Long-Term Debt

6 Months Ended

Jun. 30, 2012

Long-Term Debt.

Long-Term Debt

Note 4. Long-Term Debt

During the first quarter of 2012, we exercised our option under the agreement with Meyer Werft to construct the second ship of a new generation of Royal Caribbean International cruise ships, known as “Project Sunshine”.  The second ship is scheduled for delivery in the second quarter of 2015.  During 2011, we entered into credit agreements to finance the construction of the first and second Project Sunshine ships. Each facility makes available to us an unsecured term loan in an amount up to the United States dollar equivalent corresponding to approximately €595.0 million, with funding of approximately 5% remaining subject to syndication for the first ship and 50% remaining subject to syndication for the second ship prior to delivery of the applicable ship. Euler Hermes Kreditversicherungs AG (“Hermes”), the official export credit agency of Germany, has agreed to guarantee to the lender payment of 95% of the financing.  The loans will amortize semi-annually and will mature 12 years following delivery of the applicable ship.  Pursuant to the credit agreements, interest on the loans will accrue at our election (to be made prior to funding) at either a fixed rate (including applicable margin) of 4.76% or a floating rate of LIBOR plus a margin of 1.30%.  Separately, we have entered into forward-starting interest rate swap agreements which effectively convert the floating rate available to us per the credit agreements to a fixed rate (including applicable margin) of 3.74% and 3.86% for the first and second Project Sunshine ships, respectively.  See Note 9. Fair ValueMeasurements and Derivative Instruments for further information regarding these agreements.

Under the terms of our revolving credit facility due July 2016, we have the ability to increase the available capacity under the facility by $300.0 million subject to the receipt of additional or increased lender commitments.  During the first six months of 2012, we increased the capacity of this facility by $213.0 million bringing our total capacity, including our revolving credit facility due November 2014, to $1.6 billion as of June 30, 2012. In July 2012, we increased our capacity by an additional $20.0 million.

We have a credit agreement in place providing financing for Celebrity Reflection which is scheduled for delivery in the fourth quarter of 2012.  The credit agreement provides for an unsecured term loan for up to 80% of the purchase price of the vessel which will be 95% guaranteed by Hermes and will be funded at delivery.  The loan will have a 12-year life with semi-annual amortization, and pursuant to the credit agreement, will bear interest at our election (to be made prior to funding) of either a fixed rate of 4.13% (inclusive of the applicable margin) or a floating rate at LIBOR plus a margin of 0.40%.  Separately, we have entered into forward-starting interest rate swap agreements which effectively convert the floating rate available to us per the credit agreement to a fixed rate (including applicable margin) of 2.85%.  See Note 9. Fair Value Measurements and Derivative Instruments for further information regarding these agreements.

Certain of our unsecured ship financing term loans are guaranteed by the export credit agency in the respective country in which the ship is constructed.  In consideration for these guarantees, depending on the financing arrangement, we pay to the applicable export credit agency fees that range from either (1) 0.88% to 1.48% per annum based on the outstanding loan balance semi-annually over the term of the loan (subject to adjustment in certain of our facilities based upon our credit ratings) or (2) an upfront fee of approximately 2.3% to 2.37% of the maximum loan amount. We amortize the fees that are paid upfront over the life of the loan and those that are paid semi-annually over each respective payment period.  We classify these fees within Debt issuance costs in our consolidated statement of cash flows.

Under certain of our agreements, the contractual interest rate, facility fee and/or export credit agency fee vary with our debt rating.