bank or the Swing Line Bank, as the case may be, is satisfied that the related L/C Exposure or Swing Line Exposure, as the case may be, will be 100% covered by the Revolving Credit Commitments of the Non-Defaulting Lenders, cash collateral or a letter of credit provided by the Borrower, and participating interests in any such newly issued or increased Letter of Credit or Swing Line Advance shall be allocated among Non-Defaulting Lenders in a manner consistent with Section 2.15(a)(i) (and Defaulting Lenders shall not participate therein).
(c) No Revolving Credit Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.15, performance by the Borrower of its obligations shall not be excused or otherwise modified as a result of the operation of this Section 2.15. The rights and remedies against a Defaulting Lender under this Section 2.15 are in addition to any other rights and remedies which the Borrower, the Administrative Agent, each Issuing Bank, the Swing Line Bank or any Lender may have against such Defaulting Lender.
(d) If the Borrower, the Administrative Agent, the Swing Line Bank and each Issuing Bank agree in writing in their reasonable determination that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral or letters of credit), that Lender will, to the extent applicable, purchase at par that portion of outstanding Advances of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Credit Exposure to be held on a pro rata basis by the Lenders in accordance with their Ratable Shares (without giving effect to Section 2.15(a) but after giving effect to the reallocation provisions of Sections 2.2(b) and 2.3(b)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder
from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.
(e) Notwithstanding anything to the contrary contained in this Agreement, any payment of principal, interest, facility fees, Letter of Credit commissions or other amounts received by the Administrative Agent for the account of any Defaulting Lender under this Agreement (whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise) shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to each Issuing Bank or the Swing Line Bank hereunder; third, if so determined by the Administrative Agent or requested by each Issuing Bank, to be held as cash collateral for future funding obligations of such Defaulting Lender in respect of any participation in any Letter of Credit; fourth, as the Borrower may request (so long as no Default and no Prepayment Event shall have occurred and be continuing), to the funding of any Advance in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in the L/C Cash Collateral Account and released in order to satisfy obligations of such Defaulting Lender to fund Advances under this Agreement; sixth, to the payment of any amounts owing to the Lenders, each Issuing Bank or the Swing Line Bank as a result of any judgment of a court of competent jurisdiction obtained by any Lender, Issuing Bank or the Swing Line Bank against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default and no Prepayment Event shall have occurred and be continuing, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Advance in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Advances were made or the related Letters of Credit were issued at a time when the applicable conditions set forth in Article IV were satisfied or waived, such payment shall be applied solely to pay the Advances of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Advances of such Defaulting Lender and provided, further, that any amounts held as cash collateral for funding obligations of a Defaulting Lender shall be returned to such Defaulting Lender upon the termination of this Agreement and the satisfaction of such Defaulting Lender’s obligations hereunder. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section 2.15 shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
Section 2.16 Extension of Termination Date.
(a) Requests for Extension. The Borrower may, by notice to the Administrative Agent (who shall promptly notify the applicable Lenders) not earlier than 60 days and not later than 45 days prior to any anniversary of the Effective Date, request that each Lender with an Extended Revolving Credit Commitment and/or each Lender with a Non-Extended Commitment extend such Lender’s Termination Date for an additional one year from the Termination Date then applicable to such Lender; provided that the Borrower may not extend the Termination Date under this Section 2.16 on more than two occasions.
(b) Lender Elections to Extend. Each Lender that receives a request pursuant to clause (a) above, acting in its sole and individual discretion, shall, by notice to the Administrative Agent given not later than the date (the “Notice Date”) that is 30 days prior to such anniversary, advise the Administrative Agent whether or not such Lender agrees to such extension (and each such Lender that determines not to so extend its Termination Date (a “Declining Lender”) shall notify the Administrative Agent of such fact promptly after such determination (but in any event no later than the Notice Date) and any such Lender that does not so advise the Administrative Agent on or before the Notice Date shall be deemed to be a Declining Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree.
(c) Notification by Administrative Agent. The Administrative Agent shall notify the Borrower of each Lender’s determination under this Section no later than the date 25 days prior to the applicable anniversary of the Effective Date (or, if such date is not a Business Day, on the immediately preceding Business Day).
(d) Additional Commitment Lenders. The Borrower shall have the right on or before the applicable anniversary of the Effective Date to replace each Declining Lender with, and add as “Lenders” under this Agreement in place thereof, one or more commercial banks or financial institutions reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank (each, an “Additional Commitment Lender”) as provided in Section 11.11 each of which Additional Commitment Lenders shall have entered into a Lender Assignment Agreement pursuant to which such Additional Commitment Lender shall, effective as of such anniversary, undertake an Extended Commitment or a Non-Extended Commitment, as applicable (and, if any such Additional Commitment Lender is already a Lender, its applicable Commitment shall be in addition to such Lender’s applicable Commitment(s) hereunder on such date); provided that no Declining Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Declining Lender shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Declining Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Declining Lender under this Agreement.
(e) Minimum Extension Requirement. If (and only if) the total of the Extended Commitments and/or Non-Extended Commitments of the Lenders that have agreed so to extend their Termination Date and the additional applicable Commitments of the Additional Commitment Lenders shall be more than 50% of the aggregate amount of the Extended Commitments and/or Non-Extended Commitments, as the case may be, in effect immediately prior to the applicable anniversary of the Effective Date, then, effective as of such anniversary, the Termination Date with respect to the relevant Commitments and Advances of each consenting Lender and of each Additional Commitment Lender shall be extended to the date falling one year after the latest Termination Date then in effect, as applicable, for Extended Commitments and Extended Advances, on the one hand, or for Non-Extended Commitments and Non-Extended Advances, on the other hand (except that, if such date is not a Business Day, such Termination Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall thereupon become a “Lender” for all purposes of this Agreement.
(f) Conditions to Effectiveness of Extensions. Notwithstanding the foregoing, the extension of the Termination Date pursuant to this Section shall not be effective with respect to any Lender unless:
(i) no Default or Prepayment Event or event which with notice or lapse of time or both would become a Prepayment Event shall have occurred and be continuing on the date of such extension and after giving effect thereto; and
(ii) the representations and warranties contained in this Agreement are true and correct on and as of the date of such extension and after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
Section 2.17 Other Interest Rate Provisions.
Section 2.17.1 Inability to Determine Rates. Subject to Section 2.17.3, if, on or prior to the first day of any Interest Period for any SOFR Advance or EURIBOR Advance, or, with respect to any RFR Advance, at any time:
(a) the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that (i) “Adjusted Term SOFR” or “Adjusted EURIBOR Rate” cannot be determined pursuant to the definition thereof (including because the Relevant Screen Rate is not available or published on a current basis) or (ii) adequate and reasonable means do not exist for ascertaining Adjusted Daily Simple RFR; or
(b) the Administrative Agent is advised by the Required Lenders that (i) in connection with any request for a SOFR Advance or EURIBOR Advance or a conversion thereto or a continuation thereof, that Adjusted Term SOFR or the Adjusted EURIBOR Rate, as applicable, for any requested Interest Period does not adequately and fairly reflect the cost to such Lenders of making and maintaining such Advance or (ii) Adjusted Daily Simple RFR will not adequately and fairly reflect the cost to such Lenders of making and maintaining their RFR Advance, and, in each case, the Required Lenders have provided notice of such determination to the Administrative Agent (provided that if the circumstances giving rise to such notice affect only one Type of Borrowing, then all other Types of Borrowings shall be unaffected by such notice), then the Administrative Agent will promptly so notify the Borrower and each Lender
(c) and, until (x) the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect to the applicable Benchmark and (y) the Borrower delivers a new Interest Period Notice or a new Notice of Revolving Credit Borrowing, as applicable, with respect to such affected Advances, then (A)(1) if the Benchmark identified in such notice is the Adjusted Term SOFR Rate, any Interest Period Notice that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a SOFR Advance and any Notice of Borrowing that requests a SOFR Advance shall instead be deemed to be an Interest Period Notice or a Notice of Revolving Borrowing, as applicable, for an ABR Advance and (2) any SOFR Advance outstanding on the last day of the Interest Period applicable to such SOFR Advance following the Borrower’s receipt of such notice shall be deemed to have been converted to an ABR Advance as of such date and (B)(1) if the Benchmark identified in such notice is the Adjusted EURIBOR Rate or the Adjusted Daily Simple RFR, any Interest Period Notice that requests the conversion to, or continuation of any Borrowing as a EURIBOR Advance or an RFR Advance, as applicable, shall instead be deemed to be an Interest Period Notice or a Notice of Revolving Borrowing, as applicable, for a Central Bank Rate Advance in the applicable Committed Currency and (2) any EURIBOR Advance outstanding on the last day of the Interest Period applicable to such EURIBOR Advance following the Borrower’s receipt of such notice, or any RFR Advance outstanding on the date of the Borrower’s receipt of such notice shall, as of such date, bear interest at the Central Bank Rate for such Committed Currency plus the applicable CBR Spread; provided that, if the Administrative Agent determines (which determination shall be conclusive and binding absent
manifest error) that the Central Bank Rate for the applicable Committed Currency cannot be determined, any outstanding affected Advances denominated in such Committed Currency shall, at the Borrower’s election be prepaid by the Borrower on such date, or, solely for the purpose of calculating the interest rate applicable to such Advance, shall be deemed to be a SOFR Advance denominated in Dollars and shall accrue interest at the same interest rate applicable to SOFR Advances denominated in Dollars at such time.
Section 2.17.2 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Advances whose interest is determined by reference to SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBOR, the Adjusted EURIBOR Rate, or to determine or charge interest based upon SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBOR, or the Adjusted EURIBOR Rate, then, upon notice thereof by such Lender to the Borrower (through the Administrative Agent) (an “Illegality Notice”), (a) any obligation of the Lenders to make SOFR Advances, and any right of the Borrower to continue SOFR Advances or to convert ABR Advances to SOFR Advances, shall be suspended, and (b) the interest rate on which ABR Advances shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to clause (c) of the definition of “ABR”, in each case until each affected Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of an Illegality Notice, the Borrower shall, if necessary to avoid such illegality, upon demand from any Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all SOFR Advances or EURIBOR Advances, as applicable, to ABR Advances (the interest rate on which ABR Advances shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to clause (c) of the definition of “ABR”), on the last day of the Interest Period therefor, if all affected Lenders may lawfully continue to maintain such SOFR Advances to such day, or immediately, if any Lender may not lawfully continue to maintain such SOFR Advances to such day, in each case until the Administrative Agent is advised in writing by each affected Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBOR or the Adjusted EURIBOR Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 3.4.
Section 2.17.3 Benchmark Replacement Setting.
(a) Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, the Administrative Agent and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 P.M. (New York City time) on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all affected Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. No replacement of a Benchmark with a Benchmark Replacement pursuant to this Section 2.17.3(a) will occur prior to the applicable Benchmark Transition Start Date.
(b) In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right, in consultation with the Borrower and the Borrower, to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become
effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(c) The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 2.17.3(d) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.17.3, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.17.3.
(d) Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate or the EURIBOR Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(e) Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, (i) the Borrower may revoke any pending request for a SOFR Advance, EURIBOR Advance or RFR Advance of, conversion to or continuation of SOFR Advances, EURIBOR Advances or RFR Advances, as applicable, to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request with respect to any affected Advance into a request for a Borrowing of or conversion to an ABR Advance and (ii)(1) if such notice is delivered with respect to the Term SOFR Reference Rate, any SOFR Advances outstanding on the last day of the Interest Period applicable to such SOFR Advance following the Borrower’s receipt of such notice shall be deemed to have been converted to an ABR Advance on such date and (2) if such notice is delivered in respect of the Adjusted EURIBOR Rate or the Adjusted Daily Simple RFR, any affected EURIBOR Advances or RFR Advances, as applicable, shall bear interest at the Central Bank Rate for the applicable Committed Currency plus the CBR Spread as of, in the case of a EURIBOR Advance, the last day of the Interest Period applicable to such EURIBOR Advance following the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, and, in the case of an RFR Advance, on the date of the
Borrower’s receipt of such notice; provided that, if the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that the Central Bank Rate for such Committed Currency cannot be determined, any outstanding affected Advances denominated in such Committed Currency shall, at the Borrower’s election, be prepaid by the Borrower on such day or, solely for the purpose of calculating the interest rate applicable to such Advance, be deemed to be a SOFR Advance denominated in Dollars and shall accrue interest at the same interest rate applicable to SOFR Advances denominated in Dollars at such time. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of ABR.
ARTICLE III
CERTAIN OTHER PROVISIONS
Section 3.1 [Intentionally Omitted].
Section 3.2 [Intentionally Omitted].
Section 3.3 Increased Costs, etc. If a change in any applicable treaty, law, regulation or regulatory requirement (including by introduction or adoption of any new treaty, law, regulation or regulatory requirement) or in the interpretation thereof or in its application to the Borrower, or if compliance by any Lender Party with any applicable direction, request, requirement or guideline (whether or not having the force of law, and for the avoidance of doubt, including any changes resulting from (i) requests, rules, guidelines or directives concerning capital adequacy or liquidity issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, and in each case for both clauses (i) and (ii), regardless of the date enacted, adopted or issued) of any governmental or other authority including, without limitation, any agency of the United States or the United Kingdom, the European Union or similar monetary or multinational authority insofar as it may be changed or imposed after the date hereof, shall:
(a) subject any Lender Party to any taxes, levies, duties, charges, fees, deductions or withholdings of any nature with respect to its commitment to lend or to issue or participate in Letters of Credit and other commitments of such type or the issuance or maintenance of participations in Letters of Credit (or similar contingent obligations) or any part thereof imposed, levied, collected, withheld or assessed by any jurisdiction or any political subdivision or taxing authority thereof (other than taxation on overall net income and, to the extent such taxes are described in Section 3.6, withholding taxes); or
(b) change the basis of taxation to any Lender Party (other than a change in taxation on the overall net income of such Lender Party) of payments of principal or interest or any other payment due or to become due pursuant to this Agreement; or
(c) impose, modify or deem applicable any reserve, liquidity or capital adequacy requirements (other than the reserve costs described in Section 3.7) or other banking or monetary controls or requirements which affect the manner in which a Lender Party shall allocate its capital resources to its obligations hereunder or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or
for the account of, or loans by, any Lender Party (provided that such Lender Party shall, unless prohibited by law, allocate its capital resources to its obligations hereunder in a manner which is consistent with its present treatment of the allocation of its capital resources); or
(d) impose on any Lender Party any other condition affecting its commitment to lend or to issue or participate in Letters of Credit hereunder, and the result of any of the foregoing is either (i) to increase the cost to such Lender Party of making Advances or of issuing or participating in Letters of Credit or maintaining its Commitment or any part thereof, (ii) to reduce the amount of any payment received by such Lender Party or its effective return hereunder or on its capital or (iii) to cause such Lender Party to make any payment or to forego any return based on any amount received or receivable by such Lender Party hereunder, then and in any such case if such increase or reduction in the opinion of such Lender Party materially affects the interests of such Lender Party, (A) the Lender Party concerned shall (through the Administrative Agent) notify the Borrower of the occurrence of such event and use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different lending office if the making of such a designation would avoid the effects of such law, regulation or regulatory requirement or any change therein or in the interpretation thereof and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party and (B) the Borrower shall forthwith upon demand pay to the Administrative Agent for the account of such Lender Party such amount as is necessary to compensate such Lender Party for such additional cost or such reduction and ancillary expenses, including taxes, incurred as a result of such adjustment. Such notice shall (i) describe in reasonable detail the event leading to such additional cost, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such additional cost, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is the Lender Party’s standard method of calculating such amount, (v) certify that such request is consistent with its treatment of other borrowers that are subject to similar provisions, and (vi) certify that, to the best of its knowledge, such change in circumstance is of general application to the commercial banking industry in such Lender Party’s jurisdiction of organization or in the relevant jurisdiction in which such Lender Party does business. Failure or delay on the part of any Lender Party to demand compensation pursuant to this Section shall not constitute a waiver of such Lender Party’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender Party pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender Party notifies the Borrower of the circumstance giving rise to such increased costs or reductions and of such Lender Party’s intention to claim compensation therefor; provided further that, if the circumstance giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender Party notifies the Borrower of the circumstance giving rise to such cost or reductions and of such Lender Party’s intention to claim compensation therefor.
Section 3.4 Funding Losses. In the event any Lender shall incur any loss or expense (other than loss of profits, business or anticipated savings) by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Advance as a SOFR Advance as a result of:
(a) any conversion or repayment or prepayment of the principal amount of any SOFR Advances on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; or
(b) any SOFR Advances not being made in accordance with the Notice of Revolving Credit Borrowing therefor due to the fault of the Borrower or as a result of any of the conditions precedent set forth in Article IV not being satisfied, then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five Business Days of its receipt thereof, pay directly to such Lender such amount as will reimburse such Lender for such loss or expense. Such written notice shall include calculations in reasonable detail setting forth the loss or expense to such Lender.
