UBS and Lehman Brothers are ready to set sail with a $400 million senior secured credit facility for Oceania Cruises. The bank meeting is scheduled for tomorrow in New York to launch the five-year, $25 million revolver; six-year, $300 million first-lien term loan and seven-year, $75 million second-lien term loan. Pricing on the deal has not yet been determined.
The financing will be used by the Miami-based cruise operator to acquire the three sailing vessels the company currently leases: Regatta, Insignia and Nautica, all of which hold 684 guests. A company spokesman declined to comment on the price of the transaction and mentioned the company has very minimal existing debt. "Once we acquire the three existing vessels, our next step is to finalize our contracts with two new boats that would take delivery in 2009 and 2010," he said. He said the company is looking at a variety of options for financing the new vessels including equity financing and traditional lending, but would not comment on specifics.
Standard & Poor's rated the proposed facility's first lien B with a 2 recovery rating and the second lien CCC+ with a recovery rating of 5. The ratings agency cited Oceania's vulnerability within the cruise sector due to its small fleet and niche marketing, as well as minimal cash flow diversity. Moody's Investors Service rated the credit's first lien B1 with a loss-given-default of 3 and rated the second lien Caa1 with an LGD of 6.
Oceania chose UBS and Lehman Brothers to lead the credit facility because of their reputation, the spokesman said. "Both banks have outstanding reputations and worked very hard for our business," he said. The company talked to a variety of banks before choosing the two leads. "They seem to have a very good understanding of not just the cruise industry but the model under which we run out business. We dug out a very unique niche for ourselves and there's a lot of thinking in the industry that one business model fits all and that's not a line of thought that we subscribe to here." Oceania operates passenger vessels that are focused on the destination oriented, upper premium cruise market.