What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2020-07-10 compared with 2020-04-03 · 69 added, 81 removed, 86 unchanged (64% of the section changed)

Risk Factors .

The risk factors in this Form 10-Q below should be carefully considered, including the risk factors discussed in "Risk Factors" and other risks discussed in our Form 10-K, our Form 10-Q for the quarter ended February 29, 2020, and other filings with the SEC since the date of the Form 10-K.

These risks could materially and adversely affect our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity, and stock price.

Our business also could be affected by risks that we are not presently aware of or that we currently consider immaterial to our operations.

• COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations.

The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity, and stock price .

The spread of COVID-19 and the recent developments surrounding the global pandemic are having material negative impacts on all aspects of our business.

We have implemented a voluntary pause of our global fleet cruise operations across all brands and such pause may be prolonged.

As of March 31, 2020, substantially all our ships are at port and all are expected to dock by the end of April.

We have implemented a pause of our guest cruise operations across all brands and such pause may be prolonged.

In addition, we have been, and will continue to be further, negatively impacted by related developments, including heightened governmental regulations and travel advisories, recommendations by the U.S.

Department of State and the Centers for Disease Control and Prevention, and travel bans and restrictions, each of which has impacted, and is expected to continue to significantly impact, global guest sourcing and our access to various ports of call.

To date we have incurred, and expect to continue to incur, significant costs as we bring currently ongoing cruises to a conclusion, provide air transportation to return our passengers to their home destinations and assist some of our crew that is, or will be upon docking, unable to return home, with food and housing.

We will continue to incur COVID-19 related costs as we sanitize our ships and implement additional hygiene-related protocol to our ships.

Department of State, the Centers for Disease Control and Prevention and other regulatory authorities, and travel bans and restrictions, each of which has impacted, and is expected to continue to significantly impact, global guest sourcing and our access to various ports of call.

To date we have incurred, and expect to continue to incur, significant costs as we pause our guest cruise operations, provide air transportation to return our passengers to their home destinations, repatriate shipboard team members and assist some of our crew that is, or will be upon docking, unable to return home, with food and housing.

We will continue to incur COVID-19 related costs as we sanitize our ships and implement additional hygiene-related protocol to our ships, as well as prepare for the resumption of guest operations.

In addition, the industry may be subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks, which requirements may be costly and take a significant amount of time to implement across our global fleet cruise operations.

Due to the outbreak of COVID-19 on some of our ships, and the resulting illness and loss of life in certain instances, we have been the subject of negative publicity which could have a long term impact on the appeal of our brands, which would diminish demand for vacations on our vessels.

We cannot predict how long the negative impact of recent media attention on our brands will last, or the level of investment that will be required to address the concerns of potential travelers through marketing and pricing actions.

We have received, and expect to continue to receive, lawsuits from passengers aboard the Grand Princess voyage in February 2020.

We may receive additional lawsuits stemming from COVID-19.

We cannot predict the quantum or outcome of any such proceedings and the impact that they will have on our financial results, but any such impact may be material.

We also remain subject to extensive, complex, and closely monitored obligations under the court-ordered environmental compliance plan supervised by the U.S.

We cannot predict how long the negative impact of media attention on our brands will last, or the level of investment that will be required to address the concerns of potential travelers through marketing and pricing actions.

We have received, and may continue to receive, lawsuits, other governmental investigations and other actions stemming from COVID-19.

We cannot predict the quantum or outcome of any such proceedings, some of which could result in the imposition of civil and criminal penalties in the future, and the impact that they will have on our financial results, but any such impact may be material.

We also remain subject to extensive, complex, and closely monitored obligations under the court-ordered

environmental compliance plan supervised by the U.S.

District Court for the Southern District of Florida, as a result of the previously disclosed settlement agreement relating to the violation of probation conditions for a plea agreement entered into by Princess Cruises and the U.S.

1 unchanged sentence

We remain fully committed to satisfying those obligations.

However, COVID-19 presents enormous challenges for the Company, which could result in material adverse impacts.

COVID-19 presents enormous challenges for the Company, which could result in material adverse impacts.

We have insurance coverage for certain liabilities, costs and expenses related to COVID-19 through our participation in Protection and Indemnity (“P&I”) clubs, including coverage for direct and incremental costs including, but not limited to, certain quarantine expenses and for certain liabilities to passengers and crew.

3 unchanged sentences

We have no insurance coverage for loss of revenues or earnings from our ships or other operations.