Section 3.5 Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law and for the avoidance of doubt, including any changes resulting from (i) requests, rules, guidelines or directives concerning capital adequacy or liquidity issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, and in each case for both clauses (i) and (ii), regardless of the date enacted, adopted or issued) of any court, central bank, regulator or other governmental authority increases the amount of capital required to be maintained by any Lender Party or any Person controlling such Lender Party, and the rate of return on its or such controlling Person’s capital as a consequence of its Commitments or the Advances made by such Lender Party is reduced to a level below that which such Lender Party or such controlling Person would have achieved but for the occurrence of any such change in circumstance, then, in any such case upon notice from time to time by such Lender Party to the Borrower, the Borrower shall immediately pay directly to such Lender Party additional amounts sufficient to compensate such Lender Party or such controlling Person for such reduction in rate of return. Any such notice shall (i) describe in reasonable detail the capital adequacy or liquidity requirements which have been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such lowered return, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is such Lender Party’s standard method of calculating such amount, (v) certify that such request for such additional amounts is consistent with its treatment of other borrowers that are subject to similar provisions and (vi) certify that, to the best of its knowledge, such change in circumstances is of general application to the commercial banking industry in the jurisdictions in which such Lender Party does business. In determining such amount, such Lender Party may use any method of averaging and attribution that it shall, subject to the foregoing sentence, deem applicable. Each Lender Party agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different lending office if the making of such a designation would avoid such reduction in such rate of return and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. Failure or delay on the part of any Lender Party to demand compensation pursuant to this Section shall not constitute a waiver of such Lender Party’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender Party pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender Party notifies the Borrower of the circumstance giving rise to such reductions and of such Lender Party’s intention to claim compensation therefor; provided, further, that, if the circumstance giving rise to such reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender Party notifies the Borrower of the circumstance giving rise to such reductions and of such Lender Party’s intention to claim compensation therefor.
Section 3.6 Taxes. All payments by the Borrower of principal of, and interest on, the Advances and all other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding, with respect to each Lender Party, taxes imposed on or measured by such Lender Party’s net income or receipts and franchise taxes imposed in lieu of net income taxes or taxes on receipts, by the jurisdiction under the laws of which such Lender Party is organized or any political subdivision thereof or the jurisdiction of such Lender Party’s lending office or any political subdivision thereof or any other jurisdiction unless such net income taxes are imposed solely as a result of the Borrower’s activities in such other jurisdiction, and any taxes imposed under FATCA (such non-excluded items being called “Taxes”). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will:
(a) pay directly to the relevant authority the full amount required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of the Lender Parties such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender Party will equal the full amount such Lender Party would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender Party with respect to any payment received by the Administrative Agent or such Lender Party hereunder, the Administrative Agent or such Lender Party may pay such Taxes and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by such Person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Person would have received had no such Taxes been asserted.
Any Lender Party claiming any additional amounts payable pursuant to this Section agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party.
If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lender Parties, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lender Parties for any incremental withholding Taxes, interest or penalties that may become payable by any Lender Party as a result of any such failure (so long as such amount did not become payable as a result of the failure of such Lender Party to provide timely notice to the Borrower of the assertion of a liability related to the payment of Taxes). For purposes of this Section 3.6, a distribution hereunder by the Administrative Agent or any Lender Party to or for the account of any Lender Party shall be deemed a payment by the Borrower.
If any Lender Party is entitled to any refund, credit, deduction or other reduction in tax by reason of any payment made by the Borrower in respect of any tax under this Section 3.6 or by reason of any payment made by the Borrower pursuant to Section 3.3, such Lender Party shall use reasonable efforts to obtain such refund, credit, deduction or other reduction and, promptly
after receipt thereof, will pay to the Borrower such amount (plus any interest received by such Lender Party in connection with such refund, credit, deduction or reduction) as is equal to the net after-tax value to such Lender Party of such part of such refund, credit, deduction or reduction as such Lender Party reasonably determines is allocable to such tax or such payment (less out-of-pocket expenses incurred by such Lender Party), provided that no Lender Party shall be obligated to disclose to the Borrower any information regarding its tax affairs or tax computations.
Each Lender Party (and each Participant) agrees with the Borrower and the Administrative Agent that it will (i) in the case of a Lender Party or a Participant that is organized under the laws of a jurisdiction other than the United States (a) provide to the Administrative Agent and the Borrower an appropriately executed copy of Internal Revenue Service Form W-8ECI certifying that any payments made to or for the benefit of such Lender Party or such Participant are effectively connected with a trade or business in the United States (or, alternatively, an Internal Revenue Service Form W-8BEN or W-8BEN-E claiming the benefits of a tax treaty, but only if the applicable treaty described in such form provides for a complete exemption from U.S. federal income tax withholding), or any successor form, on or prior to the date hereof (or, in the case of any assignee as provided for in Section 11.11.1 or Participant, on or prior to the date of the relevant assignment or participation) in each case attached to an Internal Revenue Service Form W-8IMY, if appropriate, (b) notify the Administrative Agent and the Borrower if the certifications made on any form provided pursuant to this paragraph are no longer accurate and true in all material respects and (c) provide such other tax forms or other documents as shall be prescribed by applicable law, if any, or as otherwise reasonably requested, to demonstrate, to the extent applicable, that payments to such Lender Party (or Participant) hereunder are exempt from withholding under FATCA, and (ii) in all cases, provide such forms, certificates or other documents or information, as and when reasonably requested by the Borrower, necessary to claim any applicable exemption from, or reduction of, Taxes or any payments made to or for benefit of such Lender Party or such Participant; provided that the Lender Party or Participant is legally able to deliver such forms, certificates or other documents. For any period with respect to which a Lender Party (or Participant) has failed to provide the Borrower with the foregoing forms (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided (which, in the case of an assignee as provided for in Section 11.11.1, would be the date on which the original assignor was required to provide such form) or if such form otherwise is not required hereunder) such Lender Party (or Participant) shall not be entitled to the benefits of this Section 3.6 with respect to Taxes imposed by reason of such failure.
Section 3.7 Reserve Costs. Without in any way limiting the Borrower’s obligations under Section 3.3, the Borrower shall pay to each Lender on the last day of each Interest Period of each SOFR Advance, so long as the relevant lending office of such Lender is required to maintain reserves against “Eurocurrency liabilities” under Regulation D of the F.R.S. Board, upon notice from such Lender, an additional amount equal to the product of the following for each SOFR Advance for each day during such Interest Period:
(i) the principal amount of such SOFR Advance outstanding on such day; and
(ii) the remainder of (x) a fraction the numerator of which is the rate (expressed as a decimal) at which interest accrues on such SOFR Advance for such Interest Period as provided in this Agreement (less the Applicable Margin applicable to the relevant SOFR Advances and the relevant Applicable Percentage) and the denominator of which is one minus any increase after the Effective Date in the effective rate (expressed as a decimal) at which such reserve requirements are imposed on such Lender minus (y) such numerator; and
(iii) 1/360.
Such notice shall (i) describe in reasonable detail the reserve requirement that has been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the applicable reserve percentage, (iii) certify that such request is consistent with such Lender’s treatment of other borrowers that are subject to similar provisions and (iv) certify that, to the best of its knowledge, such requirements are of general application in the commercial banking industry in the United States.
Each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to avoid the requirement of maintaining such reserves (including by designating a different lending office) if such efforts would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
Section 3.8 Replacement Lenders, etc. If the Borrower shall be required to make any payment to any Lender pursuant to Section 3.3, 3.4, 3.5, 3.6 or 3.7, the Borrower shall be entitled at any time (so long as no Default and no Prepayment Event shall have occurred and be continuing) within 180 days after receipt of notice from such Lender Party of such required payment to (a) terminate such Lender Party’s Revolving Credit Commitment (whereupon the Ratable Shares of each other Lender Party shall automatically be adjusted to an amount equal to each such Lender Party’s ratable share of the remaining Revolving Credit Commitments), and such Lender Party’s right to receive any facility fee accruing after such termination, (b) prepay the affected portion of such Lender Party’s Advances in full, together with accrued interest thereon through the date of such prepayment (provided that the Borrower shall not prepay any such Lender Party pursuant to this clause (b) without replacing such Lender Party pursuant to the following clause (c) until a 30-day period shall have elapsed during which the Borrower and the Agents shall have attempted in good faith to replace such Lender Party), and/or (c) replace such Lender Party with another financial institution reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank; provided that (i) each such assignment shall be either an assignment of all of the rights and obligations of the assigning Lender Party under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender Party under this Agreement and (ii) no Lender Party shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Lender Party shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender Party, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender Party under this Agreement. Each Lender Party represents and warrants to the Borrower that, as of the date of this Agreement (or, with respect to any Lender Party not a party hereto on the date hereof, on the date that such Lender Party becomes a party hereto), there is no existing treaty, law, regulation, regulatory requirement, interpretation, directive, guideline, decision or request pursuant to which such Lender Party would be entitled to request any payments under any of Sections 3.3, 3.4, 3.5, 3.6 and 3.7 to or for account of such Lender Party.
Section 3.9 Setoff. Upon the occurrence and during continuance of an Event of Default or Prepayment Event, each Lender Party shall have, to the extent permitted by applicable law, the right to appropriate and apply to the payment of the Obligations then due and owing to it any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender Party; provided that any such appropriation and application shall be subject to the provisions of Section 2.12; provided, further, that in the event that any Defaulting Lender exercises any such right of setoff, (x) all amounts so set off will be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.15(e) and, pending such payment, will be segregated by such Defaulting Lender from
its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Banks, the Swing Line Bank and the Lenders and (y) the Defaulting Lender will provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. Each Lender Party agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender Party; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender Party under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender Party may have.
Section 3.10 Use of Proceeds. The Borrower shall apply the proceeds of each Borrowing in accordance with the third recital; without limiting the foregoing, no proceeds of any Advance will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any “margin stock”, as defined in F.R.S. Board Regulation U.
ARTICLE IV
CONDITIONS TO BORROWING
Section 4.1 Effectiveness. The obligations of the Lender Parties to fund any Borrowing or to issue any Letter of Credit became effective on and as of the first date (the “Closing Date”) on which each of the conditions precedent set forth in this Section 4.1 were satisfied.
(a) Resolutions, etc. The Administrative Agent shall have received from the Borrower:
(i) a certificate, dated the Closing Date, of its Secretary or Assistant Secretary as to the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document and as to the truth and completeness of the attached:
(x) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document, and
(y) Organic Documents of the Borrower, and upon which certificate each Lender Party may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower canceling or amending such prior certificate; and
(ii) Certificate of Good Standing issued by the relevant Liberian authorities in respect of the Borrower.
(b) Delivery of Notes. The Administrative Agent shall have received, for the account of the respective Lenders, the Notes requested by Lenders pursuant to Section 2.13 at least five Business Days prior to the Closing Date, duly executed and delivered by the Borrower.
(c) Opinions of Counsel. The Administrative Agent shall have received opinions, dated the Closing Date and addressed to the Agents and each Lender Party, from:
(i) Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Borrower, as to New York law, in a form reasonably satisfactory to the Administrative Agent; and
(ii) Watson Farley & Williams LLP, counsel to the Borrower, as to Liberian law, in a form reasonably satisfactory to the Administrative Agent.
(d) Closing Fees, Expenses, etc. The Administrative Agent shall have received for its own account, or for the account of each Lender Party, as the case may be, all fees that the Borrower shall have agreed in writing to pay to the Administrative Agent (whether for its own account or for account of any of the Lender Parties) and all invoiced expenses of the Administrative Agent (including the agreed fees and expenses of counsel to the Administrative Agent) on or prior to the Closing Date.
(e) Know your Customer. Each Lender shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the Patriot Act to the extent reasonably requested by such Lender at least five Business Days prior to the Closing Date.
(f) Payment Under the Existing Credit Facility. The Borrower shall, substantially simultaneously with the occurrence of the Closing Date (and in any event no later than the close of business on the Closing Date), pay all of the accrued fees and interest under the Existing Credit Facility, and each of the Lenders that is a party to the Existing Credit Facility hereby waives, upon execution of this Agreement, any notice required by said credit facility relating to such payments thereunder.
Section 4.2 All Borrowings and Issuances. The obligation of each Lender to fund any Advance on the occasion of any Borrowing (including the initial Borrowing) (other than (x) a Swing Line Advance made by a Lender pursuant to Section 2.2(b) or (y) an Advance made by any Issuing Bank or any Lender pursuant to Section 2.3(c)) and the obligation of any Issuing Bank to issue a Letter of Credit shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 4.2.
(a) Compliance with Warranties, No Default, etc. Both before and after giving effect to any Borrowing or Issuance the following statements shall be true and correct:
(i) the representations and warranties set forth in Article V (excluding, however, those contained in the last sentence of Section 5.6 and in Sections 5.8, 5.9(b), 5.10 and 5.12) shall be true and correct in all material respects except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct, with the same effect as if then made; and
(ii) no Default and no Prepayment Event and no event which (with notice or lapse of time or both) would become a Prepayment Event shall have then occurred and be continuing.
(b) Request. The Administrative Agent shall have received a Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing or a Notice of Issuance, as applicable. Each of the delivery of a Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing or a Notice of Issuance, as applicable, and the acceptance by the Borrower of the proceeds of such Borrowing or Issuance shall
constitute a representation and warranty by the Borrower that on the date of such Borrowing or Issuance (both immediately before and after giving effect to such Borrowing or Issuance and the application of the proceeds thereof) the statements made in Section 4.2(a) are true and correct.
Section 4.3 Determinations Under Section 4.1. For purposes of determining compliance with the conditions specified in Section 4.1, each Lender Party was deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties. The Administrative Agent previously notified the Lender Parties of the occurrence of the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lender Parties and the Administrative Agent to enter into this Agreement, to make Advances and to issue Letters of Credit hereunder, the Borrower represented and warranted to the Administrative Agent and each Lender Party as set forth in this Article V as of the Closing Date and, except with respect to the representations and warranties in Sections 5.6 (with respect to the final sentence only), 5.8, 5.9(b), 5.10 and 5.12, the Borrower represents and warrants to the Administrative Agent and each Lender Party as set forth in this Article V as of the date of each Borrowing and Issuance after the Closing Date.
Section 5.1 Organization, etc. The Borrower and each of the Principal Subsidiaries is a corporation validly organized and existing and in good standing under the laws of its jurisdiction of incorporation; the Borrower is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect; and the Borrower has full power and authority, has taken all corporate action and holds all governmental and creditors’ licenses, permits, consents and other approvals necessary to enter into each Loan Document and to perform the Obligations.
Section 5.2 Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower of this Agreement and each other Loan Document, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not:
(a) contravene the Borrower’s Organic Documents;
(b) contravene any law or governmental regulation of any Applicable Jurisdiction except as would not reasonably be expected to result in a Material Adverse Effect;
(c) contravene any court decree or order binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect;
(d) contravene any contractual restriction binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect; or
(e) result in, or require the creation or imposition of, any Lien on any of the Borrower’s properties except as would not reasonably be expected to result in a Material Adverse Effect.
Section 5.3 Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower of this Agreement or any other Loan Document (except for authorizations or approvals not required to be obtained on or prior to the Closing Date that have been obtained or actions not required to be taken on or prior to the Closing Date that have been taken). Each of the Borrower and each Principal Subsidiary holds all governmental licenses, permits and other approvals required to conduct its business as conducted by it on the Closing Date, except to the extent the failure to hold any such licenses, permits or other approvals would not have a Material Adverse Effect.
Section 5.4 Compliance with Environmental Laws. The Borrower and each Principal Subsidiary is in compliance with all applicable Environmental Laws, except to the extent that the failure to so comply would not have a Material Adverse Effect.
Section 5.5 Validity, etc. This Agreement constitutes, and the Notes will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
Section 5.6 Financial Information. The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2021, and the related consolidated statements of operations and cash flows of the Borrower and its Subsidiaries, copies of which have been furnished to the Administrative Agent and each Lender Party, have been prepared in accordance with GAAP, and present fairly in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as at December 31, 2021, and the results of their operations for the Fiscal Year then ended. Since December 31, 2021, there has been no material adverse change in the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole.
Section 5.7 No Default, Event of Default or Prepayment Event. No Default, Event of Default or Prepayment Event has occurred and is continuing.
