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 have determined that TUI Cruises GmbH, our 50%-owned joint venture which operates the brand TUI Cruises, is a VIE. As of December 31, 2015 and December 31, 2014, our investment, including equity and loans, in TUI Cruises was approximately $293.8 million and $370.1 million, respectively. This amount was included within Other assets in our consolidated balance sheets. In addition, we and TUI AG, our joint venture partner, have each guaranteed the repayment of 50% of a bank loan originally borrowed by TUI Cruises in 2011 and refinanced in May 2015. As of December 31, 2015, the outstanding principal amount of the loan was €137.4 million, or approximately $149.4 million based on the exchange rate at December 31, 2015. In addition the maturity date was extended from May 2016 to May 2022. Notwithstanding this, the lenders have agreed to release each shareholder's guarantee in 2018. The loan continues to amortize quarterly and to be secured by first mortgages on the Mein Schiff 1 and Mein Schiff 2 vessels. Based on current facts and circumstances, we do not believe potential obligations under our guarantee of this bank loan are probable.

A portion of the additional proceeds received by TUI Cruises in connection with the refinancing of the bank loan discussed above were used during the second quarter of 2015 to repay in full the outstanding balance of the debt facility we originally provided to TUI Cruises in 2011 in connection with our sale of Celebrity Mercury.

Our investment amount and the potential obligations under the bank loan guarantee are substantially our maximum exposure to loss. We have determined that we are not the primary beneficiary of TUI Cruises. We believe that the power to direct the activities that most significantly impact TUI Cruises’ economic performance are shared between ourselves and TUI AG. All the significant operating and financial decisions of TUI Cruises require the consent of both parties, which we believe creates shared power over TUI Cruises. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

TUI Cruises has four newbuild ships on order with Meyer Turku scheduled to be delivered in each of 2016, 2017, 2018 and 2019. TUI Cruises received commitments for the secured financing of the ships for up to 80% of the contract price of each ship on order. Finnvera has agreed to guarantee to the lenders payment of 95% of the financing. The remaining portion of the contract price of the ships will be funded through an existing €150.0 million bank facility and TUI Cruises’ cash flows from operations. The various ship construction and credit agreements include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUI Cruises below 37.55% through 2021.

In March 2015, we announced the pending sale of Splendour of the Seas to TUI Cruises. The sale for €188.0 million is scheduled to be completed in April 2016 in order to retain the future revenues to be generated for sailings through that date. After the sale, TUI Cruises will lease the ship to Thomson Cruises, a subsidiary of TUI AG, which will operate the ship. The purchase price will be financed by us under a secured credit agreement to be repaid over 10 years. The resulting term loan will be 50% guaranteed by TUI AG and will be secured by a first mortgage on the ship. Interest will accrue at the rate of 6.25% per annum. We executed certain forward contracts to lock in the sales price of the ship at approximately $213 million. We expect to recognize a gain on the sale, which we do not expect will have a material effect to our consolidated financial statements.

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. The 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. During the year ended December 31, 2015, we made payments of $21.7 million to Grand Bahama for ship repair and maintenance services. 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 and we account for this investment under the equity method of accounting. As of December 31, 2015, the net book value of our investment in Grand Bahama was approximately $51.2 million, consisting of $12.6 million in equity and $38.6 million in loans. As of December 31, 2014, the net book value of our investment in Grand Bahama was approximately $53.8 million, consisting of $7.7 million in equity and $46.1 million in loans. These amounts represent our maximum exposure to loss. During 2015 and 2014, we received approximately $3.1 million and $3.6 million, respectively, in principal and interest payments related to a loan in accrual status from Grand Bahama, which was paid in full during 2015. The remaining amount of our loan to Grand Bahama is in non-accrual status and is included within Other assets in our consolidated balance sheets for which we received payments of approximately $4.4 million during 2015. We monitor credit risk associated with this loan through our participation on Grand Bahama's board of directors along with our review of Grand Bahama's financial statements and projected cash flows. Based on this review, we believe the risk of loss associated with the outstanding loan is not probable as of December 31, 2015.

We have determined that Skysea Holding, in which we have a 35% noncontrolling 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. Accordingly, we do not consolidate this entity and we account for this investment under the equity method of accounting. In addition, we and Ctrip.com International Ltd, which also owns 35% of Skysea Holding, each provided a debt facility to a wholly owned subsidiary of Skysea Holding in the amount of $80.0 million. Interest under these facilities, which mature in January 2030, initially accrues at a rate of 3.0% per annum with an increase of at least 0.5% every two years through maturity. The facilities, which are pari passu to each other, are each 100% guaranteed by Skysea Holding and are secured by a first priority mortgage on the ship Golden Era, formerly known as Celebrity Century, which we sold to a wholly owned subsidiary of Skysea Holding in September 2014. As of December 31, 2015 and December 31, 2014, our investment in Skysea Holding and its subsidiaries, including equity and loans, was approximately $99.8 million and $106.3 million, respectively. These amounts were included within Other assets in our consolidated balance sheets and represent our maximum exposure to loss. During 2015, Skysea Holding and its subsidiaries commenced operations through the brand SkySea Cruises.

Our share of income from investments accounted for under the equity method of accounting, including the entities discussed above, was $81.0 million, $51.6 million and $32.0 million for the years ended December 31, 2015, 2014 and 2013, respectively, and was recorded within Other income (expense). Additionally, we received $33.3 million, $5.8 million and $5.1 million of dividends from our equity method investees for the years ended December 31, 2015, 2014 and 2013, respectively. Also, we provide ship management and procurement services to TUI Cruises GmbH and Skysea Holding and recorded $20.2 million, $8.5 million and $9.1 million in revenues and $15.7 million, $4.0 million and $4.5 million in expenses for these services during the years ended December 31, 2015, 2014 and 2013, respectively, which was recorded within Onboard and other revenues and Other operating expenses, respectively .

Summarized financial information for our affiliates accounted for under the equity method of accounting was as follows (in thousands):



	As of December 31,
	2015		2014
Current Assets	$	315,264	$	325,527
Non Current Assets	2,246,809		1,929,182
Total Assets	$	2,562,073	$	2,254,709

Current Liabilities	$	585,887	$	513,842
Non Current Liabilities	1,231,262		958,988
Total Liabilities	$	1,817,149	$	1,472,830

Equity Attributable to:
Noncontrolling Interest	$	1,683	$	2,795



	For the period ended December 31,
	2015			2014			2013
Total Revenues	$	990,172		$	797,441		$	605,293
Total Expenses	(830,898		)	(682,430		)	(538,922		)
Net Income	$	159,274		$	115,011		$	66,371