UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 1.01 Entry into a Material Definitive Agreement.
On November 19, 2021, NCL Corporation Ltd. (“NCLC”), a subsidiary of Norwegian Cruise Line Holdings Ltd. (the “Company” or “NCLH”), closed its previously announced private offering (the “Notes Offering”) of $1,150 million aggregate principal amount of 1.125% exchangeable senior notes due 2027 (the “Notes”) (including $150 million aggregate principal amount of Notes issued in connection with the full exercise by the initial purchasers of their option to purchase additional Notes). The Notes were issued pursuant to an indenture, dated November 19, 2021, by and among NCLC, as issuer, the Company, as guarantor, and U.S. Bank National Association, as trustee (the “Indenture”). The Notes will be guaranteed by the Company on a senior unsecured basis.
In connection with the Notes Offering, NCLC received gross proceeds of $1.15 billion and net proceeds, after initial purchasers’ discounts and before offering expenses, of $1.121 billion (which includes the initial purchasers' exercise of their option to purchase additional Notes in full). NCLC used the net proceeds from the Notes Offering, together with a portion of the proceeds from the Company’s Equity Offering (as defined below), to repurchase $715.9 million aggregate principal amount of its 6.00% Exchangeable Senior Notes due 2024 (the “2024 Exchangeable Notes”) for approximately $1.4 billion, including accrued and unpaid interest, pursuant to privately negotiated agreements with a limited number of holders of such 2024 Exchangeable Notes, and to pay related premiums, fees and expenses.
Interest on the Notes will accrue from November 19, 2021 and is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2022, at a rate of 1.125% per year. The Notes will mature on February 15, 2027 (the “Maturity Date”) unless earlier exchanged, redeemed or repurchased.
The Notes will be exchangeable at the holder’s option (i) at any time prior to the close of business on the business day immediately preceding August 15, 2026, subject to the satisfaction of certain conditions and during certain periods, and (ii) on or after August 15, 2026 until the close of business on the business day immediately preceding the maturity date, regardless of whether such conditions have been met. Upon exchange of the Notes, NCLC will satisfy its exchange obligation by paying and/or delivering, as the case may be, cash, ordinary shares of the Company (“ordinary shares”) or a combination of cash and ordinary shares, at NCLC’s election. NCLC will pay any cash required to be paid upon exchange of the Notes. If NCLC elects to satisfy its exchange obligation solely in ordinary shares or in a combination of ordinary shares and cash, the Notes will convert into Series A Preference Shares of NCLC (“preference shares”), which shall immediately and automatically be exchanged for a number of ordinary shares. The initial exchange rate per $1,000 principal amount of Notes is 29.6850 ordinary shares, which is equivalent to an initial exchange price of approximately $33.69 per ordinary share, subject to adjustment in certain circumstances. The initial exchange price represents a premium of approximately 42.50% above the offering price in the Equity Offering.
The Notes are exchangeable at the option of the holders of such Notes, based on the initial maximum exchange rate of 42.3012 ordinary shares per $1,000 principal amount of Notes, into a maximum of 1,150,000 preference shares of NCLC, which will be immediately and automatically exchanged into a maximum of 48,646,380 ordinary shares of NCLH. The initial maximum exchange rate reflects potential adjustments to the initial exchange rate of 29.6850 ordinary shares per $1,000 principal amount of Notes for additional ordinary shares, which would only be made in the event of certain make-whole fundamental changes, tax redemption or optional redemption events. The description of the initial maximum exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transactions and is qualified in its entirety by the terms of the Indenture.
On or after February 20, 2025, NCLC may redeem for cash all or part of the Notes, at its option, if the last reported sale price of ordinary shares has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which NCLC provides notice of an optional redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the optional redemption date. If NCLC elects to redeem fewer than all of the outstanding Notes, at least $150.0 million aggregate principal amount of Notes must be outstanding and not subject to optional redemption as of the relevant optional redemption date. NCLC may also redeem the Notes, in whole but not in part, following the occurrence of certain tax law changes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date.