Section 5.8 Litigation. There is no action, suit, litigation, investigation or proceeding pending or, to the knowledge of the Borrower, threatened against the Borrower or any Principal Subsidiary, that (i) except as set forth in filings made by the Borrower with the Securities and Exchange Commission, in the Borrower’s reasonable opinion might reasonably be expected to materially adversely affect the business, operations or financial condition of the Borrower and its Subsidiaries (taken as a whole) (collectively, “Material Litigation”) or (ii) purports to affect the legality, validity or enforceability of the Loan Documents or the consummation of the transactions contemplated hereby.
Section 5.9 Vessels. Each Vessel is
(a) legally and beneficially owned by the Borrower or a Principal Subsidiary,
(b) registered in the name of the Borrower or such Principal Subsidiary under the flag identified in Item 5.9(b) of the Disclosure Schedule,
(c) free of all recorded Liens, other than Liens permitted by Section 6.2.3, and
(d) insured against loss or damage in compliance with Section 6.1.5.
Section 5.10 Subsidiaries. The Borrower has no Existing Principal Subsidiaries on the Effective Date, except those Existing Principal Subsidiaries which are identified in Item 5.10 of the Disclosure Schedule. All Existing Principal Subsidiaries are direct or indirect wholly-owned Subsidiaries of the Borrower, except to the extent any such Existing Principal Subsidiary or an interest therein has been sold in accordance with clause (b) of Section 6.2.7 or such Existing Principal Subsidiary no longer owns a Vessel.
Section 5.11 Obligations rank pari passu. The Obligations rank at least pari passu in right of payment and in all other respects with all other unsecured unsubordinated Indebtedness of the Borrower other than Indebtedness preferred as a matter of law.
Section 5.12 No Filing, etc. Required. No filing, recording or registration and no payment of any stamp, registration or similar tax is necessary under the laws of any Applicable Jurisdiction to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement or the other Loan Documents (except for filings, recordings, registrations or payments not required to be made on or prior to the Closing Date that have been made).
Section 5.13 No Immunity. The Borrower is subject to civil and commercial law with respect to the Obligations. Neither the Borrower nor any of its properties or revenues is entitled to any right of immunity in any Applicable Jurisdiction from suit, court jurisdiction, judgment, attachment (whether before or after judgment), set-off or execution of a judgment or from any other legal process or remedy relating to the Obligations (to the extent such suit, court jurisdiction, judgment, attachment, set-off, execution, legal process or remedy would otherwise be permitted or exist).
Section 5.14 Pension Plans. To the extent that, at any time after the Effective Date, there are any Pension Plans, no Pension Plan shall have been terminated, and no contribution failure will have occurred with respect to any Pension Plan, in each case which could (a) give rise to a Lien under section 302(f) of ERISA and (b) result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty which, in either case, would have a Material Adverse Effect.
Section 5.15 Investment Company Act. The Borrower is not required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section 5.16 Regulation U. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Advances will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U. Terms for which meanings are provided in F.R.S. Board Regulation U or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.
Section 5.17 Accuracy of Information. The financial and other information (other than financial projections or other forward looking information) furnished to the Administrative Agent and the Lender Parties in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller in connection with the negotiation of this Agreement is, when taken as a whole, to the best knowledge and belief of the Borrower, true and correct and contains no misstatement of a fact of a material nature. All financial projections, if any, that have been furnished to the Administrative Agent and the Lender Parties in writing by or on
behalf of the Borrower by its chief financial officer, treasurer or corporate controller in connection with this Agreement have been or will be prepared in good faith based upon assumptions believed by the Borrower to be reasonable at the time made (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrower’s control, and that no assurance can be given that the projections will be realized). All financial and other information furnished to the Administrative Agent and the Lender Parties in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller after the date of this Agreement shall have been prepared by the Borrower in good faith.
Section 5.18 Compliance with Laws. The Borrower is in compliance with all applicable laws, rules, regulations and orders, except to the extent that the failure to so comply does not and could not reasonably be expected to have a Material Adverse Effect, and the Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions. The Borrower and its Subsidiaries and, to the knowledge of the Borrower, their respective officers, employees, directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions, in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in Borrower being designated as a Sanctioned Person. None of (a) the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary any of their respective directors, officers or employees, or (b) to the knowledge of the Borrower, any agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person.
Section 5.19 ERISA. As of the date hereof, the Borrower is not and will not be (1) an employee benefit plan subject to Title I of ERISA, (2) a plan or account subject to Section 4975 of the Code; (3) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code; or (4) a “governmental plan” within the meaning of ERISA.
Section 5.20 EEA Financial Institution. The Borrower is not an EEA Financial Institution.
ARTICLE VI
COVENANTS
Section 6.1 Affirmative Covenants. The Borrower agrees with the Administrative Agent and each Lender Party that, until all Commitments have terminated and all Obligations (other than the contingent amounts for which no claim or demand has been made) have been paid in full, the Borrower will perform the obligations set forth in this Section 6.1.
Section 6.1.1 Financial Information, Reports, Notices, etc. The Borrower will furnish, or will cause to be furnished, to the Administrative Agent (with sufficient copies for distribution to each Lender Party) the following financial statements, reports, notices and information:
(a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a copy of the Borrower’s report on Form 10-Q (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Quarter, containing unaudited consolidated financial statements of the Borrower for such Fiscal Quarter (including a balance sheet and profit and loss statement) prepared in accordance with GAAP, subject to normal year-end audit adjustments;
(b) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, a copy of the Borrower’s annual report on Form 10-K (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Year, containing audited consolidated financial statements of the Borrower for such Fiscal Year prepared in accordance with GAAP (including a balance sheet and profit and loss statement) and audited by PricewaterhouseCoopers LLP or another firm of independent public accountants of similar standing;
(c) together with each of the statements delivered pursuant to the foregoing clause (a) or (b), a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing, as of the last day of the relevant Fiscal Quarter or Fiscal Year compliance with the covenants set forth in Section 6.2.4 (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Administrative Agent); it being understood and agreed, for the avoidance of doubt, that no such certificate shall be required to be delivered with respect to any Fiscal Quarter or Fiscal Year ending during the Waiver Period;
(d) as soon as possible after the occurrence of a Default or Prepayment Event, a statement of the chief financial officer of the Borrower setting forth details of such Default or Prepayment Event (as the case may be) and the action which the Borrower has taken and proposes to take with respect thereto;
(e) as soon as the Borrower becomes aware thereof, notice of any Material Litigation except to the extent that such Material Litigation is disclosed by the Borrower in filings with the SEC;
(f) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to all holders of each security issued by the Borrower, and all registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange;
(g) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender Party through the Administrative Agent may from time to time reasonably request;
(h) within five Business Days after the end of each month in which the covenant set forth Section 6.2.9 remains in effect, a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing, as of the last day of the immediately preceding month, compliance with such covenant; provided that, if the Borrower is not in compliance with the covenant set forth in Section 6.2.9 as of the last day of such month, the Borrower shall show compliance with such covenant as of the date such certificate is delivered;
(i) within ten Business Days after the end of each month during the period commencing on the Waiver Effective Date and ending with delivery of information for the month ending on September 30, 2023, a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing (x) a breakdown of customer deposits between valid cruises, cancelled cruises and future cruise certificates and (y) a reconciliation of the Borrower’s consolidated customer deposit balance, in substantially the form attached hereto as Exhibit I; and
(j) within fifteen Business Days after the end of each Fiscal Quarter during the period commencing on the Waiver Effective Date and ending with delivery of
information for the Fiscal Quarter ending on September 30, 2023, updated liquidity projections, in substantially the form attached hereto as Exhibit J, covering the next twelve-month period;
provided that information required to be furnished to the Administrative Agent under subsections (a) through (f) of this Section 6.1.1 shall be deemed furnished to the Administrative Agent when available free of charge on the Borrower’s website at http://www.rclinvestor.com or the website of the U.S. Securities and Exchange Commission at http://www.sec.gov; provided, however, that the Borrower shall as soon as reasonably practicable notify the Administrative Agent when such information required to be furnished to the Administrative Agent under subsections (c) and (d) of this Section 6.1.1 is made available free of charge on one of the websites listed in the preceding proviso.
Section 6.1.2 Approvals and Other Consents. The Borrower will obtain (or cause to be obtained) all such governmental licenses, authorizations, consents, permits and approvals as may be required for (a) the Borrower to perform its obligations under this Agreement and the other Loan Documents and (b) except to the extent that failure to obtain (or cause to be obtained) such governmental licenses, authorizations, consents, permits and approvals would not be expected to have a Material Adverse Effect, the operation of each Vessel in compliance with all applicable laws.
Section 6.1.3 Compliance with Laws, etc. The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, except (other than as described in clause (a) below) to the extent that the failure to so comply would not have a Material Adverse Effect, which compliance shall in any case include (but not be limited to):
(a) in the case of each of the Borrower and the Principal Subsidiaries, the maintenance and preservation of its corporate existence (subject to the provisions of Section 6.2.6);
(b) in the case of the Borrower, maintenance of its qualification as a foreign corporation in the State of Florida;
(c) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent being diligently contested in good faith by appropriate proceedings;
(d) compliance with all applicable Environmental Laws;
(e) compliance with all anti-money laundering and anti-corrupt practices laws and regulations applicable to the Borrower, including by not making or causing to be made any offer, gift or payment, consideration or benefit of any kind to anyone, either directly or indirectly, as an inducement or reward for the performance of any of the transactions contemplated by this agreement to the extent the same would be in contravention of such applicable laws; and
(f) The Borrower will maintain in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers and employees with Anti-Corruption Laws and applicable Sanctions.
Section 6.1.4 [Intentionally omitted].
Section 6.1.5 Insurance. The Borrower will, or will cause one or more of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies insurance with respect to all of the material properties and operations of the Borrower and each Principal Subsidiary against such casualties, third-party liabilities and contingencies and in such amounts as is customary for other businesses of similar size in the passenger cruise line industry (provided that in no event will the Borrower or any Subsidiary be required to obtain any business interruption, loss of hire or delay in delivery insurance) and will, upon request of the Administrative Agent, furnish to the Administrative Agent (with sufficient copies for distribution to each Lender Party) at reasonable intervals a certificate of a senior officer of the Borrower setting forth the nature and extent of all insurance maintained by the Borrower and the Subsidiaries and certifying as to compliance with this Section.
Section 6.1.6 Books and Records. The Borrower will, and will cause each of its Principal Subsidiaries to, keep books and records that accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender Party or any of their respective representatives, at reasonable times and intervals and upon reasonable prior notice, to visit each of its offices, to discuss its financial matters with its officers and to examine any of its books or other corporate records.
Section 6.2 Negative Covenants. The Borrower agrees with the Administrative Agent and each Lender Party that, until all Commitments have terminated and all Obligations (other than the contingent amounts for which no claim or demand has been made) have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 6.2.
Section 6.2.1 Business Activities. The Borrower will not, and will not permit any of its Subsidiaries to, engage in any principal business activity other than those engaged in by the Borrower and its Subsidiaries on the date hereof and other business activities reasonably related, ancillary or complimentary thereto or that are reasonable extensions thereof.
Section 6.2.2 Indebtedness. The Borrower will not permit any of the Existing Principal Subsidiaries to create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following:
(a) Indebtedness secured by Liens of the type described in Section 6.2.3;
(b) Indebtedness owing to the Borrower or a direct or indirect Subsidiary of the Borrower;
(c) Indebtedness incurred to finance, refinance or refund the cost (including the cost of construction) of assets acquired after the Effective Date;
(d) Indebtedness in an aggregate principal amount, together with (but without duplication of) Indebtedness permitted to be secured under Section 6.2.3(c), at any one time outstanding not exceeding (determined at the time of creation of such Lien or the incurrence by any Existing Principal Subsidiary of such Indebtedness, as applicable) 10.0% of the total assets of the Borrower and its Subsidiaries taken as a whole as determined in accordance with GAAP as at the last day of the most recent ended Fiscal Quarter; and
(e) Indebtedness of Silversea Cruise Holding Ltd. and its subsidiaries (“Silversea”) outstanding on May 24, 2019 and identified in Item 6.2.2 of the Disclosure Schedule.
Section 6.2.3 Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except:
(a) Intentionally omitted;
(b) Liens on assets (including, without limitation, shares of capital stock of corporations and assets owned by any corporation that becomes a Subsidiary of the Borrower after the Effective Date) acquired after the Effective Date (whether by purchase, construction or otherwise) by the Borrower or any of its Subsidiaries (other than (x) an Existing Principal Subsidiary or (y) any other Principal Subsidiary which, at any time, after three months after the acquisition of a Vessel, owns a Vessel free of any mortgage Lien), which Liens were created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such assets, so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each such Lien is created within three months after the acquisition of the relevant assets;
(c) in addition to other Liens permitted under this Section 6.2.3, Liens securing Indebtedness in an aggregate principal amount, together with (but without duplication of) Indebtedness permitted under Section 6.2.2(d), at any one time outstanding not exceeding (determined at the time of creation of such Lien or the incurrence by any Existing Principal Subsidiary of such indebtedness, as applicable) 10.0% of the total assets of the Borrower and its Subsidiaries taken as a whole as determined in accordance with GAAP as at the last day of the most recent ended Fiscal Quarter; provided that Liens securing any Permitted Secured Facility that are incurred pursuant to this clause (c) shall only extend to Permitted Secured Facility Collateral prior to the occurrence of a Priority Release Event;
(d) Liens on assets acquired after the Effective Date by the Borrower or any of its Subsidiaries (other than by (x) any Subsidiary that is an Existing Principal Subsidiary or (y) any other Principal Subsidiary which, at any time, owns a Vessel free of any mortgage Lien) so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each of such Liens existed on such assets before the time of its acquisition and was not created by the Borrower or any of its Subsidiaries in anticipation thereof;
(e) Liens on any asset of any corporation that becomes a Subsidiary of the Borrower (other than a corporation that also becomes a Subsidiary of an Existing Principal Subsidiary) after the Effective Date so long as (i) the acquisition or creation of such corporation by the Borrower is not otherwise prohibited by the terms of this Agreement and (ii) such Liens are in existence at the time such corporation becomes a Subsidiary of the Borrower and were not created by the Borrower or any of its Subsidiaries in anticipation thereof;
(f) Liens securing Government-related Obligations;
(g) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings;
(h) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue by more than 60 days or being diligently contested in good faith by appropriate proceedings;
(i) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits;
(j) Liens for current crew’s wages and salvage;
(k) Liens arising by operation of law as the result of the furnishing of necessaries for any Vessel so long as the same are discharged in the ordinary course of business or are being diligently contested in good faith by appropriate proceedings;
(l) Liens on Vessels that:
(i) secure obligations covered (or reasonably expected to be covered) by insurance;
(ii) were incurred in the course of or incidental to trading such Vessel in connection with repairs or other work to such Vessel; or
(iii) were incurred in connection with work to such Vessel that is required to be performed pursuant to applicable law, rule, regulation or order;
provided that, in each case described in this clause (l), such Liens are either (x) discharged in the ordinary course of business or (y) being diligently contested in good faith by appropriate proceedings;
(m) normal and customary rights of setoff upon deposits of cash or other Liens originating solely by virtue of any statutory or common law provision relating to bankers’ liens, rights of setoff or similar rights in favor of banks or other depository institutions;
(n) Liens in respect of rights of setoff, recoupment and holdback in favor of credit card processors securing obligations in connection with credit card processing services incurred in the ordinary course of business;
(o) Liens on cash collateral required to be provided by the Borrower pursuant to (a) Section 2.15(a) and (b) the Borrower’s existing credit facilities as in effect on the Second Extension Amendment Effective Date;
(p) Liens on cash, cash equivalents or marketable securities of the Borrower or any Subsidiary securing obligations under Hedging Instruments not incurred for speculative purposes;
(q) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business and deposits securing liabilities to insurance carriers under insurance or self-insurance arrangements;
(r) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary;
(s) licenses, sublicenses, leases, or subleases granted to other Persons not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; and
(t) Liens on any property of Silversea in existence as of May 24, 2019 and identified in Item 6.2.3 of the Disclosure Schedule.
