UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35784

NORWEGIAN CRUISE LINE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)


Bermuda		98-0691007
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7665 Corporate Center Drive, Miami, Florida 33126		33126
(Address of principal executive offices)		(zip code)

(305) 436-4000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary shares, par value $0.001 per share		NCLH		The New York Stock Exchange

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

There were 425,423,599 ordinary shares outstanding as of July 31, 2023.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenue
Passenger ticket	$	1,478,474	$	793,892	$	2,687,315	$	1,136,347
Onboard and other		727,018		393,289		1,340,116		572,774
Total revenue		2,205,492		1,187,181		4,027,431		1,709,121
Cruise operating expense
Commissions, transportation and other		506,855		256,190		916,539		344,148
Onboard and other		161,880		96,155		281,577		128,705
Payroll and related		308,220		262,580		612,375		503,307
Fuel		164,242		181,189		359,110		316,698
Food		87,770		61,157		183,736		100,673
Other		154,643		216,045		310,691		415,198
Total cruise operating expense		1,383,610		1,073,316		2,664,028		1,808,729
Other operating expense
Marketing, general and administrative		352,222		329,080		688,235		625,287
Depreciation and amortization		197,115		181,587		391,905		360,663
Total other operating expense		549,337		510,667		1,080,140		985,950
Operating income (loss)		272,545		(396,802)		283,263		(1,085,558)
Non-operating income (expense)
Interest expense, net		(177,692)		(144,377)		(348,949)		(472,062)
Other income (expense), net		(8,043)		30,991		(16,998)		69,111
Total non-operating income (expense)		(185,735)		(113,386)		(365,947)		(402,951)
Net income (loss) before income taxes		86,810		(510,188)		(82,684)		(1,488,509)
Income tax benefit (expense)		(694)		867		9,479		(3,526)
Net income (loss)	$	86,116	$	(509,321)	$	(73,205)	$	(1,492,035)
Weighted-average shares outstanding
Basic		424,178,775		419,107,330		423,421,203		418,424,753
Diluted		461,075,240		419,107,330		423,421,203		418,424,753
Earnings (loss) per share
Basic	$	0.20	$	(1.22)	$	(0.17)	$	(3.57)
Diluted	$	0.20	$	(1.22)	$	(0.17)	$	(3.57)

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income (loss)	$	86,116	$	(509,321)	$	(73,205)	$	(1,492,035)
Other comprehensive loss:
Shipboard Retirement Plan		64		94		128		2,570
Cash flow hedges:
Net unrealized loss		(4,577)		(90,503)		(23,052)		(51,199)
Amount realized and reclassified into earnings		2,547		(36,075)		(7,327)		(43,577)
Total other comprehensive loss		(1,966)		(126,484)		(30,251)		(92,206)
Total comprehensive income (loss)	$	84,150	$	(635,805)	$	(103,456)	$	(1,584,241)

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)


	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	899,135	$	946,987
Accounts receivable, net		219,116		326,272
Inventories		153,850		148,717
Prepaid expenses and other assets		576,478		450,893
Total current assets		1,848,579		1,872,869
Property and equipment, net		15,054,710		14,516,366
Goodwill		98,134		98,134
Trade names		500,525		500,525
Other long-term assets		1,146,264		1,569,800
Total assets	$	18,648,212	$	18,557,694
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	1,125,754	$	991,128
Accounts payable		148,328		228,742
Accrued expenses and other liabilities		1,198,386		1,318,460
Advance ticket sales		3,345,767		2,516,521
Total current liabilities		5,818,235		5,054,851
Long-term debt		11,994,555		12,630,402
Other long-term liabilities		820,201		803,850
Total liabilities		18,632,991		18,489,103
Commitments and contingencies (Note 10)
Shareholders’ equity:
Ordinary shares, $0.001 par value; 980,000,000 shares authorized; 425,155,523 shares issued and outstanding at June 30, 2023 and 421,413,565 shares issued and outstanding at December 31, 2022		425		421
Additional paid-in capital		7,661,646		7,611,564
Accumulated other comprehensive income (loss)		(507,330)		(477,079)
Accumulated deficit		(7,139,520)		(7,066,315)
Total shareholders’ equity		15,221		68,591
Total liabilities and shareholders’ equity	$	18,648,212	$	18,557,694