Upon the occurrence of a “fundamental change,” which term includes certain change of control transactions, NCLC must offer to repurchase the Notes at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase. In addition, if certain corporate events occur prior to the Maturity Date or if NCLC delivers a notice of tax redemption or notice of optional redemption, NCLC will, in certain circumstances, increase the exchange rate for a holder who elects to exchange its Notes in connection with such corporate event, notice of tax redemption or notice of optional redemption, as the case may be.
The Indenture contains customary covenants and events of default.
The foregoing summary of the Indenture and the Notes does not purport to be complete and is qualified in its entirety by reference to the full text of the Indenture and form of Note, which are attached as Exhibit 4.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 above is incorporated into this Item 2.03 by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under in Item 1.01 above is incorporated into this Item 3.02 by reference.
NCLC offered and sold the Notes to the initial purchasers in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and for resale by the initial purchasers to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act. The Notes, the guarantee, the preference shares and the ordinary shares of the Company issuable upon the exchange of preference shares will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.
Item 7.01 Regulation FD Disclosure.
On November 19, 2021, the Company made available a presentation discussing the Notes Offering and the Equity Offering. A copy of the presentation is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished with this report, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 8.01 Other Events.
Equity Offering
On November 19, 2021, the Company completed a registered direct offering of 46,858,854 ordinary shares to certain holders of the 2024 Exchangeable Notes at a price of $23.64 per share (the “Equity Offering”). In connection with the Equity Offering, the Company entered into share purchase agreements with the investors in the Equity Offering. The Company expects to use the net proceeds from the Equity Offering to redeem $236.25 million aggregate principal amount of NCLC’s 12.25% Senior Secured Notes due 2024 and $262.50 million aggregate principal amount of NCLC’s 10.250% Senior Secured Notes due 2026, including any accrued but unpaid interest thereon, to pay related premiums, fees and expenses and for general corporate purposes, including the repurchase of a portion of the 2024 Exchangeable Notes.
The Equity Offering was made pursuant to a prospectus supplement, dated November 16, 2021, and filed with the Securities and Exchange Commission (the “SEC”) on November 18, 2021, and the base prospectus, dated November 17, 2020, filed as part of the Company’s automatic shelf registration statement (File No. 333-250144) that became effective under the Securities Act of 1933, as amended, when filed with the SEC on November 17, 2020.
Press Releases
On November 15, 2021, the Company issued a press release announcing the commencement of the Equity Offering. Simultaneously therewith, NCLC issued a press release announcing the commencement of the Notes Offering. Copies of the press releases are furnished as Exhibits 99.2 and 99.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
On November 16, 2021, the Company issued a press release announcing the pricing of the Equity Offering. Simultaneously therewith, NCLC issued a press release announcing the upsizing and pricing of the Notes Offering. Copies of the press releases are furnished as Exhibits 99.4 and 99.5, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
Cautionary Statement Concerning Forward-Looking Statements
Some of the statements, estimates or projections contained in this Current Report are “forward-looking statements” within the meaning of the U.S. federal securities laws intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Current Report, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects, actions taken or strategies being considered with respect to our liquidity position, valuation and appraisals of our assets and objectives of management for future operations (including those regarding expected fleet additions, our suspension of certain cruise voyages, our ability to weather the impacts of the novel coronavirus (“COVID-19”) pandemic, our expectations regarding the resumption of cruise voyages and the timing for such resumption of cruise voyages, the implementation of and effectiveness of our health and safety protocols, operational position, demand for voyages, plans or goals for our sustainability program and decarbonization efforts, our expectations for future cash flows and probability, financing opportunities and extensions, and future cost mitigation and cash conservation efforts and efforts to reduce operating expenses and capital expenditures) are forward-looking statements. Many, but not all, of these statements can be found by looking for words like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,” “estimate,” “intend,” “future” and similar words. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors which 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, the impact of:
