Are Oasis of the Seas and other Royal Caribbean new-builds in financial trouble? That's the buzz being generated by Royal Caribbean Cruises Ltd.'s recent annual performance report, which specifically mentions the potential risk of not securing proper funding for the two under-construction Oasis-class ships, Oasis of the Seas and Allure of the Seas. The 220,000-ton, 5,400-passenger Oasis of the Seas, the largest and most innovative cruise ship ever, is scheduled to debut on December 1, 2009; sister ship Allure of the Seas is due out in the summer of 2010.

In the Form 10-K report, required of all publicly traded companies by the Security and Exchange Commission, RCCL said that it has "commitments for government financing guarantees from Finnvera, the export credit agency of Finland [Oasis is under construction at Finland's STX Europe], for 80 percent of the financed amount of the Oasis-class ships," but that it "must still secure financing for Oasis of the Seas and Allure of the Seas" to fill the gap.

The filing went on: "Although we believe that we will be able to do so, there can be no assurance that we will be able to do so or that we will be able to do so on acceptable terms." The price tag for Oasis of the Seas is estimated at $1.2 billion.

Representatives from Royal Caribbean could not be reached by press time.

It's important to note that risks are listed because they are possible, not necessarily probable. In looking at the filing, potential financing issues regarding Oasis and Allure were one of nearly 20 risks listed on the 10-K that could adversely affect Royal Caribbean's bottom line. Others included terrorist and pirate attacks, failure of international banks, loss of qualified workers, change in tax status, and so on. Such inclusions are commonplace in 10-K filings, which are meant to sufficiently warn investors of general potential risks.

So what kind of additional financing is RCCL seeking for Oasis? RCCL mentioned in the filing that it is "exploring opportunities to increase the guarantee level [from the Finnish government] and obtain partial funding support from the relevant export credit agencies."

It's interesting to note that the remaining Solstice-class ships being built by Celebrity Cruises, another Royal Caribbean Cruises Ltd. brand, are already fully funded according to the filing. Those ships received a higher proportion of financial guarantee from Germany, where they're being built; HERMES, the export credit agency of the German government, has guaranteed 95 percent funding compared to Finnvera's 80.

Stay tuned.

--by Dan Askin, Assistant Editor