Section 6.2.4 Financial Condition. The Borrower will not permit:
(a) Net Debt to Capitalization Ratio, as at the end of any Fiscal Quarter, to be greater than the applicable level set forth below opposite such Fiscal Quarter under the heading “Net Debt to Capitalization Ratio”:
| Fiscal Quarter Ending | Net Debt to Capitalization Ratio |
|---|---|
| September 30, 2022 | 0.775 to 1 |
| December 31, 2022 | 0.750 to 1 |
| March 31, 2023 | 0.750 to 1 |
| June 30, 2023 | 0.750 to 1 |
| September 30, 2023 | 0.750 to 1 |
| December 31, 2023 | 0.750 to 1 |
| March 31, 2024 | 0.725 to 1 |
| June 30, 2024 | 0.700 to 1 |
| September 30, 2024 | 0.675 to 1 |
| December 31, 2024 | 0.650 to 1 |
| March 31, 2025 and thereafter | 0.625 to 1 |
(b) Fixed Charge Coverage Ratio to be less than 1.25 to 1 as at the last day of any Fiscal Quarter.
Notwithstanding anything to the contrary in this Agreement, the Borrower shall not be required to comply with the requirements of this Section 6.2.4 during the Waiver Period.
Section 6.2.5 [Intentionally omitted].
Section 6.2.6 Consolidation, Merger, etc. The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation except:
(a) any such Subsidiary may (i) liquidate or dissolve voluntarily, and may merge with and into, the Borrower or any other Subsidiary, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary or (ii) merge with and into another Person in connection with a sale or other disposition permitted by Section 6.2.7; and
(b) so long as no Event of Default or Prepayment Event has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may merge into any other Person, or any other Person may merge into the Borrower or any such Subsidiary, or the Borrower or any of its Subsidiaries may
purchase or otherwise acquire all or substantially all of the assets of any Person, in each case so long as:
(i) after giving effect thereto, the Stockholders’ Equity of the Borrower and its Subsidiaries is at least equal to 90% of such Stockholders’ Equity immediately prior thereto; and
(ii) in the case of a merger involving the Borrower where the Borrower is not the surviving corporation:
(A) the surviving corporation shall have assumed in a writing, delivered to the Administrative Agent, all of the Borrower’s obligations hereunder and under the other Loan Documents;
(B) the surviving corporation shall, promptly upon the request of the Administrative Agent or any Lender, supply such documentation and other evidence as is reasonably requested by the Administrative Agent or any Lender in order for the Administrative Agent or such Lender to carry out and be satisfied it has complied with the results of all necessary “know your customer” or other similar checks under all applicable laws and regulations; and
(C) as soon as practicable after receiving notice from the Borrower of such merger, and in any event no later than five Business Days after the delivery of such notice, for a surviving corporation that is organized under the laws of a jurisdiction other than of the United States or a political subdivision thereof or Liberia, any Lender that may not legally lend to, establish credit for the account of and/or do any business whatsoever with such surviving corporation, either directly or through an Affiliate of such Lender (a “Protesting Lender”) shall so notify the Borrower and the Administrative Agent in writing. With respect to each Protesting Lender, the Borrower shall, effective on or before the date that such surviving corporation shall have the right to borrow hereunder, notify the Administrative Agent and such Protesting Lender that the Commitments of such Protesting Lender shall be terminated; provided that such Protesting Lender shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Protesting Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Protesting Lender under this Agreement.
Section 6.2.7 Asset Dispositions, etc. The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or substantially all of the assets of (a) the Borrower or (b) the Subsidiaries of the Borrower, taken as a whole, except for sales of assets between or among the Borrower and Subsidiaries of the Borrower.
Section 6.2.8 Use of Proceeds. The Borrower will not request any Borrowing or Letter of Credit, and the Borrower and its Subsidiaries shall not use the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, or (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, unless permitted under all applicable Sanctions.
Section 6.2.9 Minimum Liquidity(a) . The Borrower will not allow the aggregate amount of unrestricted cash, Cash Equivalents, undrawn Revolving Credit Commitments and undrawn commitments under the Other Revolving Facility or any other credit facility available to the Borrower and/or any of its Subsidiaries the proceeds of which are available for general corporate purposes or which would, once utilized, otherwise increase the liquidity of the Borrower or the relevant Subsidiary, as determined in accordance with GAAP to be less than $350,000,000 as of the last day of any calendar month. Notwithstanding anything set forth herein to the contrary, only the consent of the Required Extended Lenders and the Borrower shall be required to amend, waive or modify this Section 6.2.9 or Section 6.1.1(h) or change the definition of “Required Extended Lenders”, “Extended Lender Event of Default” or “Extended Lender Prepayment Event”.
Section 6.2.10 Additional Undertakings.
(a) [reserved].
(b) The Borrower will not enter into any transaction that would result in the Borrower or any of its Subsidiaries not being able to grant the guarantees required pursuant to Section 6.2.11(b) or 6.2.11(c) hereof.
Section 6.2.11 Designated Indebtedness.
(a) The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Designated Indebtedness in an aggregate principal amount in excess of (x) $1,700,000,000 less (y) the aggregate principal amount of Designated Indebtedness repaid or prepaid in accordance with Section 6.2.11(e)(ii), at any time outstanding; provided that this clause (a) shall no longer apply if a Designated Release Event has occurred.
(b) It is hereby acknowledged that each Priority Holdco Subsidiary as of the Second Extension Amendment Effective Date has delivered to the Administrative Agent a guaranty in favor of the Administrative Agent for the benefit of the Lenders (the “First Priority Guaranty”); it being understood and agreed that the First Priority Guaranty shall automatically terminate upon the occurrence of a Priority Release Event.
(c) It is hereby acknowledged that each Specified Designated Holdco Subsidiary as of the Second Extension Amendment Effective Date has delivered to the Administrative Agent a subordinated guaranty in favor of the Administrative Agent for the benefit of the Lenders (the “Subordinated Guaranty”), and the Administrative Agent contemporaneously entered into a subordination agreement pursuant to which the obligations of the Specified Designated Holdco Subsidiaries under the Subordinated Guaranty were fully subordinated in right of payment to the obligations of the Specified Designated Holdco Subsidiaries under such Designated Indebtedness or any guaranties related thereto (and, for the avoidance of doubt, the Administrative Agent shall promptly enter into substantially similar subordination agreements in respect of any other Designated Indebtedness permitted under this Agreement upon the Borrower’s reasonable request); it being understood and agreed that the Subordinated Guaranty shall automatically terminate upon the occurrence of a Designated Release Event.
(d) Until a Priority Release Event has occurred, the Borrower will not:
(i) permit any Priority Holdco Subsidiary, or any Subsidiary thereof, to incur, grant or suffer to exist any Indebtedness, including any guaranty obligation, other than any guaranty in favor of one or more of the Beneficiary Parties and
the Other Beneficiary Parties in form and substance substantially similar to the First Priority Guaranty; provided that each such Other Beneficiary Party shall have entered into a subordination agreement pursuant to which the obligations of such Priority Holdco Subsidiary under such guaranty will be fully subordinated in right of payment to the obligations of such Priority Holdco Subsidiary under any guaranty given in favor of the Administrative Agent for the benefit of the Lenders pursuant to this Agreement, which subordination agreement will be in form and substance reasonably satisfactory to the Administrative Agent and such Other Beneficiary Party (and, for the avoidance of doubt, the Administrative Agent shall execute such subordination agreements upon the Borrower’s reasonable request);
(ii) permit, or permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien securing Indebtedness on any Priority Assets; or
(iii) permit any Subsidiary to sell, transfer, license, lease, dispose, distribute or otherwise transfer any Priority Assets or any equity interests in a Subsidiary that owns, directly or indirectly, any Priority Assets, other than (a) to any other entity that is (or will become) a Priority Holdco Subsidiary or (b) any Priority Assets or equity interests in a Subsidiary that owns, directly or indirectly, any Priority Assets with a fair market value of less than, in the aggregate, the sum of (x) $250,000,000 plus (y) the fair market value of any asset (other than (1) current assets, intercompany debt or equity instruments and (2) Priority Assets or other assets owned by another Priority Holdco Subsidiary immediately prior to acquisition) acquired by any Priority Holdco Subsidiary after the Waiver Effective Date; provided that, in the case of this clause (b), such Subsidiary shall receive fair market value and at least 75% cash consideration in connection with such sale, transfer, license, lease, disposition, distribution or other transfer.
(e) Until a Designated Release Event has occurred, the Borrower will not:
(i) permit any Designated Holdco Subsidiary, or any Subsidiary thereof, to incur, grant or suffer to exist any Indebtedness, including any guaranty obligation, other than (a) any Designated Indebtedness or (b) any subordinated guaranty in favor of one or more of the Beneficiary Parties and the Other Beneficiary Parties in form and substance substantially similar to the Subordinated Guaranty; provided that each such Other Beneficiary Party shall have entered into a subordination agreement pursuant to which the obligations of such Designated Holdco Subsidiary under such subordinated guaranty will be fully subordinated in right of payment to the obligations of such Designated Holdco Subsidiary under any guaranty given in favor of the Administrative Agent for the benefit of the Lenders pursuant to this Agreement, which subordination agreement will be in form and substance reasonably satisfactory to the Administrative Agent and such Other Beneficiary Party (and, for the avoidance of doubt, the Administrative Agent shall execute such subordination agreements upon the Borrower’s reasonable request); or
(ii) permit any Subsidiary to sell, transfer, license, lease, dispose, distribute or otherwise transfer any Designated Assets or any equity interests in a Subsidiary that owns, directly or indirectly, any Designated Assets, other than (a) to any other entity that is (or will become) a Designated Holdco Subsidiary or (b) any Designated Assets or equity interests in a Subsidiary that owns, directly or indirectly, any Designated Assets (i) the net proceeds of which are applied to repay or redeem any Designated Indebtedness or (ii) with a fair market value of less than, in the aggregate, the sum of (x) $250,000,000 in the aggregate plus (y) the fair market value of any asset
(other than (1) current assets, intercompany debt or equity instruments and (2) Designated Assets or other assets owned by another Designated Holdco Subsidiary immediately prior to acquisition) acquired by any Designated Holdco Subsidiary after the Waiver Effective Date.
(f) Notwithstanding the foregoing, this Section 6.2.11 shall not restrict (i) any Subsidiary of the Borrower with respect to any unsecured issuances of commercial paper incurred in the ordinary course of business of the Borrower and its Subsidiaries or (ii) the ability of the Borrower or any of its Subsidiaries to incur, create, assume or otherwise become liable for any Permitted Secured Facility.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 Listing of Events of Default. Each of the following events or occurrences described in this Section 7.1 shall constitute an “Event of Default.”
Section 7.1.1 Non-Payment of Obligations. The Borrower shall default in the payment when due of any principal of or interest on any Advance, any facility fee, any Letter of Credit commission or the agency fee provided for in Section 10.11 or its obligation to cash collateralize or backstop any Letter of Credit as required by clause (ii) within Section 2.3(b); provided that, in the case of any default in the payment of any interest on any Advance or of any facility fee or commission or failure by the Borrower to cash collateralize or backstop any Letter of Credit as required by clause (ii) within Section 2.3(b), such default shall continue unremedied for a period of at least five Business Days after notice thereof shall have been given to the Borrower by any Lender Party; and provided further that, in the case of any default in the payment of such agency fee, such default shall continue unremedied for a period of at least ten days after notice thereof shall have been given to the Borrower by the Administrative Agent.
Section 7.1.2 Breach of Warranty. Any representation or warranty of the Borrower made or deemed to be made hereunder or under any other Loan Document (including any certificates delivered pursuant to Article IV) is or shall be incorrect in any material respect when made.
Section 7.1.3 Non-Performance of Certain Covenants and Obligations.
(a) The Borrower shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document (other than the covenants set forth in Sections 6.2.4, 6.2.9, 6.2.10 or 6.2.11 and the obligations referred to in Section 7.1.1) and such default shall continue unremedied for a period of five days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender (or, if (i) such default is capable of being remedied within 30 days (commencing on the first day following such five-day period) and (ii) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 35 days after such notice to the Borrower).
(b) The Borrower shall default in the due performance and observance of the covenants set forth in Section 6.2.11 and such default shall continue unremedied for a period of five Business Days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender.
Section 7.1.4 Default on Other Indebtedness. (a) The Borrower or any of its Principal Subsidiaries shall fail to pay any Indebtedness that is outstanding in a principal amount of at least $100,000,000 (or the equivalent in other currencies) in the aggregate (but excluding
Indebtedness hereunder or with respect to the Hedging Instruments) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness, (b) the occurrence under any Hedging Instrument of an Early Termination Date (as defined in such Hedging Instrument) resulting from (A) any event of default under such Hedging Instrument as to which the Borrower is the Defaulting Party (as defined in such Hedging Instrument) or (B) any Termination Event (as so defined) as to which the Borrower is an Affected Party (as so defined) and, in either event, the termination value with respect to any such Hedging Instrument owed by the Borrower as a result thereof is greater than $100,000,000 and the Borrower fails to pay such termination value when due after applicable grace periods, (c) any other event shall occur or condition shall exist under any agreement or instrument evidencing, securing or relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to cause or permit the holder or holders of such Indebtedness to cause such Indebtedness to become due and payable prior to its scheduled maturity (other than as a result of any sale or other disposition of any property or assets under the terms of such Indebtedness), or (d) any such Indebtedness shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption or by voluntary agreement), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness is required to be made, in each case prior to the scheduled maturity thereof (other than as a result of any sale or other disposition of any property or assets under the terms of such Indebtedness); provided that any required prepayment or right to require prepayment triggered by terms that are certified by the Borrower to be unique to, but customary in, ship financings shall not constitute an Event of Default under this Section 7.1.4 so long as any required prepayment is made when due. For purposes of determining Indebtedness for any Hedging Instrument, the principal amount of the obligations under any such instrument at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or any Principal Subsidiary would be required to pay if such instrument were terminated at such time.
Section 7.1.5 Pension Plans. Any of the following events shall occur with respect to any Pension Plan:
(a) Any termination of a Pension Plan by the Borrower, any member of its Controlled Group or any other Person if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $100,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
and, in each case, such event shall continue unremedied for a period of five Business Days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender Party (or, if (a) such default is capable of being remedied within 15 days (commencing on the first day of such five-Business-Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 15 days).
Section 7.1.6 Bankruptcy, Insolvency, etc. The Borrower or any of the Principal Subsidiaries (or any of its other Subsidiaries to the extent that the relevant event described below would have a Material Adverse Effect) shall:
(a) generally fail to pay, or admit in writing its inability to pay, its debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for it or any of its property, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for it or for a substantial part of its property, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days; provided that in the case of such an event in respect of the Borrower, the Borrower hereby expressly authorizes the Administrative Agent and each Lender Party to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their respective rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower or any of such Subsidiaries, and, if any such case or proceeding is not commenced by the Borrower or such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that the Borrower hereby expressly authorizes the Administrative Agent and each Lender Party to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their respective rights under the Loan Documents; or
(e) take any corporate action authorizing, or in furtherance of, any of the foregoing.
Section 7.1.7 Guarantees. Once provided pursuant to Section 6.2.11(b) or 6.2.11(c), any guarantee of a Priority Holdco Subsidiary or a Designated Holdco Subsidiary shall cease to be, or shall be asserted by the Borrower, any Priority Holdco Subsidiary or any Designated Holdco Subsidiary not to be, in full force and effect (other than in accordance with the express terms hereof).
Section 7.2 Action if Bankruptcy. If any Event of Default described in clauses (b) through (d) of Section 7.1.6 shall occur with respect to the Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Advances and all other Obligations shall automatically be and become immediately due and payable, without notice or demand, provided that the foregoing shall not relieve any Lender of its obligation to make Advances pursuant to Section 2.2(b) or Section 2.3(c).
Section 7.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (b) through (d) of Section 7.1.6 with respect to the Borrower) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all of the outstanding principal amount of the Advances and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Advances and other Obligations shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate; provided that the foregoing shall not relieve any Lender of its obligation to make Advances pursuant to Section 2.2(b) or Section 2.3(c); provided, further that with respect to any Event of Default that is an Extended Lender Event of Default, such direction shall be provided only by the Required Extended Lenders.
ARTICLE VIII
PREPAYMENT EVENTS
Section 8.1 Listing of Prepayment Events. Each of the following events or occurrences described in this Section 8.1 shall constitute a “Prepayment Event.”
Section 8.1.1 Change of Control. There occurs any Change of Control.
Section 8.1.2 Unenforceability. Any Loan Document shall cease to be the legally valid, binding and enforceable obligation of the Borrower (in each case, other than with respect to provisions of any Loan Document (i) identified as unenforceable in the opinion of the Borrower’s counsel delivered pursuant to Section 4.1(c)(i) or (ii) that a court of competent jurisdiction has determined are not material) and such event shall continue unremedied for 15 days after notice thereof has been given to the Borrower by any Lender Party.
Section 8.1.3 Approvals. Any material license, consent, authorization, registration or approval at any time necessary to enable the Borrower or any Principal Subsidiary to conduct its business shall be revoked, withdrawn or otherwise cease to be in full force and effect, unless the same would not have a Material Adverse Effect.
