Star Cruises is tapping the market for a $225 million eight year facility through arrangers HSBC and Den Norske Bank. The borrowing entity will be subsidiary Norwegian Sun, a cruise liner owned by Star Cruises, with the parent providing a guarantee.
Invitations were sent out on Tuesday offering banks a margin of 140bp over Libor and front end fees on three levels. Lead arrangers earn 60bp for $40 million tickets, arrangers taking $25 million to $39 million gain 50bp and co-arrangers receive 35bp for commitments of $15 million to $24 million.
Bankers had a close look at the Star Cruises credit story last year when HSBC ran the books on a $450m three and seven year financing. A total of 11 banks joined the facility and the arranger was able to achieve a selldown of almost 80%.
Dealogic figures show that this fundraising paid an all-in of 189bp for a blended average life of 4.15 years, substantially more than the 150.7bp offered on the new deal for an average life of 5.6 years. Market observers also point out that the $300m seven year tranche paid just under 200bp for an average life of 5.25 years, 50bp more than the current transaction pays despite the longer tenor.
One banker commented that this pricing level seems tight given the impact that the Sars virus has had on holiday travel in general and in the Asian region in particular. In addition the borrower recently announced a loss of $5 million for the first quarter of 2003, before the negative effects from Sars even began to bite.
The results highlight that while passenger numbers have been rising, operating expenses and other costs have been rocketing. Analysts believe that this will discourage investors from booking the asset as they fear there is more bad news to come.
Officials close to the transaction point out that these funds will refinance an earlier facility for the purchase of the Norwegian Sun liner in 2001. This ship operates in the US where turnover increased by some 16% in the first quarter.
Market observers attribute the increase in costs to the undergoing fleet expansion and the higher oil prices due to the Iraq war. The borrower is also a well known name in the market and has raised funds on several previous occasions for both working capital and to finance the construction of liners.
Many of the existing lenders have already expressed strong interest in the new facility and are likely to sign up to the new deal. The Star Cruises family incorporates the original Asian routes and liners that sail from Taiwan, Hong Kong, South Korea, Singapore and Australia to a variety of Asian destinations. Recently the group added Norwegian Cruise Lines which operates in Europe and the Americas and Orient Lines which features Mediterranean cruises as well as Europe to Australia routes.
Responses are due in three weeks.