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Six Months Ended
	June 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(73,205)	$	(1,492,035)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		425,288		391,320
Loss on derivatives		9,423		47
Loss on extinguishment of debt		2,801		188,433
Provision for bad debts and inventory obsolescence		1,497		2,500
Gain on involuntary conversion of assets		(4,583)		(1,880)
Share-based compensation expense		72,691		62,840
Net foreign currency adjustments on euro-denominated debt		1,822		(12,063)
Changes in operating assets and liabilities:
Accounts receivable, net		106,709		566,265
Inventories		(5,815)		(36,748)
Prepaid expenses and other assets		321,120		(542,730)
Accounts payable		(72,345)		(127,188)
Accrued expenses and other liabilities		(75,009)		137,225
Advance ticket sales		826,221		755,189
Net cash provided by (used in) operating activities		1,536,615		(108,825)
Cash flows from investing activities
Additions to property and equipment, net		(974,190)		(326,303)
Proceeds from maturities of short-term investments		—		240,000
Cash paid on settlement of derivatives		(23,379)		—
Other		5,367		5,237
Net cash used in investing activities		(992,202)		(81,066)
Cash flows from financing activities
Repayments of long-term debt		(2,500,777)		(1,268,888)
Proceeds from long-term debt		2,038,187		2,073,175
Proceeds from employee related plans		2,618		2,557
Net share settlement of restricted share units		(25,223)		(11,991)
Early redemption premium		—		(172,012)
Deferred financing fees		(107,070)		(36,359)
Net cash provided by (used in) financing activities		(592,265)		586,482
Net increase (decrease) in cash and cash equivalents		(47,852)		396,591
Cash and cash equivalents at beginning of period		946,987		1,506,647
Cash and cash equivalents at end of period	$	899,135	$	1,903,238

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)


	Three Months Ended June 30, 2023
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance, March 31, 2023	$	424	$	7,631,028	$	(505,364)	$	(7,225,636)	$	(99,548)
Share-based compensation		—		44,536		—		—		44,536
Issuance of shares under employee related plans		1		(1)		—		—		—
Net share settlement of restricted share units		—		(13,917)		—		—		(13,917)
Other comprehensive loss, net		—		—		(1,966)		—		(1,966)
Net income		—		—		—		86,116		86,116
Balance, June 30, 2023	$	425	$	7,661,646	$	(507,330)	$	(7,139,520)	$	15,221

	Six Months Ended June 30, 2023
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance, December 31, 2022	$	421	$	7,611,564	$	(477,079)	$	(7,066,315)	$	68,591
Share-based compensation		—		72,691		—		—		72,691
Issuance of shares under employee related plans		4		2,614		—		—		2,618
Net share settlement of restricted share units		—		(25,223)		—		—		(25,223)
Other comprehensive loss, net		—		—		(30,251)		—		(30,251)
Net loss		—		—		—		(73,205)		(73,205)
Balance, June 30, 2023	$	425	$	7,661,646	$	(507,330)	$	(7,139,520)	$	15,221

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)


	Three Months Ended June 30, 2022
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance, March 31, 2022	$	419	$	7,537,111	$	(250,808)	$	(5,779,120)	$	1,507,602
Share-based compensation		—		30,048		—		—		30,048
Net share settlement of restricted share units		—		(30)		—		—		(30)
Other comprehensive loss, net		—		—		(126,484)		—		(126,484)
Net loss		—		—		—		(509,321)		(509,321)
Balance, June 30, 2022	$	419	$	7,567,129	$	(377,292)	$	(6,288,441)	$	901,815