Section 8.1.4 Non-Performance of Certain Covenants and Obligations. The Borrower shall default in the due performance and observance of any of the covenants set forth in Section 6.2.4, 6.2.9 or 6.2.10.
Section 8.1.5 Judgments. Any judgment or order for the payment of money in excess of $100,000,000 shall be rendered against the Borrower or any of the Principal Subsidiaries by a court of competent jurisdiction and the Borrower or such Principal Subsidiary shall have failed to satisfy such judgment and either:
(a) enforcement proceedings in respect of any material assets of the Borrower or such Principal Subsidiary shall have been commenced by any creditor upon such judgment or order and shall not have been stayed or enjoined within five Business Days after the commencement of such enforcement proceedings; or
(b) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.
Section 8.2 Mandatory Prepayment. If any Prepayment Event shall occur and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower (a) require the Borrower to prepay in full on the date of such notice all principal of and interest on the Advances and all other Obligations (and, in such event, the Borrower agrees to so pay the full unpaid amount of each Advance and all accrued and unpaid interest thereon and all other Obligations) and (b) terminate the Commitments (if not theretofore terminated); provided that the foregoing shall not relieve any Lender of its obligation to make Advances pursuant to Section 2.2(b) or Section 2.3(c); provided, further, that with respect to any Prepayment Event that is an Extended Lender Prepayment Event, such direction shall be provided only by the Required Extended Lenders.
ARTICLE IX
ACTIONS IN RESPECT OF THE LETTERS OF CREDIT
Section 9.1 Actions in Respect of the Letters of Credit. If any Commitment Termination Event shall have occurred and be continuing, the Administrative Agent may with the consent, or shall at the request, of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 7.3 or 8.2 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, (a) pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent’s office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding or (b) make such other arrangements in respect of the outstanding Letters of Credit as shall be acceptable to the Required Lenders and not more disadvantageous to the Borrower than clause (a); provided, however, that if any Event of Default described in clauses (b) through (d) of Section 7.1.6 shall occur with respect to the Borrower, an amount equal to the aggregate Available Amount of all outstanding Letters of Credit shall be immediately due and payable to the Administrative Agent for the account of the Lender Parties without notice to or demand upon the Borrower, which are expressly waived by the Borrower, to be held in the L/C Cash Collateral Account. If at any time a Commitment Termination Event is continuing the Administrative Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit, to the extent funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the Issuing Banks to the extent permitted by applicable law. After all such Letters of Credit shall have expired or been fully drawn upon and all other obligations of the Borrower hereunder and under the Notes shall have been paid in full, the balance, if any, in such L/C Cash Collateral Account shall be returned to the Borrower.
ARTICLE X
THE AGENTS
Section 10.1 Actions. Each of the Lender Parties hereby irrevocably appoints JPMorgan to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent and the Lender Parties, and the Borrower shall not have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
Section 10.2 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender Party and may exercise the same as though it were not the Administrative Agent, and the term
“Lender Party” or “Lender Parties” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lender Parties.
Section 10.3 Lender Indemnification. (a) Each Lender hereby severally indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative Agent (to the extent not reimbursed by the Borrower) from and against such Lender’s Ratable Share of any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel) that be incurred by or asserted or awarded against, the Administrative Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document or any action taken or omitted by the Administrative Agent under this Agreement, the Notes or any other Loan Document; provided that no Lender shall be liable for the payment of any portion of such claims, damages, losses, liabilities and expenses which have resulted from the Administrative Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket and documented expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any such indemnified costs, this Section applies whether any such investigation, litigation or proceeding is brought by the Administrative Agent, any Lender or a third party.
(b) Each Lender hereby severally indemnifies the Issuing Banks (to the extent not promptly reimbursed by the Borrower) from and against such Lender’s Ratable Share of any and all claims, damages, losses, liabilities and expenses of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any such Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Issuing Bank hereunder or in connection herewith; provided, however, that no Lender (in such capacity) shall be liable for any portion of such claims, damages, losses, liabilities and expenses resulting from such Issuing Bank’s gross negligence or willful misconduct.
(c) The failure of any Lender to reimburse the Administrative Agent or any Issuing Bank promptly upon demand for its Ratable Share of any amount required to be paid by the Lenders to the Administrative Agent as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Administrative Agent or any Issuing Bank for its Ratable Share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Administrative Agent or any Issuing Bank for such other Lender’s Ratable Share of such amount. Without prejudice to the survival of any other agreement of any Lender hereunder, the agreement and obligations of each Lender contained in this Section 10.3 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. Each of the Administrative Agent and each Issuing Bank agrees to promptly return to the Lenders their respective Ratable Shares of any amounts paid under this Section 10.3 that are subsequently reimbursed by the Borrower.
Section 10.4 Exculpation. (a) The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
(i) shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default or Prepayment Event has occurred and is continuing;
(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any debtor relief law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any debtor relief law; and
(iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
(b) The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.1 and 7.3), or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Event of Default or Prepayment Event unless and until notice describing such Event of Default or Prepayment Event is given to the Administrative Agent in writing by the Borrower, a Lender Party or an Issuing Bank.
(c) The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
Section 10.5 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) reasonably believed by it to be
genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and reasonably believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of an Advance, or the Issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to such Lender or Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or Issuing Bank prior to the making of such Advance or the Issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Nothing in this Section 10.5 shall limit the exclusion for gross negligence or willful misconduct referred to in Section 10.3.
Section 10.6 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facility established hereby as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents; provided, however, that the foregoing release of the Administrative Agent shall not apply with respect to negligence or misconduct of any Affiliates, directors, officers or employees of the Administrative Agent.
Section 10.7 Resignation of Administrative Agent. (a) The Administrative Agent may at any time give notice of its resignation to the Lender Parties and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower, to appoint a successor, which shall be a commercial banking institution having a combined capital and surplus of at least $500,000,000 (or the equivalent in other currencies). If no such successor shall have been so appointed by the Required Lenders with the consent of the Borrower and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lender Parties, appoint a successor Administrative Agent meeting the qualifications set forth above, subject to the consent of such proposed successor Administrative Agent to such appointment. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b) Anything herein to the contrary notwithstanding, if at any time the Required Lenders determine that the Person serving as Administrative Agent is (without taking into account any provision in the definition of “Defaulting Lender” requiring notice from the Administrative Agent or any other party) a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders (determined after giving effect to Section 11.1) may by notice to the Borrower and such Person remove such Person as Administrative Agent and, with the consent of the Borrower, appoint a replacement Administrative Agent hereunder. Such removal will, to the fullest extent permitted by applicable law, be effective on the earlier of (i) the date a replacement Administrative
Agent is appointed and (ii) the date 30 days after the giving of such notice by the Required Lenders (regardless of whether a replacement Administrative Agent has been appointed).
(c) With effect from the Resignation Effective Date (1) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender Party directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent, and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Sections 11.3 and 11.4 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.
Section 10.8 Non-Reliance on Administrative Agent and Other Lenders. Each Lender Party acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section 10.9 No Other Duties. Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers or Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender, a Swing Line Bank or an Issuing Bank hereunder.
Section 10.10 Copies, etc. The Administrative Agent shall give prompt notice to each Lender Party of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lender Parties by the Borrower). The Administrative Agent will distribute to each Lender Party each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lender Parties by the Administrative Agent in accordance with the terms of this Agreement.
Section 10.11 Agency Fee. The Borrower agrees to pay to the Administrative Agent for its own account an annual agency fee in an amount, and at such times, heretofore agreed to in writing between the Borrower and the Administrative Agent.
Section 10.12 Lender ERISA Matters. Each Lender represents and warrants as of the date hereof to the Administrative Agent and each Arranger and their respective Affiliates, and not, for the avoidance of doubt, for the benefit of the Borrower, that such Lender is not and will not be (i) an employee benefit plan subject to Title I of ERISA, (ii) a plan or account subject to Section 4975 of the Code; (iii) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code that is using “plan assets” of any such plans or accounts to fund or hold Advances or perform its obligations under this Agreement; or (iv) a “governmental plan” within the meaning of ERISA.
Section 10.13 Certain Erroneous Payments.
(a) Each Lender Party hereby agrees that (x) if the Administrative Agent notifies such Lender Party that the Administrative Agent has determined in its sole discretion that any funds received by such Lender Party from the Administrative Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such Lender Party (whether or not known to such Lender Party), and demands the return of such Payment (or a portion thereof), such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender Party to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender Party shall not assert, and hereby waives, as to the Administrative Agent, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Payments received, including without limitation any defense based on “discharge for value” or any similar doctrine. A notice of the Administrative Agent to any Lender Party under this Section 10.13 shall be conclusive, absent manifest error.
(b) Each Lender Party hereby further agrees that if it receives a Payment from the Administrative Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on notice, in each such case, that an error may have been made with respect to such Payment. Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender Party shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender Party to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(c) The Borrower hereby agrees that (x) in the event an erroneous Payment (or portion thereof) are not recovered from any Lender Party that has received such Payment (or portion thereof) for any reason, the Administrative Agent shall be
subrogated to all the rights of such Lender Party with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower, except, in each case, to the extent the Administrative Agent or any of its Affiliates receives funds from (or at the direction of) the Borrower in respect of any such Payment or such Payment is made with or on account of the proceeds of a payment made by (or at the direction of) the Borrower to the Administrative Agent or any of its affiliates in accordance with the terms of this Agreement.
ARTICLE XI MISCELLANEOUS PROVISIONS
Section 11.1 Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided that no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender;
(b) modify this Section 11.1 or change the definition of “Required Lenders” shall be made without the consent of each Lender;
(c) increase the Commitment(s) of any Lender, reduce any fees described in Section 2.4 payable to any Lender or extend the Termination Date with respect to any Lender shall be made without the consent of such Lender;
(d) extend the due date for, or reduce the amount of, any scheduled repayment or prepayment of principal of or interest on any Advance or fees (or reduce the principal amount of or rate of interest on any Advance) applicable to any Lender shall be made without the consent of such Lender;
(e) extend the termination date of a Letter of Credit beyond the latest Termination Date without the consent of each Lender whose Revolving Credit Commitment expires on such Termination Date;
(f) affect adversely the interests, rights or obligations of the Administrative Agent in its capacity as such shall be made without consent of the Administrative Agent;
(g) affect adversely the interests, rights or obligations of the Swing Line Bank in its capacity as such shall be made without consent of the Swing Line Bank; or
(h) affect adversely the interests, rights or obligations of any Issuing Bank in its capacity as such shall be made without consent of such Issuing Bank;
No failure or delay on the part of the Administrative Agent or any Lender Party in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent or any Lender Party under
this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.
If any Lender Party is a Non-Consenting Lender, the Borrower shall be entitled at any time to replace such Lender Party with another financial institution willing to take such assignment and reasonably acceptable to the Administrative Agent, the Swing Line Bank and each Issuing Bank; provided that (i) each such assignment shall be either an assignment of all of the rights and obligations of the assigning Lender Party under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender Party under this Agreement, (ii) such assignment shall not conflict with applicable law and (iii) no Non-Consenting Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Non-Consenting Lender shall have received one or more payments from either the Borrower or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Non-Consenting Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Non-Consenting Lender under this Agreement.
Section 11.2 Notices. (a) All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile or by electronic mail and addressed, delivered or transmitted to such party at its address, or facsimile number, or e-mail address, as follows:
(i) if to the Borrower or the Administrative Agent, at its address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule III hereto; and
(ii) if to a Lender, to it at its address (or facsimile number or e-mail address), set forth in its Administrative Questionnaire, or at such other address, or facsimile number, or e-mail address as may be designated by such party in a notice to the other parties;
provided that notices, information, documents and other materials that the Borrower is required to deliver hereunder may be delivered to the Administrative Agent and the Lender Parties as specified in Section 11.2(b). Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received.
(b) So long as JPMorgan is the Administrative Agent, the Borrower may provide to the Administrative Agent all information, documents and other materials that it furnishes to the Administrative Agent hereunder or any other Loan Document (and any guaranties, security agreements and other agreements relating thereto), including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing Borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due hereunder or any other Loan Document prior to the scheduled date therefor, (iii) provides notice of any Default, Event of Default or Prepayment Event or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of the Agreement and/or any Borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in
a format acceptable to the Administrative Agent to marsea.medori@chase.com and covenant.compliance@jpmchase.com (or any other address as the Administrative Agent may specify in writing to the Borrower); provided that any Communication requested pursuant to Section 6.1.1(g) shall be in a format acceptable to the Borrower and the Administrative Agent.
(1) The Borrower agrees that the Administrative Agent may make such items included in the Communications as the Borrower may specifically agree available to the Lender Parties by posting such notices, at the option of the Borrower, on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “Platform”). Although the primary web portal is secured with a dual firewall and a User ID/Password Authorization System and the Platform is secured through a single user per deal authorization method whereby each user may access the Platform only on a deal-by-deal basis, the Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform.
(2) The Administrative Agent agrees that the receipt of Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of such Communications to the Administrative Agent for purposes hereunder and any other Loan Document (and any guaranties, security agreements and other agreements relating thereto).
(c) Each Lender Party agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such Communications to such Lender Party for purposes of this Agreement. Each Lender Party agrees (i) to notify the Administrative Agent in writing (including by electronic communication) of such Lender Party’s e-mail address to which a Notice may be sent by electronic transmission on or before the date such Lender Party becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address for such Lender Party) and (ii) that any Notice may be sent to such e-mail address.
(d) Patriot Act. Each Lender Party hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Act”)), that it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender Party to identify the Borrower in accordance with the Act.
Section 11.3 Payment of Costs and Expenses. The Borrower agrees to pay on demand all reasonable and documented out-of-pocket expenses of the Administrative Agent (including the reasonable and documented fees and out-of-pocket expenses of one counsel to the Administrative Agent and the Lender Parties) in connection with the preparation, execution and delivery of, and any amendments, waivers, consents, supplements or other modifications to, this
Agreement or any other Loan Document. The Borrower further agrees to pay, and to save the Administrative Agent and the Lender Parties harmless from all liability for, any stamp, recording, documentary or other similar taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or any other Loan Documents. The Borrower also agrees to reimburse the Administrative Agent and each Lender Party upon demand for all reasonable and documented out-of-pocket expenses (including reasonable and documented attorneys’ fees and legal expenses) incurred by the Administrative Agent or such Lender Party in connection with (x) the negotiation of any restructuring or “work-out”, whether or not consummated, of any Obligations and (y) the enforcement of any Obligations.
Section 11.4 Indemnification. In consideration of the execution and delivery of this Agreement by each Lender Party and the extension of the Commitments, the Borrower hereby indemnifies and holds harmless the Administrative Agent, each Lender Party and each of their respective Affiliates and their respective officers, advisors, directors, employees, partners and controlling persons (collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable and documented fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), in each case arising out of or in connection with or by reason of this Agreement, the Notes or the other Loan Documents or the transactions contemplated hereby or thereby or any actual or proposed use of the proceeds of the Advances, including but not limited to the proceeds of any Letters of Credit (collectively, the “Indemnified Liabilities”), except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct or the material breach by such Indemnified Party of its obligations under this Agreement or any other Loan Document. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, any of its directors, security holders or creditors, an Indemnified Party or any other person or an Indemnified Party is otherwise a party thereto. Each Indemnified Party shall (a) furnish the Borrower with prompt notice of any action, suit or other claim covered by this Section 11.4, (b) not agree to any settlement or compromise of any such action, suit or claim without the Borrower’s prior consent, (c) shall cooperate fully in the Borrower’s defense of any such action, suit or other claim (provided that the Borrower shall reimburse such Indemnified Party for its reasonable and documented out-of-pocket expenses incurred pursuant hereto) and (d) at the Borrower’s request, permit the Borrower to assume control of the defense of any such claim, other than regulatory, supervisory or similar investigations, provided that (i) the Borrower acknowledges in writing its obligations to indemnify the Indemnified Party in accordance with the terms herein in connection with such claims, (ii) the Borrower shall keep the Indemnified Party fully informed with respect to the conduct of the defense of such claim, (iii) the Borrower shall consult in good faith with the Indemnified Party (from time to time and before taking any material decision) about the conduct of the defense of such claim, (iv) the Borrower shall conduct the defense of such claim properly and diligently taking into account its own interests and those of the Indemnified Party, (v) the Borrower shall employ counsel reasonably acceptable to the Indemnified Party and at the Borrower’s expense, and (vi) the Borrower shall not enter into a settlement with respect to such claim unless either (A) such settlement involves only the payment of a monetary sum, does not include any performance by or an admission of liability or responsibility on the part of the Indemnified Party, and contains a provision unconditionally releasing the Indemnified Party and each other indemnified party from, and holding all such Persons harmless, against, all liability in respect of claims by any releasing party or (B) the Indemnified Party provides written consent to such settlement (such consent not to be unreasonably withheld or delayed). Notwithstanding the Borrower’s election to assume the
defense of such action, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such action and the Borrower shall bear the fees, costs and expenses of such separate counsel if (1) the use of counsel chosen by the Borrower to represent the Indemnified Party would present such counsel with an actual or potential conflict of interest, (2) the actual or potential defendants in, or targets of, any such action include both the Borrower and the Indemnified Party, and the Indemnified Party shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Borrower and determined that it is necessary to employ separate counsel in order to pursue such defenses (in which case the Borrower shall not have the right to assume the defense of such action on the Indemnified Party’s behalf), (3) the Borrower shall not have employed counsel reasonably acceptable to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of the institution of such action, or (4) the Borrower authorizes the Indemnified Party to employ separate counsel at the Borrower’s expense. The Borrower acknowledges that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Borrower or any of its security holders or creditors for or in connection with the transactions contemplated hereby, except to the extent such liability is determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct or the material breach by such Indemnified Party of its obligations under this Agreement or any other Loan Document. In no event, however, shall any Indemnified Party be liable on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings). If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
Section 11.5 Survival. The obligations of the Borrower under Sections 3.3, 3.4, 3.5, 3.6, 3.7, 11.3 and 11.4, and the obligations of the Lender Parties under Section 10.3, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrower in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document.