| · | the spread of epidemics, pandemics and viral outbreaks and specifically, the COVID-19 pandemic, including its effect on the ability or desire of people to travel (including on cruises), which are expected to continue to adversely impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price; |
| · | our ability to comply with the United States Centers for Disease Control and Prevention’s (“CDC”) Conditional Order and any additional or future regulatory restrictions on our operations and to otherwise develop enhanced health and safety protocols to adapt to the pandemic’s unique challenges; |
| · | legislation prohibiting companies from verifying vaccination status; |
| · | coordination and cooperation with the CDC, the federal government and global public health authorities to take precautions to protect the health, safety and security of guests, crew and the communities visited and the implementation of any such precautions; |
| · | our ability to work with lenders and others or otherwise pursue options to defer, renegotiate, refinance or restructure our existing debt profile, near-term debt amortization, newbuild related payments and other obligations and to work with credit card processors to satisfy current or potential future demands for collateral on cash advanced from customers relating to future cruises; |
| · | our need for additional financing, or financing to optimize our balance sheet, which may not be available on favorable terms, or at all, and may be dilutive to existing shareholders; |
| · | our indebtedness and restrictions in the agreements governing our indebtedness that require us to maintain minimum levels of liquidity and otherwise limit our flexibility in operating our business, including the significant portion of assets that are collateral under these agreements; |
| · | the accuracy of any appraisals of our assets as a result of the impact of the COVID-19 pandemic or otherwise; |
| · | our success in controlling operating expenses and capital expenditures; |
| · | our guests’ election to take cash refunds in lieu of future cruise credits or the continuation of any trends relating to such election; |
| · | trends in, or changes to, future bookings and our ability to take future reservations and receive deposits related thereto; |
| · | the unavailability of ports of call; |
| · | future increases in the price of, or major changes or reduction in, commercial airline services; |
| · | adverse events impacting the security of travel, such as terrorist acts, armed conflict and threats thereof, acts of piracy, and other international events; |
| · | adverse incidents involving cruise ships; |
| · | adverse general economic and related factors, such as fluctuating or increasing levels of unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence; |
| · | any further impairment of our trademarks, trade names or goodwill; |
| · | breaches in data security or other disturbances to our information technology and other networks or our actual or perceived failure to comply with requirements regarding data privacy and protection; |
| · | changes in fuel prices and the type of fuel we are permitted to use and/or other cruise operating costs; |
| · | mechanical malfunctions and repairs, delays in our shipbuilding program, maintenance and refurbishments and the consolidation of qualified shipyard facilities; |
| · | the risks and increased costs associated with operating internationally; |
| · | fluctuations in foreign currency exchange rates; |
| · | overcapacity in key markets or globally; |
| · | our expansion into and investments in new markets; |
| · | our inability to obtain adequate insurance coverage; |
| · | pending or threatened litigation, investigations and enforcement actions; |
| · | volatility and disruptions in the global credit and financial markets, which may adversely affect our ability to borrow and could increase our counterparty credit risks, including those under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship progress payment guarantees; |
| · | our inability to recruit or retain qualified personnel or the loss of key personnel or employee relations issues; |
| · | our reliance on third parties to provide hotel management services for certain ships and certain other services; |
| · | our inability to keep pace with developments in technology; |
| · | changes involving the tax and environmental regulatory regimes in which we operate; and |
| · | other factors set forth under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2021, June 30, 2021 and September 30, 2021. |
Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 pandemic. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown.
The above examples are not exhaustive and new risks emerge from time to time. Such forward-looking statements are based on our current beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we expect to operate in the future. These forward-looking statements speak only as of the date made. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based, except as required by law.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Norwegian Cruise Line Holdings Ltd. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 19, 2021
| NORWEGIAN CRUISE LINE HOLDINGS LTD. | |||
| By: | /s/ Mark A. Kempa | ||
| Name: | Mark A. Kempa | ||
| Title: | Executive Vice President and Chief Financial Officer | ||