	Six Months Ended June 30, 2022
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance, December 31, 2021	$	417	$	7,513,725	$	(285,086)	$	(4,796,406)	$	2,432,650
Share-based compensation		—		62,840		—		—		62,840
Issuance of shares under employee related plans		2		2,555		—		—		2,557
Net share settlement of restricted share units		—		(11,991)		—		—		(11,991)
Other comprehensive loss, net		—		—		(92,206)		—		(92,206)
Net loss		—		—		—		(1,492,035)		(1,492,035)
Balance, June 30, 2022	$	419	$	7,567,129	$	(377,292)	$	(6,288,441)	$	901,815

The accompanying notes are an integral part of these consolidated financial statements.

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Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the basic weighted-average number of shares outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) and assumed conversion of exchangeable notes by diluted weighted-average shares outstanding.

A reconciliation between basic and diluted earnings (loss) per share was as follows (in thousands, except share and per share data):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income (loss) - Basic EPS	$	86,116	$	(509,321)	$	(73,205)	$	(1,492,035)
Effect of dilutive securities - exchangeable notes		4,603		—		—		—
Net income (loss) and assumed conversion of exchangeable notes - Diluted EPS	$	90,719	$	(509,321)	$	(73,205)	$	(1,492,035)
Basic weighted-average shares outstanding		424,178,775		419,107,330		423,421,203		418,424,753
Dilutive effect of share awards		2,758,715		—		—		—
Dilutive effect of exchangeable notes		34,137,750		—		—		—
Diluted weighted-average shares outstanding		461,075,240		419,107,330		423,421,203		418,424,753
Basic EPS	$	0.20	$	(1.22)	$	(0.17)	$	(3.57)
Diluted EPS	$	0.20	$	(1.22)	$	(0.17)	$	(3.57)

Each exchangeable note (see Note 7 – “Long-Term Debt”) is individually evaluated for its dilutive or anti-dilutive impact on EPS. Only the interest expense and weighted average shares for exchangeable notes which are dilutive are included in the effect of dilutive securities above. During the three months ended June 30, 2023, only the 2027 1.125% Exchangeable Notes were dilutive. For the three months ended June 30, 2023 and 2022, a total of 55.7 million and 97.7 million shares, respectively, and for the six months ended June 30, 2023 and 2022, a total of 89.6 million and 92.1 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. The resulting gains or losses are recognized in our consolidated statements of operations within other income (expense), net. We recognized a loss of $11.1 million and a gain of $36.4 million for the three months ended June 30, 2023 and 2022, respectively, and a loss of $19.8 million and a gain of $44.7 million for the six months ended June 30, 2023 and 2022, respectively, related to remeasurement of assets and liabilities denominated in foreign currencies. Remeasurements of foreign currency related to operating activities are recognized within changes in operating assets and liabilities in the consolidated statement of cash flows.

Depreciation and Amortization Expense

The amortization of deferred financing fees is included in depreciation and amortization expense in the consolidated statements of cash flows; however, for purposes of the consolidated statements of operations they are included in interest expense, net.

Accounts Receivable, Net

Accounts receivable, net included $31.5 million and $118.4 million due from credit card processors as of June 30, 2023 and December 31, 2022, respectively.

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3. Revenue Recognition

Disaggregation of Revenue

Revenue and cash flows are affected by economic factors in various geographical regions. Revenues by destination were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
North America	$	1,221,177	$	673,503	$	2,582,230	$	1,160,938
Europe		880,129		499,917		961,447		524,714
Asia-Pacific		89,890		13,362		295,552		21,654
Other		14,296		399		188,202		1,815
Total revenue	$	2,205,492	$	1,187,181	$	4,027,431	$	1,709,121

North America includes the U.S., the Caribbean, Canada and Mexico. Europe includes the Baltic region, Canary Islands and Mediterranean. Asia-Pacific includes Australia, New Zealand and Asia. Other includes all other international territories.