Section 11.6 Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 11.7 Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof.
Section 11.8 Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and each Lender Party (or notice thereof satisfactory to the Administrative Agent and the Borrower) shall have been received by the Administrative Agent and the Borrower (or, in the case of any Lender Party, receipt of signature pages transmitted by facsimile) and notice thereof shall have been given by the Administrative Agent to the Borrower and each Lender Party.
Section 11.9 Governing Law; Entire Agreement. THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF LAWS OF ANOTHER JURISDICTION. This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.
Section 11.10 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided that:
(a) except to the extent permitted under Section 6.2.6, the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lender Parties are subject to Section 11.11.
Section 11.11 Sale and Transfer of Advances and Note; Participations in Advances. Each Lender Party may assign, or sell participations in, its Advances and Commitment(s) to one or more other Persons in accordance with this Section 11.11.
Section 11.11.1 Assignments. Any Lender Party may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Advances at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(a) Minimum Amounts.
(i) in the case of an assignment of the entire remaining amount of the assigning Lender Party’s Commitments and/or the Advances at the time owing to it or in the case of an assignment to a Lender Party or an Affiliate of a Lender Party, no minimum amount need be assigned; and
(ii) in any case not described in paragraph (a)(i) of this Section, the aggregate amount of the Commitment (which for this purpose includes Advances outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Advances of the assigning Lender Party subject to each such assignment (determined as of the date the Lender Assignment Agreement with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Lender Assignment Agreement, as of the Trade Date) shall not be less than $25,000,000, unless each of the Administrative Agent and, so long as no Event of Default under Sections 7.1.1, 7.1.4(a) or 7.1.6 has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
(b) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender Party’s rights and obligations under this Agreement with respect to the Advance or the Commitments assigned.
(c) Required Consents. No consent shall be required for any assignment except to the extent required by paragraph (a)(ii) of this Section and, in addition:
(i) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default under Sections 7.1.1, 7.1.4(a) or 7.1.6 has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender Party, an Affiliate of a Lender Party or to any Federal Reserve Bank as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 10 Business Days after having received notice thereof; provided further, that in the case of an assignment to a Lender Party or an Affiliate of a Lender Party, so long as no Event of Default or a Prepayment Event has occurred and is continuing at the time of such assignment, such assignment shall be made in consultation with the Borrower;
(ii) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of the Commitments if such assignment is to a Person that is not (i) a Lender Party with, prior to the effectiveness of the assignment, a Commitment in respect of Revolving Credit Commitments, the Letter of Credit Facility or the Swing Line Facility or (ii) an Affiliate of such Lender Party, unless such assignment is to any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank; and
(iii) the consent of each Issuing Bank and the Swing Line Bank (such consents not to be unreasonably withheld or delayed) shall be required for any assignment in respect of Revolving Credit Commitments unless such assignment is to an Affiliate of a Lender Party or any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank.
(d) Lender Assignment Agreement. The parties to each assignment shall execute and deliver to the Administrative Agent a Lender Assignment Agreement, together with a processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment; provided, further, no processing and recordation fee shall be required upon any assignment to an Affiliate of a Lender Party or any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank. The assignee, if it is not a Lender Party, shall deliver to the Administrative Agent an Administrative Questionnaire.
(e) Acceptable Lender. Except for assignments to any Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank, no assignment shall be made to any Person that is not an Acceptable Lender.
(f) No Assignment to Certain Persons. No such assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of their respective Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (f).
(g) No Assignment to Natural Persons. No such assignment shall be made to a natural Person or any holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person.
(h) Certain Pledges. Notwithstanding anything to the contrary contained herein, any Lender Party may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender Party, including any pledge or assignment to secure obligations to a Federal Reserve Bank or, with the Borrower’s consent (such consent not to be unreasonably withheld or delayed), to any central governmental authority; provided that no such pledge or assignment shall release such Lender Party from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender Party as a party hereto.
(i) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable Ratable Share of Advances previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, each Issuing Bank, the Swing Line Bank and each other Lender Party hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full Ratable Share of all Advances and participations in Letters of Credit and Swing Line Advances in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 11.11.3, from and after the effective date specified in each Lender Assignment Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Lender Assignment Agreement, have the rights and obligations of a Lender Party under this Agreement, and the assigning Lender Party thereunder shall, to the extent of the interest assigned by such Lender Assignment Agreement, be released from its obligations under this Agreement (and, in the case of a Lender Assignment Agreement covering all of the assigning Lender Party’s rights and obligations under this Agreement, such Lender Party shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.3, 3.4, 3.5, 3.7, 3.9, 10.2, 11.3, 11.4 and 11.16 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender Party’s having been a Defaulting Lender. Any assignment or transfer by a Lender Party of rights
or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender Party of a participation in such rights and obligations in accordance with Section 11.11.2. Notwithstanding the foregoing, in no event shall the Borrower be required to pay to any assignee any amount under Sections 3.3, 3.4, 3.5, 3.6 and 3.7 that is greater than the amount which it would have been required to pay at the time of the relevant assignment had no such assignment been made.
Section 11.11.2 Participations. Any Lender Party may at any time sell to one or more commercial banks or other financial institutions (each of such commercial banks and other financial institutions being herein called a “Participant”) participating interests in any of its Advances, its Commitment, or other interests of such Lender Party hereunder without the consent of the Borrower, the Administrative Agent, the Issuing Bank or Swing Line Bank; provided that:
(a) no participation contemplated in this Section 11.11.2 shall relieve such Lender Party from its Commitment(s) or its other obligations hereunder;
(b) such Lender Party shall remain solely responsible for the performance of its Commitment(s) and such other obligations;
(c) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender Party in connection with such Lender Party’s rights and obligations under this Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such Lender Party, shall be entitled to require such Lender Party to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender Party may agree with any Participant that such Lender Party will not, without such Participant’s consent, take any actions of the type described in clause (c) or (d) of Section 11.1;
(e) the Borrower shall not be required to pay any amount under Sections 3.3, 3.4, 3.5, 3.6 and 3.7 that is greater than the amount which it would have been required to pay had no participating interest been sold; and
(f) each Lender Party that sells a participation under this Section 11.11.2 shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest on) each of the Participant’s interest in the Lender Party’s Advances, Commitments or other interests hereunder (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender may treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes hereunder.
The Borrower acknowledges and agrees that each Participant, for purposes of Sections 3.3, 3.4, 3.5, 3.6 and clause (g) of 6.1.1, shall be considered a Lender Party.
Section 11.11.3 Register. The Administrative Agent, acting as agent for the Borrower, shall maintain at its address referred to in Section 11.2 a copy of each Added Lender Agreement and each Lender Assignment Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment(s) of, and principal amount of the Advances owing to, each Lender Party from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party
hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender Party at any reasonable time and from time to time upon reasonable prior notice.
Section 11.12 Other Transactions. Nothing contained herein shall preclude the Administrative Agent or any Lender Party from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person.
Section 11.13 Forum Selection and Consent to Jurisdiction. EACH OF THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST ANY OTHER PARTY IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK SITTING IN NEW YORK COUNTY, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE EXTENT THAT THE BORROWER, THE ADMINISTRATIVE AGENT OR ANY LENDER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER, THE ADMINISTRATIVE AGENT AND SUCH LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(a) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (a) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
Section 11.14 Process Agent. If at any time the Borrower ceases to have a place of business in the United States, the Borrower shall appoint an agent for service of process (reasonably satisfactory to the Administrative Agent) located in New York City and shall furnish to the Administrative Agent evidence that such agent shall have accepted such appointment for a period of time ending no earlier than one year after the latest Termination Date then in effect.
Section 11.15 Judgment. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at JPMorgan’s principal office in New York at 11:00 A.M. (New York time) on the Business Day preceding that on which final judgment is given.
(b) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in a Committed Currency into Dollars, the parties agree to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase such Committed Currency with Dollars at JPMorgan’s principal office in New York at 11:00 A.M. (New York time) on the Business Day preceding that on which final judgment is given.
(c) The obligation of the Borrower in respect of any sum due from it in any currency (the “Primary Currency”) to any Lender Party or the Administrative Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender Party or the Administrative Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender Party or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency; if the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender Party or the Administrative Agent (as the case may be) in the applicable Primary Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender Party or the Administrative Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum due to any Lender Party or the Administrative Agent (as the case may be) in the applicable Primary Currency, such Lender Party or the Administrative Agent (as the case may be) agrees to remit to the Borrower such excess.
Section 11.16 No Liability of the Issuing Banks. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither an Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; (d) any error, omission, interruption, loss or delay in transmission; (e) delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder); (f) any error in interpretation of technical terms; (g) any error in translation or any consequence arising from causes beyond the control of the respective Issuing Bank or (h) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by such Issuing Bank’s willful misconduct or gross negligence (as finally determined by a court of competent jurisdiction). In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; provided that nothing herein shall be deemed to excuse such Issuing Bank if it acts with gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction) in accepting such documents.
Section 11.17 Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE LENDER PARTIES AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OTHER PARTY ENTERING INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT.
Section 11.18 Confidentiality. Each of the Administrative Agent and the Lender Parties agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners); (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or actual or prospective counterparty to any swap or derivative transaction relating to the Borrower; (g) with the consent of the Borrower; (h) to any credit insurance provider that is subject to an agreement containing provisions substantially the same as those of this Section with respect to the Information; (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section, or (y) becomes available to any Lender Party or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower; or (j) to bank market-data collectors and other similar bank trade publications in connection with this Agreement, the other Loan Documents and the Commitments and Advances provided hereunder, Information consisting of deal terms and other Information customarily found in such publications.
For purposes of this Section, “Information” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to any Lender Party on a nonconfidential basis prior to disclosure by the Borrower or any of its Subsidiaries. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Section 11.19 No Fiduciary Relationship. The Borrower acknowledges that the Lender Parties have no fiduciary relationship with, or fiduciary duty to, the Borrower arising out of or in connection with this Agreement or the other Loan Documents, and the relationship between each Lender Party and the Borrower is solely that of creditor and debtor. This Agreement and the other Loan Documents do not create a joint venture among the parties hereto. The Borrower acknowledges that the Arrangers and each Lender Party may have economic interests that conflict with those of the Borrower, its stockholders and/or its Affiliates.
Section 11.20 Electronic Execution of Assignments and Certain Other Documents. The words “execute,” “execution,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including, without limitation, any Lender Assignment Agreement, amendment or other modification, Notice of Revolving Credit Borrowing, Notice of Swing Line Borrowing, waiver and consent) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it.
Section 11.21 Contractual Recognition of Bail-In. Notwithstanding any other term of any Loan Document or any other agreement, arrangement or understanding between the parties to this Agreement, each such party acknowledges and accepts that any liability of any party to this Agreement to any other party to this Agreement under or in connection with the Loan Documents may be subject to Bail-In Action by the relevant Resolution Authority (as defined below) and acknowledges and accepts to be bound by the effect of:
(a) any Bail-In Action in relation to any such liability, including (without limitation):
(i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;
(ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and
(iii) a cancellation of any such liability; and
(b) a variation of any term of any Loan Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
As used herein:
“Article 55 BRRD” means Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms.
“Bail-In Action” means the exercise of any Write-down and Conversion Powers (as defined below).
“Bail-In Legislation” means:
(a) in relation to an EEA Member Country (as defined below) which has implemented, or which at any time implements, Article 55 BRRD, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule (as defined below) from time to time;
(b) in relation to any state other than such an EEA Member Country and the United Kingdom, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation; and
(c) in relation to the United Kingdom, the UK Bail-In Legislation(as defined below).
“EEA Member Country” means any Member State of the European Union, Iceland, Liechtenstein and Norway.
“EU Bail-In Legislation Schedule” means the document described as such and published by the Loan Market Association (or any successor person) from time to time.
“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers.
“UK Bail-In Legislation” means Part I of the United Kingdom Banking Act 2009 and any other law or regulation applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (otherwise than through liquidation, administration or other insolvency proceedings).
“Write-down and Conversion Powers” means:
(a) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule;
(b) in relation to any other applicable Bail-In Legislation other than the UK Bail-In Legislation:
(i) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and
(ii) any similar or analogous powers under that Bail-In Legislation; and
(c) in relation to the UK Bail-In Legislation, any powers under the UK Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under the UK Bail-In Legislation that are related to or ancillary to any of those powers.
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SCHEDULE I
SECOND AMENDMENT EFFECTIVE DATE COMMITMENTS
| Name of Lender | Revolving Credit<br>Commitment (Non-Extended Commitment) | Revolving CreditCommitment (Extended Commitment) | Letter of CreditCommitment | Outstanding ExtendedAdvances |
|---|---|---|---|---|
| JPMorgan Chase Bank, N.A. | - | 116,800,000.00 | 151,929,206.02 | |
| Morgan Stanley Senior Funding Inc. | - | 148,600,000.00 | -- | 116,195,637.52 |
| Citibank, N.A. | - | 136,600,000.00 | -- | 106,812,409.65 |
| Goldman Sachs Bank USA | - | 92,000,000.00 | -- | 71,938,079.75 |
| Bank of America, N.A. | - | 56,600,000.00 | -- | 44,257,557.76 |
| DNB Capital LLC | - | 56,600,000.00 | -- | 44,257,557.76 |
| Fifth Third Bank, National Association | - | 56,600,000.00 | -- | 44,257,557.76 |
| Mizuho Bank, Ltd. | - | 56,600,000.00 | -- | 44,257,557.76 |
| Nordea Bank Abp, filial i Norge | - | 56,600,000.00 | 23,070,793.98 | 44,257,557.76 |
| The Bank of Nova Scotia | - | 56,600,000.00 | -- | 44,257,557.76 |
| Truist Bank | - | 56,600,000.00 | -- | 44,257,557.76 |
| BNP Paribas | - | 36,800,000.00 | -- | 28,775,231.89 |
| Skandinaviska Enskilda Banken AB (publ) | - | 36,800,000.00 | -- | 28,775,231.89 |
| Sumitomo Mitsui Banking Corporation | - | 36,800,000.00 | -- | 28,775,231.89 |
| Banco Santander, S.A. | - | 24,400,000.00 | -- | 19,079,229.85 |
| Société Générale | - | 24,400,000.00 | -- | 19,079,229.85 |
| Landesbank Hessen-Thüringen Girozentrale, New York Branch | - | 12,000,000.00 | -- | 9,383,227.80 |
| PNC Bank, National Association | - | 12,000,000.00 | -- | 9,383,227.80 |
| Citigroup Financial Products, Inc. | $36,800,000.00 | - | -- | - |
| Total: | $36,800,000.00 | 1,073,400,000.00 | 175,000,000.00 | 839,329,726.06 |
All values are in US Dollars.
