Royal Caribbean, Finland in Oasis of the Seas Financing Talks

March 2, 2009 has confirmed that Royal Caribbean Cruise Lines (RCCL) is negotiating with the Finnish government to secure additional loan guarantees or even direct government financing for the 220,000-ton, 5,400-passenger Oasis of the Seas. As we reported last week, RCCL's annual Form 10-K, a regulatory filing sent to all investors, mentioned the risk of failure to secure financing for Oasis of the Seas and sister ship Allure of the Seas. Oasis of the Seas, the largest (by some 40 percent) and most innovative cruise ship ever, is set to debut in December of this year.

On Friday, Bloomberg reported that RCCL and Finland were in discussions over financing of the ship. RCCL's investor relations chief Ian Bailey told the business publication that "the government's larger role is aimed at making the $1.24 billion project more attractive to private lenders." Securing additional guarantees from the Finnish government would "send a strong signal and provide more reassurance [to potential lenders]," especially important given the current economic climate and near frozen international credit market.

Despite concerns, Bailey told Bloomberg that he "is comfortable we're going to be able to get this financing done."

As of now, Royal Caribbean has government financing guarantees from Finnvera, the export credit agency of Finland, for 80 percent of the financed amount of the Oasis-class ships -- meaning the Finnish government will back 80 percent of the loans RCCL secures, not that the government itself is doing the loaning. The actual loans are secured from banks and private lenders. In the Bloomberg piece, Bailey noted that it's normal for the company to begin securing loans about six months before delivery. In this case, RCCL is doing it more than nine months out.

A spokesman from STX Europe in Turku, Finland -- the shipyard where Oasis is being built -- echoed Bailey's sentiments. Martin Landtman, head of STX Europe's Finnish shipyards, told Bloomberg that "we are aware that Royal Caribbean is having these talks.... We are not concerned or worried about the situation in any way."

Royal Caribbean has yet to respond to Cruise Critic's requests for additional comment.

Stay tuned.

--by Dan Askin, Assistant Editor