Segment Reporting

We have concluded that our business has a single reportable segment. Each brand, Norwegian, Oceania Cruises and Regent, constitutes a business for which discrete financial information is available and management regularly reviews the brand level operating results and, therefore, each brand is considered an operating segment. Our operating segments have similar economic and qualitative characteristics, including similar long-term margins, products and services; therefore, we aggregate all of the operating segments into one reportable segment.

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations through the U.S. Revenue attributable to U.S.-sourced guests has approximated 83-87% of total revenue over the preceding three fiscal years. No other individual country’s revenues exceed 10% in any given period.

Contract Balances

Receivables from customers are included within accounts receivable, net. As of June 30, 2023 and December 31, 2022, our receivables from customers were $91.6 million and $94.2 million, respectively, primarily related to in-transit credit card receivables.

Our standard payment and cancellation penalties apply for all sailings after March 31, 2023. Future cruise credits that have been issued as face value reimbursement for cancelled bookings due to COVID-19 are approximately $81.2 million. The future cruise credits are not contracts, and therefore, guests who elected this option are excluded from our contract liability balance; however, the credit for the original amount paid is included in advance ticket sales.

Our contract liabilities are included within advance ticket sales. As of June 30, 2023 and December 31, 2022, our contract liabilities were $2.5 billion and $1.7 billion, respectively. Of the amounts included within contract liabilities as of June 30, 2023, approximately 40% were refundable in accordance with our cancellation policies. Of the deposits included within advance ticket sales, the majority are refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds. Refunds payable to guests are included in accounts payable. For the six months ended June 30, 2023, $1.7 billion of revenue recognized was included in the contract liability balance at the beginning of the period.

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4. Leases

Operating lease balances were as follows (in thousands):


	Balance Sheet location	June 30, 2023		December 31, 2022
Operating leases
Right-of-use assets	Other long-term assets	$	715,537	$	707,086
Current operating lease liabilities	Accrued expenses and other liabilities		40,149		39,689
Non-current operating lease liabilities	Other long-term liabilities		597,056		588,064

5. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the six months ended June 30, 2023 was as follows (in thousands):


	Six Months Ended June 30, 2023
						Change
	Accumulated		Change			Related to
	Other		Related to			Shipboard
	Comprehensive		Cash Flow			Retirement
	Income (Loss)		Hedges			Plan
Accumulated other comprehensive income (loss) at beginning of period	$	(477,079)	$	(480,578)		$	3,499
Current period other comprehensive loss before reclassifications		(23,052)		(23,052)			—
Amounts reclassified into earnings		(7,199)		(7,327)	(1)		128	(2)
Accumulated other comprehensive income (loss) at end of period	$	(507,330)	$	(510,957)	(3)	$	3,627

Accumulated other comprehensive income (loss) for the six months ended June 30, 2022 was as follows (in thousands):


	Six Months Ended June 30, 2022
						Change
	Accumulated		Change			Related to
	Other		Related to			Shipboard
	Comprehensive		Cash Flow			Retirement
	Income (Loss)		Hedges			Plan
Accumulated other comprehensive income (loss) at beginning of period	$	(285,086)	$	(279,696)		$	(5,390)
Current period other comprehensive income (loss) before reclassifications		(48,818)		(51,199)			2,381
Amounts reclassified into earnings		(43,388)		(43,577)	(1)		189	(2)
Accumulated other comprehensive income (loss) at end of period	$	(377,292)	$	(374,472)		$	(2,820)

(1)	We refer you to Note 8 – “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations.

(2)	Amortization of prior-service cost and actuarial loss reclassified to other income (expense), net.

(3)	Includes $24.0 million of loss expected to be reclassified into earnings in the next 12 months.