Schedule I-1
SCHEDULE II
DISCLOSURE SCHEDULE
Item 5.9(b): Vessels
| Vessel | Owner | Flag |
|---|---|---|
| Grandeur of the Seas | Grandeur of the Seas Inc. | Bahamas |
| Rhapsody of the Seas | Rhapsody of the Seas Inc. | Bahamas |
| Enchantment of the Seas | Enchantment of the Seas Inc. | Bahamas |
| Vision of the Seas | Vision of the Seas Inc. | Bahamas |
| Voyager of the Seas | Voyager of the Seas Inc. | Bahamas |
| Mariner of the Seas | Mariner of the Seas Inc. | Bahamas |
| Celebrity Millennium | Millennium Inc. | Malta |
| Explorer of the Seas | Explorer of the Seas Inc. | Bahamas |
| Celebrity Infinity | Infinity Inc. | Malta |
| Radiance of the Seas | Radiance of the Seas Inc. | Bahamas |
| Celebrity Summit | Summit Inc. | Malta |
| Adventure of the Seas | Adventure of the Seas Inc. | Bahamas |
| Navigator of the Seas | Navigator of the Seas Inc. | Bahamas |
| Celebrity Constellation | Constellation Inc. | Malta |
| Serenade of the Seas | Serenade of the Seas Inc. | Bahamas |
| Jewel of the Seas | Jewel of the Seas Inc. | Bahamas |
| Celebrity Xpedition | Oceanadventures S.A. | Ecuador |
| Freedom of the Seas | Freedom of the Seas Inc. | Bahamas |
| Azamara Journey | Azamara Journey Inc. | Malta |
| Azamara Quest | Azamara Quest Inc. | Malta |
| Liberty of the Seas | Liberty of the Seas Inc. | Bahamas |
| Independence of the Seas | Independence of the Seas Inc. | Bahamas |
| Celebrity Solstice | Celebrity Solstice Inc. | Malta |
| Celebrity Equinox | Celebrity Equinox Inc. | Malta |
| Oasis of the Seas | Oasis of the Seas Inc. | Bahamas |
| Celebrity Eclipse | Celebrity Eclipse Inc. | Malta |
Schedule II-1
| Allure of the Seas | Allure of the Seas Inc. | Bahamas |
|---|---|---|
| Celebrity Silhouette | Celebrity Silhouette Inc. | Malta |
| Celebrity Reflection | Celebrity Reflection Inc. | Malta |
| Quantum of the Seas | Quantum of the Seas Inc. | Bahamas |
| Brilliance of the Seas | Brilliance of the Seas Shipping Inc. | Bahamas |
| Anthem of the Seas | Anthem of the Seas Inc. | Bahamas |
| Celebrity Xploration | Oceanadventures S.A. | Ecuador |
| Ovation of the Seas | Ovation of the Seas Inc. | Bahamas |
| Harmony of the Seas | Harmony of the Seas Inc. | Bahamas |
| Symphony of the Seas | Symphony of the Seas Inc. | Bahamas |
| Celebrity Edge | Celebrity Edge Inc. | Malta |
| Silver Cloud | Silver Cloud Shipping Co. Ltd. | Bahamas |
| Silver Wind | Silver Wind Shipping Ltd. | Bahamas |
| Silver Shadow | Silver Shadow Shipping Co. Ltd. | Bahamas |
| Silver Spirit | Silver Spirit Shipping Co. Ltd. | Bahamas |
| Silver Muse | Silver Muse Shipping Co. Ltd. | Bahamas |
| Spectrum of the Seas | Spectrum of the Seas Inc. | Bahamas |
| Celebrity Flora | Islas Galápagos Turismo y Vapores C.A. | Ecuador |
| Celebrity Apex | Celebrity Apex Inc. | Malta |
| Silver Origin | Canodros CL | Ecuador |
| Wonder of the Seas | Wonder of the Seas LLC | Bahamas |
| Celebrity Beyond | Celebrity Beyond LLC | Malta |
| Odyssey of the Seas | Odyssey of the Seas Inc. | Bahamas |
| Silver Moon | Silversea New Build Seven Ltd. | Bahamas |
| Silver Endeavour | Silver Endeavor Shipping Co. Ltd. | Bahamas |
Schedule II-2
Item 5.10: Existing Principal Subsidiaries
| Name of the Subsidiary | Jurisdiction of Organization |
|---|---|
| Jewel of the Seas Inc. | Liberia |
| Majesty of the Seas Inc. | Liberia |
| Grandeur of the Seas Inc. | Liberia |
| Enchantment of the Seas Inc. | Liberia |
| Rhapsody of the Seas Inc. | Liberia |
| Vision of the Seas Inc. | Liberia |
| Voyager of the Seas Inc. | Liberia |
| Explorer of the Seas Inc. | Liberia |
| Radiance of the Seas Inc. | Liberia |
| Adventure of the Seas Inc. | Liberia |
| Navigator of the Seas Inc. | Liberia |
| Serenade of the Seas Inc. | Liberia |
| Mariner of the Seas Inc. | Liberia |
| Millennium Inc. | Liberia |
| Infinity Inc. | Liberia |
| Summit Inc. | Liberia |
| Constellation Inc. | Liberia |
| Islas Galápagos Turismo y Vapores C.A. | Ecuador |
| Freedom of the Seas Inc. | Liberia |
| Azamara Journey Inc. | Liberia |
| Azamara Quest Inc. | Liberia |
| RCL Zenith LLC | Liberia |
| Nordic Empress Shipping Inc. | Liberia |
| Liberty of the Seas Inc. | Liberia |
| Independence of the Seas Inc. | Liberia |
| Celebrity Solstice Inc. | Liberia |
| Oasis of the Seas Inc. | Liberia |
| Celebrity Eclipse Inc. | Liberia |
| Celebrity Equinox Inc. | Liberia |
| RCL Horizon LLC | Liberia |
| RCL Sovereign LLC | Liberia |
| Allure of the Seas Inc. | Liberia |
Schedule II-3
| Celebrity Silhouette Inc. | Liberia |
|---|---|
| Celebrity Reflection Inc. | Liberia |
| RCL Monarch LLC | Liberia |
| Quantum of the Seas Inc. | Liberia |
| Brilliance of the Seas Shipping Inc. | Liberia |
| Anthem of the Seas Inc. | Liberia |
| Oceanadventures S.A. | Ecuador |
| Ovation of the Seas Inc. | Liberia |
| Harmony of the Seas Inc. | Liberia |
| Symphony of the Seas Inc. | Liberia |
| Celebrity Edge Inc. | Liberia |
| Azamara Pursuit Inc. | Liberia |
| Silver Cloud Shipping Co. Ltd. | Bahamas |
| Silver Wind Shipping Ltd. | Bahamas |
| Silver Shadow Shipping Co. Ltd. | Bahamas |
| Silver Spirit Shipping Co. Ltd. | Bahamas |
| Silver Muse Shipping Co. Ltd. | Bahamas |
| Canodros CL | Ecuador |
Item 6.2.2: Existing Indebtedness of Silversea
(a) The obligations of the Borrower or its Subsidiaries in connection with those certain Bareboat Charterparties with respect to (i) the vessel SILVER EXPLORER dated July 22, 2011 between Silversea Cruises Ltd. and Hammonia Adventure and Cruise Shipping Company Ltd. and (ii) the vessel SILVER WHISPER dated March 15, 2012 between Whisper S.p.A. and various lessors, and the replacement, extension, renewal or amendment of each of the foregoing without increase in the amount or change in any direct or contingent obligor of such obligations, (the “Existing Silversea Leases”);
(b) Indebtedness arising pursuant to that certain Bareboat Charterparty dated May 17, 2018 by and between Hai Xing 1702 Limited and Silversea New Build Eight Ltd., as such agreement may be amended from time to time; and
(c) Indebtedness secured by Liens of the type described in Item 6.2.3 of the Disclosure Schedule.
Item 6.2.3: Existing Liens of Silversea
(a) Liens securing the $620 million in principal amount of 7.25% senior secured notes due 2025 issued by Silversea Cruise Finance Ltd. pursuant that that Indenture dated as of January 30, 2017;
Schedule II-4
(b) Liens on the vessels SILVER WHISPER and SILVER EXPLORER existing as of the Effective Date and securing the Existing Silversea Leases (and any Lien on such vessels securing any refinancing of the Existing Silversea Leases, so long as such Vessel was subject to a Lien securing the Indebtedness being refinanced immediately prior to such refinancing);
(c) Liens on the Vessel with Hull 6280 currently being built at Fincantieri S.p.A. and arising pursuant to that certain Bareboat Charterparty dated May 17, 2018 by and between Hai Xing 1702 Limited and Silversea New Build Eight Ltd., as such agreement may be amended from time to time (and any Lien on such vessel securing any refinancing of such bareboat charterparty); and
(d) Liens securing Indebtedness of the type described in Item 6.2.2 of the Disclosure Schedule.
Schedule II-5
SCHEDULE III
NOTICES
If to the Borrower:
Royal Caribbean Cruises Ltd. Attention: Antje Gibson, Vice President and Treasurer 1050 Caribbean Way Miami, FL 33132-2096 Phone: (305) 539-6440 Facsimile: (305) 539-0562 Email: agibson@rccl.com
If to the Administrative Agent:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Phone No: +1-302-634-1928
Fax No: 12012443629@tls.ldsprod.com
Email: marsea.medori@chase.com
Agency Withholding Tax Inquiries:
Email: agency.tax.reporting@jpmorgan.com
Agency Compliance/Financials/Intralinks:
Email: covenant.compliance@jpmchase.com
If to the Swingline Lenders:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Phone No: +1-302-634-1928
Fax No: 12012443629@tls.ldsprod.com
Email: marsea.medori@chase.com
Nordea Bank ABP, New York Branch
1211 Avenue of the Americas New York, New York 10036 Facsimile No.: (212) 750-9188 E-mail: DLNY-NY-CADLOAN@nordea.com Attention: Credit Administration Department
If to the Issuing Banks:
JPMorgan Chase Bank, N.A.
Schedule III-1
10420 Highland Manor Dr. 4th Floor
Tampa, FL 33610
Attention: Standby LC Unit
Tel: 800-364-1969
Fax: 856-294-5267
Email: GTS.Client.Services@jpmchase.com
With a copy to:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Phone No: +1-302-634-1928
Fax No: 12012443629@tls.ldsprod.com
Email: marsea.medori@chase.com
Nordea Bank ABP, New York Branch
1211 Avenue of the Americas New York, New York 10036 Facsimile No.: (212) 750-9188 E-mail: DLNY-NY-CADLOAN@nordea.com Attention: Credit Administration Department
If to the Collateral Agent:
JPMorgan Chase & Co.
CIB DMO WLO
Mail code NY1-C413
4 CMC, Brooklyn, NY, 11245-0001
United States
Email: ib.collateral.services@jpmchase.com
Schedule III-2
SCHEDULE IV
BENEFICIARY PARTIES
| Other Facility Obligation | Beneficiary Party | |
|---|---|---|
| 1. | Term Loan Agreement, dated as of April 5, 2019, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and BANK OF AMERICA, N.A., as administrative agent | BANK OF AMERICA, N.A., as administrative agent |
| 2. | Amended and Restated Credit Agreement, dated as of April 5, 2019, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and JPMORGAN CHASE BANK, N.A., as administrative agent (as successor to THE BANK OF NOVA SCOTIA, as administrative agent) | JPMORGAN CHASE BANK, N.A., as administrative agent (as successor to THE BANK OF NOVA SCOTIA, as administrative agent) |
| 3. | Credit Agreement, dated as of May 11, 2010, among FALMOUTH JAMAICA LAND COMPANY LIMITED, a Jamaican corporation, ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, and THE BANK OF NOVA SCOTIA, as lender | THE BANK OF NOVA SCOTIA |
| 4. | Credit Agreement, dated as of February 2, 2018, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, NEW YORK BRANCH, as administrative agent | INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, NEW YORK BRANCH, as administrative agent |
Schedule IV-1
| 5. | Credit Agreement, dated as of November 16, 2017, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), as administrative agent | SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), as administrative agent |
|---|---|---|
| 6. | Term Loan Agreement, as amended and restated on December 3, 2019, among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and SUMITOMO MITSUI BANKING CORPORATION, as administrative agent | SUMITOMO MITSUI BANKING CORPORATION, as administrative agent |
| 7. | Credit Agreement, dated as of June 7, 2019, among SILVERSEA CRUISE HOLDING LTD., a private limited liability company incorporated under the laws of the Commonwealth of the Bahamas, ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, the various financial institutions party thereto, as lenders, and NORDEA BANK ABP, NEW YORK BRANCH, as administrative agent | NORDEA BANK ABP, NEW YORK BRANCH, as administrative agent |
Schedule IV-2
| 8. | Guarantee, dated as of July 18, 2016, by ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation, in favor of the Beneficiaries (as defined therein) | MIAMI-DADE COUNTY, as Ground Lessor<br><br>SMBC LEASING AND FINANCE, INC., as Lessor, Administrative Agent, Lead Arranger and Bookrunner and Borrower<br><br>MIAMI CRUISE TERMINAL A LLC, as Lessee and Construction Agent<br><br>SUMITOMO MITSUI BANKING CORPORATION, as Collateral Agent and Lender<br><br>BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Lender<br><br>NORDDEUTSCHE LANDESBANK GIROZENNTRALE, as Lender<br><br>FIFTH THIRD BANK, as Lender<br><br>SOCIETE GENERALE, as Lender<br><br>STONEGATE BANK, as Lender<br><br>CAPITAL BANK CORPORATION, as Lender<br><br>Each of the foregoing’s successors and permitted assigns. |
|---|---|---|
| 9. | Any card acceptance agreement, merchant services bank card agreement, global merchant agreement, merchant services agreement, or other similar agreement in connection with card-related services that exists as of the Waiver Effective Date. | Any counterparty to such agreement. |
Schedule IV-3
Document
Exhibit 21.1
LIST OF SUBSIDIARIES
The following is a list of all our subsidiaries, their jurisdiction of incorporation and the names under which they do business. This list does not include those subsidiaries that, in the aggregate, would not have been a “significant subsidiary” as of December 31, 2022.