We have a total of 16 cruise ships scheduled to be delivered through 2025, including four during the remainder of fiscal 2020.

We believe the effects of COVID-19 on the shipyards where our ships are under construction will result in a delay in ship deliveries, which we cannot predict and may be prolonged.

We have a total of 16 cruise ships expected to be delivered through 2025, including several during the remainder of fiscal 2020.

The effects of COVID-19 on the operations of shipyards where our ships are under construction will result in a delay in ship deliveries, which we cannot predict and may be prolonged.

We cannot predict when any of our ships will begin to sail again and ports will reopen to our ships.

3 unchanged sentences

We may be adversely impacted as a result of the adverse impact our partners suffer.

We have never previously experienced a complete cessation of our cruising operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our brands and future prospects is uncertain.

We have never previously experienced a complete cessation of our guest cruise operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our brands and future prospects is uncertain.

In particular, we cannot predict the impact on our financial performance and our cash flows required for cash refunds of deposits as a result of the pause in our global fleet cruise operations, which may be prolonged, and the public’s concern regarding the health and safety of travel, especially by cruise ship, and related decreases in demand for travel and cruising.

1 unchanged sentence

As a result, we expect a net loss on both a U.S.

GAAP and adjusted basis for the fiscal year ending November 30, 2020, and our ability to forecast our cash inflows and additional capital needs is hampered.

As a result of all of the foregoing, we may be required to raise additional capital and our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings.

As a result of COVID-19, in March and April 2020, Moody's and S&P Global downgraded our long-term issuer and senior unsecured debt ratings.

GAAP and adjusted basis for the second half of 2020, and our ability to forecast our cash inflows and additional capital needs is hampered.

As a result of all of the foregoing, we have raised, and may be required to further raise, additional capital.

Our access to and cost of financing depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings.

As a result of COVID-19's effects on our liquidity, in May and June 2020, Moody's and S&P Global further downgraded our long-term issuer rating and our short-term rating, which prevents us from issuing additional commercial paper except for government-backed programs.

In addition, our long-term ratings were placed on review for further downgrade by both rating agencies.

Our short-term commercial paper credit ratings were downgraded and also placed on review for further downgrade.

If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt financing will be further negatively impacted.

11 unchanged sentences

• Any potential government disaster relief assistance could impose significant limitations on our corporate activities and may not be on terms favorable to us .

If any government agrees to provide disaster relief assistance, it may impose certain requirements on the recipients of the aid including restrictions on executive officer compensation, share buybacks, dividends, prepayment of debt and other similar restrictions until the aid is repaid or redeemed in full.

If any government agrees to provide disaster relief assistance, it may impose certain requirements on the recipients of the aid including restrictions on executive officer compensation, share buybacks, dividends, prepayment of debt, incurrence of additional indebtedness and other similar restrictions until the aid is repaid or redeemed in full.

We cannot assure you that any such government disaster relief assistance, if passed, will not significantly limit our corporate activities or be on terms that are favorable to us or at all.

Such restrictions and terms could adversely impact our business and operations.

• Any failure to protect our intellectual property rights could impair our brands, negatively impact our business or both .

Our success and ability to compete depend in part on protecting our brands and other intellectual property, including our ability to use trademarks in order to capitalize on name-recognition and increase awareness of our brands.

We rely on a combination of trademark, patent, copyright, trade secrets and other rights, as well as confidentiality procedures and contractual provisions to protect our intellectual property and proprietary technology.

The steps we take to protect our intellectual property rights, however, may not be adequate.

For example, not all of the trademarks that are used in our business have been registered in all countries in which we do business or may do business in the future, and some of the trademarks may never be registered in all of these countries.

Rights in trademarks are generally national in character, and are obtained on a country-by-country basis by the first person to obtain protection through use or registration in that country in connection with specified products and services.

Some countries’ laws do not protect unregistered trademarks at all, or make them more difficult to enforce, and third parties may have filed for trademarks that are the same or similar to our brands in countries where we have not registered our brands as trademarks.

Accordingly, we may not be able to adequately protect our brands everywhere we do business and use of our brands may result in liability for trademark infringement, trademark dilution or unfair competition.

In addition, the laws of some foreign countries do not protect intellectual property to the same extent as the laws of the United States, and we may not receive registrations for all of our pending trademark, patent or copyright applications, and existing or future registrations may not provide sufficient protection or competitive advantages for our products and services.