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6.Property and Equipment, Net

Property and equipment, net increased $538.3 million for the six months ended June 30, 2023 primarily due to the delivery of Oceania Cruises’ Vista. We determine the weighted average useful lives of our ships based primarily on our estimates of the useful lives of the ships’ major component systems on the date of acquisition, such as cabins, main diesels, main electric, superstructure and hull, and their related proportional weighting to the ship as a whole. We have assessed the weighted-average useful life of the components of Oceania Cruises’ Vista and assigned a useful life and residual value to the Allura Class Ships consistent with our accounting policy. The useful life and residual value consider the historical useful lives of similar assets, manufacturer recommended lives, planned maintenance programs, anticipated changes in technological conditions and the related proportional weighting of the major components of the Allura Class Ships.

7. Long-Term Debt

In February 2023, NCLC issued $600.0 million aggregate principal amount of 8.375% senior secured notes due 2028 (the “2028 Senior Secured Notes”). The 2028 Senior Secured Notes and related guarantees are secured by first-priority interests in, among other things and subject to certain agreed security principles, thirteen of our vessels that also secure the Senior Secured Credit Facility. The 2028 Senior Secured Notes are guaranteed by our subsidiaries that own the vessels that secure the 2028 Senior Secured Notes. NCLC may redeem the 2028 Senior Secured Notes at its option, in whole or in part, at any time and from time to time prior to February 1, 2025, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the 2028 Senior Secured Notes at its option, in whole or in part, at any time and from time to time on or after February 1, 2025, at the redemption prices set forth in the indenture governing the 2028 Senior Secured Notes plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to February 1, 2025, NCLC may choose to redeem up to 40% of the aggregate principal amount of the 2028 Senior Secured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 108.375% of the principal amount of the 2028 Senior Secured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the 2028 Senior Secured Notes issued remains outstanding following such redemption. The 2028 Senior Secured Notes pay interest at 8.375% per annum, semiannually on February 1 and August 1 of each year, to holders of record at the close of business on the immediately preceding January 15 and July 15, respectively.

The proceeds from the 2028 Senior Secured Notes were used to repay the loans outstanding under our Term Loan A Facility that otherwise would have become due in January 2024, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses. As a result, all of the remaining term loans outstanding under our Term Loan A Facility will mature in January 2025, subject to, if a one-time minimum liquidity threshold is not satisfied on September 16, 2024, a springing maturity date of September 16, 2024.

The indenture governing the 2028 Senior Secured Notes includes requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

In July 2022, NCLC entered into a $1 billion amended and restated commitment letter (the “commitment letter”) with the purchasers named therein (collectively, the “Commitment Parties”), which superseded a $1 billion commitment letter previously executed in November 2021. The commitment letter, among other things, extended the commitments thereunder through March 31, 2023. In February 2023, the Commitment Parties further amended the commitment letter (the “amended commitment letter”) to extend certain commitments thereunder through February 2024, with an option for NCLC to further extend such commitments through February 2025 at its election. Pursuant to the amended commitment letter, the Commitment Parties have agreed to purchase from NCLC an aggregate principal amount of up to $650 million of senior secured notes at NCLC’s option. NCLC has the option to make up to two draws, consisting of (i) $250 million of senior secured notes due 2028 that, if issued, will accrue interest at a rate of 11.00% per annum subject

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to a 1.00% increase or decrease based on certain market conditions at the time drawn (the “Class B Notes”) and (ii) $400 million aggregate principal amount of 8.00% senior secured notes due five years after the issue date (the “Backstop Notes”). The Class B Notes and the Backstop Notes are subject to a quarterly commitment fee of 0.75% for so long as the commitments with respect to Class B Notes or the Backstop Notes, as applicable, are outstanding, which fee will be increased to 1.00% if NCLC extends the commitments through February 2025 at its election. If drawn, the Class B Notes will be subject to an issue fee of 2.00%, and the Backstop Notes will be subject to a quarterly duration fee of 1.50%, as well as an issue fee of 3.00%.