| NAME | INCORPORATION |
|---|---|
| Admiral Management Inc. | Liberia |
| Adventure of the Seas Inc. | Liberia |
| Allure of the Seas Inc. | Liberia |
| Anthem of the Seas Inc. | Liberia |
| Brilliance of the Seas Shipping Inc. | Liberia |
| Canodros CL | Ecuador |
| Celebrity Apex Inc. | Liberia |
| Celebrity Beyond LLC | Liberia |
| Celebrity Cruise Lines Inc. | Cayman Islands |
| Celebrity Cruises Holdings Inc. | Liberia |
| Celebrity Cruises Inc., doing business as Celebrity Cruises | Liberia |
| Celebrity Eclipse Inc. | Liberia |
| Celebrity Edge Inc. | Liberia |
| Celebrity Equinox Inc. | Liberia |
| Celebrity Reflection Inc. | Liberia |
| Celebrity Silhouette Inc. | Liberia |
| Celebrity Solstice Inc. | Liberia |
| Constellation Inc. | Liberia |
| Enchantment of the Seas Inc. | Liberia |
| Explorer of the Seas Inc. | Liberia |
| Freedom of the Seas Inc. | Liberia |
| GG Operations Inc. | Delaware |
| Global Fleet Management LLC | Liberia |
| Global Fleet Management Two LLC | Liberia |
| Grandeur of the Seas Inc. | Liberia |
| Harmony of the Seas Inc. | Liberia |
| Independence of the Seas Inc. | Liberia |
| Infinity Inc. | Liberia |
| Island for Science, Inc. | Indiana |
| Islas Galapagos Turismo y Vapores CA | Ecuador |
| Jewel of the Seas Inc. | Liberia |
| Labadee Investments Ltd. | Cayman Islands |
| Liberty of the Seas Inc. | Liberia |
| Mariner of the Seas Inc. | Liberia |
| Millennium Inc. | Liberia |
| Navigator of the Seas Inc. | Liberia |
| Oasis of the Seas Inc. | Liberia |
| Oceanadventures S.A. | Ecuador |
| Odyssey of the Seas Inc. | Liberia |
| Ovation of the Seas Inc. | Liberia |
| Quantum of the Seas Inc. | Liberia |
| Radiance of the Seas Inc. | Liberia |
| RCI Holdings LLC | Liberia |
| RCL Cruise Holdings LLC | Liberia |
| --- | --- |
| RCL Cruises (Cyprus) Limited | Cyprus |
| RCL Cruises Ltd. | England and Wales |
| RCL GEO LLC | Florida |
| RCL Holdings Cooperatief U.A. | Netherlands |
| RCL Investments Ltd. | England and Wales |
| RCL New Vessel Holding Company LLC | Liberia |
| RCL TUI Cruises German Holding GmbH & Co. KG | Germany |
| RCL (UK) Ltd. | England and Wales |
| RCL Worldwide (Hong Kong) Limited | Hong Kong |
| RCL Worldwide Ltd. | Liberia |
| Rhapsody of the Seas Inc. | Liberia |
| Royal Caribbean Cruise Lines AS | Norway |
| Royal Caribbean Cruises (Asia) Pte. Ltd. | Singapore |
| Royal Caribbean Cruises Services (China) Company Limited | China |
| Serenade of the Seas Inc. | Liberia |
| SG Expeditions Cyprus Limited | Cyprus |
| SG Expeditions SAGL | Switzerland |
| Silver Cloud Shipping Co. Ltd. | Bahamas |
| Silver Endeavor Shipping Co. Ltd. | Bahamas |
| Silversea Cruise Finance Ltd. | Bahamas |
| Silversea Cruise Holding Ltd. | Bahamas |
| Silversea Cruises Australia Pty. Ltd. | Australia |
| Silversea Cruises Canada Ltd. | Canada |
| Silversea Cruises (Europe) Ltd. | England and Wales |
| Silversea Cruises Ltd. | Bahamas |
| Silversea Cruises South Africa Pty. Ltd. | South Africa |
| Silversea Cruises (UK) Ltd. | England and Wales |
| Silversea New Build Seven Ltd. | Bahamas |
| Silversea RCL Holdings LLC | Liberia |
| Silversea SAM | Monaco |
| Silver Muse Shipping Co. Ltd. | Bahamas |
| Silver Shadow Shipping Co. Ltd. | Bahamas |
| Silver Spirit Shipping Co. Ltd. | Bahamas |
| Silver Wind Shipping Ltd. | Bahamas |
| Societe Labadee Nord, S.A. | Haiti |
| Spectrum of the Seas Inc. | Liberia |
| Summit Inc. | Liberia |
| Symphony of the Seas Inc. | Liberia |
| Torcatt Enterprises Limitada | Costa Rica |
| Vision of the Seas Inc. | Liberia |
| Voyager of the Seas Inc. | Liberia |
| Whisper SpA | Italy |
| White Sand Inc. | Liberia |
| Wonder of the Seas LLC | Liberia |
| XP Tours S.A. | Ecuador |
Document
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-253674) and Form S-8 (Nos. 333-257442, 333-228427, 333-202263, 333-170170, 333-157097, 333-84982, 333-84980, 333-42070,
333-42072 and 333-266803) of Royal Caribbean Cruises Ltd. of our report dated February 23, 2023 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP Hallandale Beach, Florida February 23, 2023
Document
Exhibit 23.2
Faegre Drinker Biddle & Reath LLP One Logan Square, Suite 2000 Philadelphia, Pennsylvania 19103
+1 215 988 2700 main
+1 215 988 2757 fax
February 9, 2023
Royal Caribbean Cruises Ltd. 1050 Caribbean Way
Miami, FL 33132
Re: Form 10-K for Year Ended December 31, 2022
Dear Sirs and Mesdames:
You have asked for our opinion on certain U.S. Federal tax matters relating to Royal Caribbean Cruises Ltd. (the “Company”) and its direct and indirect subsidiaries. For purposes of rendering our opinion, we have, when relevant facts were not independently established, relied upon information provided by representatives of the Company.
Certain Factual Assumptions
In issuing our opinion, we have relied upon representations and/or publicly available information that:
(1) the Company and its direct and indirect wholly-owned subsidiaries that own, charter or operate a ship or ships consist of:
(a) corporations formed under the laws of Liberia;
(b) a United Kingdom company (the “UK Disregarded Entity”) for which a valid and timely election has been filed with the Internal Revenue Service (the “IRS”) on Form 8832 to be classified as a disregarded entity for U.S. Federal income tax purposes, and the equity interests in which are owned entirely by the Company;
(c) an Ecuadorean corporation (the “Ecuador Subsidiary”) that owns and operates a ship used for Galapagos Islands cruises that are conducted entirely outside the United States; and
(d) Silversea Cruise Holding Ltd., a Bahamian company, and wholly- owned direct and indirect subsidiaries of it (collectively, the “Silversea Entities”), most of which subsidiaries are also Bahamian companies;
(2) valid and timely elections have been filed with the IRS on Forms 8832 to cause each of the Silversea Entities with U.S.-source income to be classified as a disregarded entity for
U.S. Federal income tax purposes;
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(3) the common stock of the Company is the Company’s only outstanding class of stock, and there are currently more than 255 million common shares outstanding;1
(4) all outstanding shares of common stock of the Company are listed for trading on the New York Stock Exchange (the “NYSE”), where those shares are regularly quoted by dealers making a market in the stock (by regularly and actively offering to make, and making, purchases and sales of such shares in the ordinary course of business to and from customers who are not related persons with respect to the dealers), and Company shares are not traded on any non-U.S. securities market;
(5) trades of Company common stock are effected on the NYSE in other than de minimis quantities on at least 60 days during each year, and the aggregate number of such shares traded on the NYSE each year equals or exceeds 10% of the average number of shares of Company common stock outstanding during the year;
(6) the NYSE is a national securities exchange that is registered under section 6 of the Securities Act of 1934;
(7) more than 50% of the outstanding shares of Company common stock are (and will be for at least 183 days during the current year) owned by persons each of whom owns less than 5% of such outstanding shares (treating as one person for this purpose any two or more persons who are related within the meaning of section 267(b) of the Internal Revenue Code of 1986, as amended (the “Code”)), 2 and no such shares (or any shares of a subsidiary of the Company) are in bearer form;
(8) the Company’s certificate of incorporation precludes any person from acquiring more than 4.9% of the outstanding shares of Company’s common stock (treating as one person for this purpose any two or more persons who are related within the meaning of Code section 267(b)), except that this restriction does not apply to existing 5% shareholders of the Company and may not apply, under Liberian law, to shares that were not voted in favor of the adoption of such restriction; and
(9) the Company and each relevant subsidiary will comply with all applicable substantiation and reporting requirements set forth in Treasury Regulation §§1.883-1(c)(3), 1.883- 2(e) and (f), and 1.883-4(d).
Discussion
Under Code section 883, certain foreign corporations are exempt from U.S. Federal income tax and branch profits tax on income derived from or incidental to the international
1 The Company also has outstanding certain convertible senior notes issued in June 2020, October 2020 and August 2022, which are properly treated as debt rather than equity for U.S. Federal income tax purposes.
2 Code §267(b) describes a number of relationships between two or more persons, including members of the same family, a grantor and a fiduciary of a trust, a fiduciary and a beneficiary of a trust, and various other relationships between individuals and entities and between entities. Additional attribution rules applicable under Code §267(b) are set forth in Code §267(c).
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operation of a ship or ships, including income from the leasing of such ships. Thus, Code section 883(a) provides, in relevant part, that such international shipping income “shall not be included in gross income” of such a corporation and “shall be exempt from taxation under this subtitle” – which is the subtitle regarding income taxes.
A foreign corporation will qualify for the benefits of section 883 if, in relevant part,
(1) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the United States, and (2) (a) more than 50% of the value of the corporation’s capital stock is owned, directly or indirectly, by individuals who are residents of a foreign country or countries that grant such an equivalent exemption to corporations organized in the United States or (b) the stock of the corporation is “primarily and regularly traded on an established securities market” in the United States or another qualifying country.3 If the stock of a parent corporation meets the test of clause (2)(b), then any stock of a direct or indirect subsidiary is treated for purposes of clause (2)(a) as if it were owned by individual residents of the country of incorporation of the parent corporation.4
The Company and each direct and indirect wholly-owned subsidiary that owns, charters or operates a ship or ships that generates U.S.-source international shipping income will meet the requirements of clause (1) above because Liberia is a country that grants an equivalent exemption for all relevant categories of international shipping income.5 For this purpose, the Company will be treated as the owner or operator of all ships owned or operated by the UK Disregarded Entity and likewise for all ships owned or operated by the Silversea Entities.6 Lastly, the vessel owned and operated by the Ecuador Subsidiary does not visit U.S. ports, or otherwise operate in U.S. waters, so the Ecuador Subsidiary will have no U.S.-source shipping income.7
With respect to the requirements of clause (2)(b) above, regulations and other guidance under Code section 883 set forth the tests applicable to determine whether a corporation’s shares of stock should be considered “primarily and regularly traded on an established securities market” in the United States or another qualifying country. One or more classes of stock of the corporation that, in the aggregate, represent more than 50% of the vote and value of the stock of
3 Code §§883(a)(1), (c)(1), (c)(3)(A).
4 Code §883(c)(3)(B).
5 Rev. Rul. 2008-17, 2008-1 C.B. 626; see Exchange of Notes Between Liberia Ministry of Foreign Affairs, dated Oct. 7, 1987, and U.S. Embassy, Monrovia, Liberia, dated Oct. 23, 1987, reprinted at 1988-1 C.B. 463; Exchange of Notes Between Liberia Ministry of Foreign Affairs, dated Dec. 9, 2004, and U.S. Embassy, Monrovia, Liberia, dated June 4, 2005.
6 The Silversea Entities that are Bahamian companies would also meet the requirements of clause (1) even if they were corporations for U.S. Federal income tax purposes, because the Bahamas is a country that grants an equivalent exemption for all relevant categories of international shipping income. Rev. Rul. 2008-17, 2008-1 C.B. 626; see Exchange of Notes between Department of State, Washington D.C., dated June 26, 1987, and Embassy of the Commonwealth of the Bahamas, Washington, D.C., dated July 16, 1987, reprinted at 1988-1 C.B. 458.
7 Code §863(c). An Ecuador corporation may also qualify for the equivalent exemption. According to Rev. Rul. 2008-17, the internal tax law of Ecuador provides an equivalent exemption for international shipping income, based on the IRS’s review of Ecuador tax law as of December 1989. Thus, unless that aspect of Ecuador tax law has changed in the interim, the Ecuador Subsidiary would be eligible for the benefits of §883 were it to have any U.S- source international shipping income.
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the corporation must be listed on such a market and must meet the applicable tests for being “primarily and regularly traded” on such market.8
The Company’s common shares are traded on an established securities market in the United States. The NYSE constitutes an established securities market for purposes of section 883 because it is a “national securities exchange that is registered under section 6 of the Securities Act of 1934.”9 The Company’s common stock is its only class of outstanding equity as a legal and Federal tax matter.
The Company’s shares are considered “primarily” traded on an established securities market in the United States, because they are traded on the NYSE and are not traded on any securities market in any other country.10
Stock will generally be considered “regularly traded” on a securities market if trades in more than de minimis quantities occur on the market on at least sixty days of the year, and the annual trading volume on the market equals or exceeds 10% of the outstanding shares.11 The Company’s shares meet this test with respect to the NYSE. The Company’s shares also meet an alternative basis for such a conclusion with respect to the NYSE, inasmuch as the stock is regularly quoted by dealers making a market in the stock.12
If, for at least half the number of days in the year, 50% or more of a corporation’s outstanding shares are owned by 5% or greater shareholders other than registered investment companies (a “closely-held group”), the regulations under Code section 883 provide that the shares generally will fail to be treated as “regularly traded” unless the corporation can identify sufficient qualified direct or indirect shareholders within the closely-held group as to reduce to 50% or less the aggregate shares owned by the closely-held group that are not owned, directly or indirectly, by qualified shareholders.13 Less than 50% of the Company’s outstanding shares are owned by such 5% or greater shareholders, so the Company is not disqualified by reason of the closely-held exception. The restriction in the Company’s certificate of incorporation described in paragraph (8) above is designed to ensure that this will continue to be the case.
So long as the Company meets the requirements of clause (2)(b) above, then each subsidiary in which the Company owns, directly or indirectly, more than 50% of the value of the stock, and that meets the requirements of clause (1) above, will be treated as meeting the requirements of clause (2)(a) above.
As noted above, section 883(a) provides that the international shipping income of a qualified foreign corporation “shall not be included in gross income” and “shall be exempt from taxation under this subtitle.” Section 883 is contained in subtitle A of the Code, which is entitled
8 Treas. Reg. §1.883-2(d)(1)(i).
9 Treas. Reg. §1.883-2(b)(1)(ii).
10 Treas. Reg. §1.883-2(c).
11 Treas. Reg. §1.883-2(d)(1)(ii).
12 Treas. Reg. §1.883-2(d)(2).
13 Treas. Reg. §1.883-2(d)(3).
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“INCOME TAXES” and encompasses Code sections 1 through 1563. Thus, the plain language of section 883 provides that no tax imposed by any of those sections should apply to international shipping income that is covered by section 883.
Conclusion
Based upon, and subject to the factual representations and assumptions described above, and the legal authorities and limitations set forth below, it is our opinion that the income derived from a U.S. trade or business and/or from sources within the United States by the Company, and by its subsidiaries that own or operate a ship or ships, is excluded from gross income and exempt from taxation for U.S. Federal income tax purposes pursuant to Code section 883 to the extent derived from or incidental to the international operation of a ship or ships.
* * * * *
This opinion represents our best legal judgment, but it has no binding effect or official status of any kind, and no assurance can be given that contrary positions may not be taken by the IRS or a court considering the issues. We express no opinion relating to any Federal income tax matter except on the basis of the facts described above, and any changes in such facts could require a reconsideration and modification of our opinion. We also express no opinion regarding tax consequences under foreign, state or local laws. In issuing our opinion, we have relied solely upon existing provisions of the Code, existing and proposed regulations under it, and current administrative positions and other authorities. Those laws, regulations, administrative positions and other authorities are subject to change at any time. Any such changes could affect the validity of the opinion set forth above. Also, future changes in Federal tax laws and the interpretation thereof can have retroactive effect.
Our firm includes lawyers admitted to practice in the Commonwealth of Pennsylvania, the States of California, Colorado, Connecticut, Delaware, Illinois, Indiana, Iowa, Minnesota, New Jersey, New York, Texas, the District of Columbia, the United Kingdom and China. We do not purport to be experts in the laws of any other jurisdiction, aside from U.S. Federal law.
Very truly yours,
FAEGRE DRINKER BIDDLE & REATH LLP
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Document
Exhibit 24.1
POWER OF ATTORNEY
DIRECTORS OF
ROYAL CARIBBEAN CRUISES LTD.
The undersigned directors of Royal Caribbean Cruises Ltd., a Liberian corporation (the “Company”), hereby constitute and appoint Jason T. Liberty and Naftali Holtz and each of them (with full power to each of them to act alone), the true and lawful attorneys-in-fact and agents for the undersigned, and on behalf of the undersigned and in the name, place and stead of the undersigned, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 to be filed by the Company with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, and any and all amendments, applications, or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratify and confirm all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 23rd day of February 2023.
/s/ John F. Brock /s/ Richard D. Fain
John F. Brock – Director Richard D. Fain – Chairman
/s/ Stephen R. Howe Jr. /s/ William L. Kimsey
Stephen R. Howe Jr. – Director William L. Kimsey – Director
/s/ Michael O. Leavitt /s/ Amy C. McPherson
Michael O. Leavitt – Director Amy C. McPherson – Director
/s/ Maritza G. Montiel /s/ Ann S. Moore
Maritza G. Montiel – Director Ann S. Moore – Director
/s/ Eyal M. Ofer /s/ Vagn O. Sørensen
Eyal M. Ofer – Director Vagn O. Sørensen – Director
/s/ Donald Thompson /s/ Arne Alexander Wilhelmsen
Donald Thompson – Director Arne Alexander Wilhelmsen – Director
Document
Exhibit 31.1
CERTIFICATIONS
I, Jason T. Liberty, certify that:
1. I have reviewed this annual report on Form 10-K of Royal Caribbean Cruises Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | February 23, 2023 | |
|---|---|---|
| /s/ Jason T. Liberty | ||
| Jason T. Liberty | ||
| President and | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Document
Exhibit 31.2
CERTIFICATIONS
I, Naftali Holtz, certify that:
1. I have reviewed this annual report on Form 10-K of Royal Caribbean Cruises Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | February 23, 2023 | |
|---|---|---|
| /s/ Naftali Holtz | ||
| Naftali Holtz | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Document
Exhibit 32.1
In connection with the annual report on Form 10-K for the year ended December 31, 2022 as filed by Royal Caribbean Cruises Ltd. with the Securities and Exchange Commission on the date hereof (the “Report”), Jason T. Liberty, President and Chief Executive Officer, and Naftali Holtz, Chief Financial Officer, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Royal Caribbean Cruises Ltd.
| Date: | February 23, 2023 | ||
|---|---|---|---|
| By: | /s/ Jason T. Liberty | ||
| Jason T. Liberty | |||
| President and | |||
| Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| By: | /s/ Naftali Holtz | ||
| Naftali Holtz | |||
| Chief Financial Officer | |||
| (Principal Financial Officer) |