In the event that we are not able to obtain grants or registrations in respect of such intellectual property applications, we may not be able to obtain statutory protections available under the relevant intellectual property laws, which could limit our ability to protect our intellectual property and impede our marketing efforts.

In addition, we cannot be certain that our products and technology do not and will not infringe the intellectual property rights of others, and third parties may seek to challenge, invalidate or circumvent our trademark, patent, copyright, trade secrets and other rights or applications for any of the foregoing.

Furthermore, it is difficult for us to monitor unauthorized uses of our intellectual property, and if we become aware of a third party’s unauthorized use or misappropriation of our intellectual property, it may not be practicable, effective or cost-efficient for us to enforce our intellectual property and contractual rights fully.

In order to protect or enforce our intellectual property rights, we may be required to spend significant resources.

Regardless of the merits of any such claim as a plaintiff or defendant, litigation could be costly, time consuming, distracting and we may not prevail, which could result in the impairment or loss of intellectual property rights.

To the extent claims against us are successful, we may have to pay substantial monetary damages (including treble damages), or discontinue or modify certain products or services that are found to be in violation of another party’s rights.

We may have to seek a license to continue offering our products or technology, which may not be available on reasonable terms, or at all.

Our failure to secure, protect and enforce our intellectual property rights could materially adversely affect our business.

• We are subject to casualty risks that could materially adversely affect our business .

We use a combination of insurance and self-insurance to cover a number of risks associated with owning and operating our vessels and other non-ship related risks.

There are, however, certain losses, including losses resulting from terrorist acts and certain environmental disasters, that may be either uninsurable or not economically insurable, in whole or in part.

As a result, we cannot assure you that the insurance proceeds will compensate us fully for our losses.

If we suffer a total or partial loss, we cannot assure you that any insurance proceeds received by us will be sufficient to satisfy all of our obligations.

Moreover, we do not carry coverage related to loss of earnings or revenues from our ships or other operations.

In the event of a total or partial loss to any of our vessels, such vessels and certain items of equipment inventory may not be easily replaced.

Accordingly, even though there may be insurance coverage, the extended period needed to replace such vessels or items could cause significant losses.

• Our substantial debt could adversely affect our financial health and operating flexibility .

We have a substantial amount of debt and significant debt service obligations.

As of February 29, 2020, on an as-adjusted basis after giving effect to the draw on our Existing Multicurrency Facility and the Secured Notes and Convertible Notes offerings, we would have had total gross debt of $21,841 million.

Our substantial debt could have important negative consequences for us.

Our substantial debt could:

13 unchanged sentences

a variable rate of interest.

• Despite our leverage, we may incur more debt, which could adversely affect our business and prevent us from

fulfilling our obligations with respect to our debt.

• Despite our leverage, we may incur more debt, which could adversely affect our business and prevent us from fulfilling our obligations with respect to our debt.

We may be able to incur substantial additional debt in the future.

Although the instruments governing our existing indebtedness contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that could be incurred in compliance with these restrictions could be substantial and a portion of such debt could be secured.

The instruments governing our existing indebtedness do not prevent us from incurring liabilities that do not constitute “Indebtedness” as defined therein.

If new debt is added to our existing debt levels, our business could be adversely affected which may prevent us from fulfilling our obligations with respect to our debt.

1 unchanged sentence

In addition, if we fail to comply with any of these restrictions, it could have a material adverse effect on the Company .

Our Existing Multicurrency Facility, the indenture governing the Secured Notes and certain of our other debt instruments limit our flexibility in operating our business.

For example, the indenture governing the Secured Notes will restrict or limit the ability of Carnival Corporation, Carnival plc and certain of their respective subsidiaries to, among other things:

The Secured Term Loan Facility, the indenture governing the 2023 Secured Notes, the Revolving Facility Agreement and certain of our other debt instruments limit our flexibility in operating our business.

For example, the Secured Term Loan Facility and the indenture governing the 2023 Secured Notes restrict or limit the ability of Carnival Corporation, Carnival plc and certain of their respective subsidiaries to, among other things:

◦ incur or guarantee additional indebtedness;

◦ pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments;

◦ make investments;

◦ make certain investments;

◦ consummate certain asset sales;

2 unchanged sentences

◦ consolidate, merge or transfer all or substantially all of our assets.

All of these limitations will be subject to significant exceptions and qualifications.

Despite these exceptions and qualifications, we cannot assure you that the operating and financial restrictions and covenants in our Existing Multicurrency Facility, the indenture governing the Secured Notes and certain of our other debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest.

