Benzinga | Nov 22, 2021 09:08AM EST

Norwegian Cruise Line Holdings Completes Strategic Balance Sheet Optimization Transactions

Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) (the "Company") announced today that it has closed on a series of related balance sheet and cash flow optimization transactions initiated last week. The net result of these strategic transactions is significantly favorable for the Company and its shareholders as it reduces annual interest expense, lowers leverage, extends the Company's debt maturity profile and increases its liquidity. A key benefit of these related transactions is that assuming the newly issued 1.125% exchangeable senior notes due 2027 (the "2027 Exchangeable Notes") are settled entirely in cash, at the Company's election, the Company will benefit from a net reduction in its diluted shares outstanding of approximately 5.2 million shares.



"The completion of these balance sheet and cash flow optimization transactions represents an important milestone for our Company as we have now taken the first significant step forward in executing on our post-crisis financial recovery plan," said Mark A. Kempa, Executive Vice President and Chief Financial Officer of Norwegian Cruise Line Holdings Ltd. "We are focused on maximizing value for allof our key stakeholders and we believe this transaction delivers long-term benefits from multiple perspectives by reducing our annual interest expense, reducing our outstanding debt, extending our debt maturities and increasing liquidity, all while providing additional flexibility to limit future shareholder dilution. While our ability to clearly and fully communicate the significant and expected multiple benefits of these transactions to our valued shareholders was limited by contractual and legal restrictions prior to completion of these transactions, we are pleased to now be able to convey the highlights of the transactions to our various stakeholders."

Key elements of the optimization transactions include:

* Issuance of $1,150 million aggregate principal amount of 2027 Exchangeable Notes, which includes the full exercise of the greenshoe option. The initial exchange rate per $1,000 principal amount of 2027 Exchangeable 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.

* Repurchase of $715.9 million aggregate principal amount of its 6.00% exchangeable senior notes due 2024 (the "2024 Exchangeable Notes") for approximately $1.4 billion.

* Issuance of 46,858,854 ordinary shares to certain existing holders of the 2024 Exchangeable Notes at a price of $23.64 per share, resulting in net proceeds of approximately $1.1 billion.

* A portion of the net proceeds from the issuance of the ordinary shares will be used to redeem $236.25 million aggregate principal amount of the Company's 12.25% senior secured notes due 2024 and $262.50 million aggregate principal amount of the Company's 10.250% senior secured notes due 2026.

The Company anticipates that the expected net effect of the optimization transactions, which are outlined as follows, will increase shareholder value:

Estimated Annualized Interest Expense Savings: Approximately $86 millionReduction in Diluted Shares Outstanding1: Approximately 5.2 millionDebt Principal Reduction: Approximately $65 millionAdditional Liquidity (After Estimated Expenses and Approximately $259Fees): million

By repurchasing the majority of the 2024 Exchangeable Notes, which are required to be settled entirely in ordinary shares of the Company, the Company was able to remove approximately 52.1 million shares from its diluted share count, which was partially offset by the issuance of approximately 46.9 million shares in the equity offering. The 2027 Exchangeable Notes may be settled at the Company's election, in cash, ordinary shares or a combination of cash and ordinary shares, preserving flexibility for the Company to manage shareholder dilution in the future. Assuming the Company elects, in accordance with the terms of the indenture governing the 2027 Exchangeable Notes, to settle the 2027 Exchangeable Notes entirely in cash, the net result from the optimization transactions would be a reduction in diluted shares outstanding of approximately 5.2 million shares.

For additional details on the strategic rationale and expected impact of these balance sheet optimization transactions please view an investor presentation, which can be found at https://www.nclhltd.com/investors and here.