Royal Caribbean seeks finance

New York: Royal Caribbean Cruises, the company building the world's largest cruise ship, is in talks to obtain increased loan guarantees from Finland and possibly a direct government loan to help finance the vessel's delivery.

The Oasis of the Seas is scheduled to be completed by December. Miami-based Royal Caribbean, the world's second-largest cruise operator, "is comfortable we're going to be able to get this financing done", investor relations chief Ian Bailey said.

The government's larger role is aimed at making the $1.24 billion project more attractive to private lenders, Bailey said in a telephone interview. Discussions with lenders over Oasis, under construction by STX Europe's Finnish shipyards, are ahead of Royal Caribbean's normal schedule, he said.

"We're taking every possible action to make this the strongest possible basket for the lending groups," Bailey said. "Obviously a higher guarantee and direct participation from the government entity is going to send a strong signal and provide more reassurance."

Near-frozen credit markets have prompted Finland and other nations to boost state financing and other supports for businesses. The Oasis and $1.4 billion sister ship Allure of the Seas, due late next year, are part of about $5.4 billion of new ships on order that Royal Caribbean will have to finance, according to a regulatory filing.

Finnvera, a state-owned company that provides export credits to Finnish businesses, agreed to guarantee 80 per cent of Royal Caribbean's loans to buy Oasis and Allure when the shipbuilding contracts were signed.

The agency has given loan guarantees of more than 80 per cent in exceptional cases "but it's not a routine thing that we do", Topi Vesteri, Finnvera's executive vice-president responsible for export credit guarantees, said in an interview. He declined to discuss whether the agency was in talks with Royal Caribbean.

"It used to be that an 80 per cent sovereign guarantee was all that you would need," Bailey said. "If you can provide a higher number, it's going to be beneficial to the lenders."

Royal Caribbean uses a broad group of lenders in the US and Europe to finance its vessels, Bailey said. The company usually begins putting syndicated loans together six months before delivery, so "the fact that we're already in negotiations with our lending group and with Finnvera is an indication that we're well ahead of the timeframe."

The Finnish government this year allowed Finnvera to finance export credits under a temporary programme to help the country's trade. Finnvera would finance only part of the credits together with banks, and Oasis could "in theory" qualify, Vesteri said. No loans have been extended yet, he said.

Demand for Finnvera's export credit guarantees has surged almost 400 per cent in the past year, Chief Executive Officer Pauli Heikkilae said.

"We began seeing applications for projects in hundreds of millions of euros, and we are being asked for funding as well as guarantees," Heikkilae said in an interview. "Banks don't have the capability to fin-ance things alone without guarantees anymore."