In February 2023, in connection with the execution of the amended commitment letter, NCLC issued $250 million aggregate principal amount of 9.75% senior secured notes due 2028 (the “Class A Notes” and, collectively with the Class B Notes and the Backstop Notes, the “Notes”), subject to an issue fee of 2.00%. NCLC used the net proceeds from the Class A Notes for general corporate purposes. NCLC may redeem the Class A Notes at its option, in whole or in part, at any time and from time to time prior to February 22, 2025, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the Class A Notes at its option, in whole or in part, at any time and from time to time on or after February 22, 2025, at the redemption prices set forth in the indenture governing the Class A Notes, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. The Class A Notes pay interest at 9.75% per annum, quarterly on February 15, May 15, August 15 and November 15 of each year, to holders of record at the close of business on the immediately preceding February 1, May 1, August 1 and November 1, respectively.

The Class A Notes are, and the Class B Notes and the Backstop Notes, if issued, will be, secured by first-priority interests in, among other things and subject to certain agreed security principles, shares of capital stock in certain guarantors, our material intellectual property and two islands that we use in the operations of our cruise business. The Class A Notes are, and the Class B Notes and the Backstop Notes, if issued, will be, guaranteed by our subsidiaries that own the property that secures the Notes as well as certain additional subsidiaries whose assets do not secure the Notes.

The indenture governing the Class A Notes includes requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

In February 2023, NCLC entered into a Backstop Agreement with Morgan Stanley & Co. LLC (“MS”), pursuant to which MS has agreed to provide backstop committed financing to refinance and/or repay in whole or in part amounts outstanding under the Senior Secured Credit Facility. Pursuant to the Backstop Agreement, we may, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes up to an aggregate principal amount sufficient to generate gross proceeds of $300 million at any time between October 4, 2023 and January 2, 2024.

In April 2023, $82.5 million in aggregate principal amount of the Revolving Loan Facility due January 2024 was assigned to a new lender, and the maturity date was extended by one year to January 2025. The terms of the assigned principal are the same as the existing lenders who extended commitments in December 2022 under Amendment No. 4 to the Senior Secured Credit Facility.

In April 2023, we took delivery of Oceania Cruises’ Vista. We had export credit financing in place for 80% of the contract price. The associated $632.6 million term loan bears interest at a fixed rate of 3.64% with a maturity date of April 30, 2035. Principal and interest payments are payable semiannually.

In May and June 2023, certain of NCLC’s export-credit backed facilities were amended to replace LIBOR with Term SOFR. In connection with these amendments, the Company adopted Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted

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by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. As of June 30, 2023, we have applied certain optional expedients in our accounting for these amendments and the impact was immaterial.

Exchangeable Notes

The following is a summary of NCLC’s exchangeable notes as of June 30, 2023 (in thousands):


			Unamortized
	Principal		Deferred		Net Carrying		Fair Value
	Amount		Financing Fees		Amount		Amount		Leveling
2024 Exchangeable Notes (1)	$	146,601	$	(1,329)	$	145,272	$	242,046	Level 2
2025 Exchangeable Notes		450,000		(5,264)		444,736		616,397	Level 2
2027 1.125% Exchangeable Notes		1,150,000		(20,777)		1,129,223		1,059,518	Level 2
2027 2.5% Exchangeable Notes		473,175		(9,077)		464,098		450,458	Level 2

(1)	Classified within current portion of long-term debt as of June 30, 2023. We expect that the holders of the 2024 Exchangeable Notes will exchange their 2024 Exchangeable Notes for shares.

The following is a summary of NCLC’s exchangeable notes as of December 31, 2022 (in thousands):

Unamortized

Principal

Deferred

Net Carrying

Fair Value

Amount

Financing Fees


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PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 5.	Other Information	41

Item 6.	Exhibits	41

SIGNATURES		45