All of these limitations are subject to significant exceptions and qualifications.

Despite these exceptions and qualifications, we cannot assure you that the operating and financial restrictions and covenants in our Secured Term Loan Facility, the indenture governing the 2023 Secured Notes, the Revolving Facility and certain of our other debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest.

Any future indebtedness may include similar or other restrictive terms.

1 unchanged sentence

These include prevailing economic, financial and industry conditions.

If we breach any of these covenants or restrictions, we could be in default under the terms of our Existing Multicurrency Facility and certain of our other debt facilities and the relevant lenders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing that debt.

Such a breach could also result in an event of default under the indenture governing the Secured Notes.

If the debt under the Existing Multicurrency Facility, the guarantees or certain of our other debt instruments that we enter into were to be accelerated, our assets may be insufficient to repay in full our debt.

If we breach any of these covenants or restrictions, we could be in default under the terms of our Secured Term Loan Facility, the indenture governing the 2023 Secured Notes, the Revolving Facility and certain of our other debt facilities and the relevant lenders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral, if any, securing that debt.

If the debt under the Secured Term Loan Facility, the indenture governing the 2023 Secured Notes, the Revolving Facility or certain of our other debt instruments that we enter into were to be accelerated, our assets may be insufficient to repay in full our debt.

Borrowings under other debt instruments that contain cross-default provisions also may be accelerated or become payable on demand.

In these circumstances, our assets may not be sufficient to repay in full our indebtedness then outstanding.

• We will require a significant amount of cash to service our debt and sustain our operations.

• We require a significant amount of cash to service our debt and sustain our operations.

Our ability to generate cash depends on many factors beyond our control, and we may not be able to generate cash required to service our debt .

Our ability to meet our other debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash.

Our ability to meet our debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash.

This will be affected by our ability to successfully implement our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic.

If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets.

We cannot assure you that we will be able to generate sufficient cash through any of

the foregoing.

We cannot assure you that we will be able to generate sufficient cash through any of the foregoing.

If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt.

See “Recent Developments”, “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources” in our Annual Report and “Update on Liquidity and Management’s Plans” in our current report on Form 8-K as filed on March 31, 2020.

Refer to “Liquidity, Financial Condition and Capital Resources".

• Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly .

Borrowings under the Existing Multicurrency Facility and certain of our other facilities are at variable rates of interest and expose us to interest rate risk.

Borrowings under the Secured Term Loan Facility, the Revolving Facility Agreement and certain of our other facilities are at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on certain of our variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

In addition, in July 2017, the U.K.

Financial Conduct Authority announced that it intends to stop collecting LIBOR rates from banks after 2021.

The announcement indicates that LIBOR will not continue to exist on the current basis.

We are unable to predict the effect of any changes to LIBOR, the establishment and success of any alternative reference rates, or any other reforms to LIBOR or any replacement of LIBOR that may be enacted in the United Kingdom or elsewhere.

Such changes, reforms or replacements relating to LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, derivatives or other financial instruments or extensions of credit held by us.

As such, LIBOR-related changes could affect our overall results of operations and financial condition.

In addition, in July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it will no longer persuade or compel banks to submit LIBOR rates after 2021.

It is unclear whether or not, at that time, LIBOR will cease to exist and a satisfactory replacement rate developed or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of, among other entities, large U.S.

financial institutions, is considering replacing U.S.

dollar LIBOR with a new index that measures the cost of borrowing cash overnight, backed by U.S.

Treasury securities (“SOFR”).

SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.

Whether or not SOFR attains market traction as a LIBOR replacement rate remains in question.

As such, the future of LIBOR at this time is uncertain.

If LIBOR ceases to exist, the level of interest payments on the portion of our indebtedness that bears interest at variable rates would be affected, which may adversely impact the amount of our interest payments under such debt.

We have entered into, and in the future we will continue to enter into, interest rate swaps that involve the exchange of floating for fixed-rate interest payments to reduce interest rate volatility.

However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any such swaps may not fully mitigate our interest rate risk, may prove disadvantageous, or may create additional risks.

Each 0.125% change in interest rates would result in approximately $9 million change in annual interest expense on our variable interest debt instruments that were outstanding as of November 30, 2019, including the impact of our interest rate swaps, and the Existing Multicurrency Facility.

• As a result of the COVID-19 outbreak, we have paused our global fleet cruise operations, and if we are unable to re-commence normal operations in the near-term, we may be out of compliance with a maintenance covenant in certain of our debt facilities

Under the terms of certain of our debt facilities with an aggregate outstanding principal amount of $8.4 billion of indebtedness as of February 29, 2020, we are required to maintain an interest coverage ratio (EBITDA to consolidated net interest charges for the most recently ended four fiscal quarters) of not less than 3.0 to 1.0 at the end of each fiscal quarter.

As a result of the COVID-19 outbreak, we have paused our global fleet cruise operations and if we are unable to re-commence normal operations in the near-term, we may be out of compliance with our interest coverage ratio covenant as of the end of our third fiscal quarter or in future periods.

If we expected to be out of compliance, we expect to seek waivers from the lenders under these numerous facilities prior to any covenant violation.

Any covenant waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities.

• As a result of the COVID-19 outbreak, we have paused our guest cruise operations, and if we are unable to re-commence normal operations in the near-term, we may be out of compliance with a maintenance covenant in certain of our debt facilities as of May 31, 2021.

At May 31, 2020, we were in compliance with all of our debt covenants.

Under the terms of certain of our debt facilities, we are required to maintain minimum debt service coverage (EBITDA to consolidated net interest charges for the most recently ended four fiscal quarters) of not less than 3.0 to 1.0 at the end of each fiscal quarter.

We have entered into supplemental agreements or side letters to amend our agreements with respect to this covenant to:

• Waive compliance, in conjunction with the Debt Holiday, for our export credit facilities through March 31, 2021, August 31, 2021 or December 31, 2021, as applicable.

We will be required to comply beginning with the next testing date of May 31, 2021, November 30, 2021 or February 28, 2022, respectively.

• Waive compliance through November 30, 2021 for certain of our bank loans.

We will be required to comply beginning with the next testing date of February 28, 2022.

• Waive compliance for the remaining applicable bank loans through their respective maturity dates.

Even though we have waivers in place with respect to this covenant, if we were unable to re-commence normal operations in the near term, we may be out of compliance with our minimum debt service coverage covenant as of May 31, 2021 or in future periods for certain agreements.

If we expected to be out of compliance, we would again seek waivers from the lenders under the applicable facilities prior to any covenant violation.

Covenant waivers have led and may continue to lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities.

Our ability to provide additional lender protections under these facilities, including the granting of security interests in collateral, will be limited by the restrictions in our indebtedness.

2 unchanged sentences

As a consequence, we would need to refinance or repay the applicable debt facility or facilities, and would be required to raise additional debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

If we were to be unable to obtain a covenant waiver under any one or more of these debt

facilities, there can be no assurance that we would be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

If we were to be unable to obtain a covenant waiver under any one or more of these debt facilities, there can be no assurance that we would be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

With respect to each of these debt facilities, if we were not to obtain a waiver or refinance or repay such debt facilities, it would lead to an event of default under such facilities, which could lead to an acceleration of the indebtedness under such debt facilities.

1 unchanged sentence

As a result, the failure to obtain the covenant waivers described above would have a material adverse effect.

Additional risk factors that affect our business and financial results are discussed in “Item 1A.

Risk Factors,” included in the Form 10-K.

We wish to caution the reader that the risk factors discussed in “Item 1A.

Risk Factors,” included in the Form 10-K, and those described elsewhere in this report or other Securities and Exchange Commission filings, could cause future results to differ materially from those stated in any forward-looking statements.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

• The covenants in certain of our debt facilities may require us to secure those facilities in the future.

Certain of our debt facilities contain provisions which may require that we provide a security interest in certain assets.

In certain of our debt facilities, there is a requirement that if the credit rating of our senior indebtedness should fall below investment grade (which occurred on June 24, 2020) and at such time we have granted liens or security interests in respect of indebtedness in an amount exceeding 25% of our total assets (excluding for these purposes the value of any intangible assets) as shown in our most recent Consolidated Balance Sheet, then we will be required to provide a first-priority security interest in certain designated assets.

In addition, under our export credit facilities, there is a requirement that if a security interest or lien is granted in respect of a vessel to secure borrowed money under certain other debt facilities, then a first-priority security interest will be required to be provided over certain designated vessels.

If the events described above were to occur, we may be unable to comply with this requirement and expect to seek waivers from the lenders under the relevant facilities.

Any such waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities.

Our ability to give additional lender protections under these facilities, including the granting of security interests in collateral, will be limited by the restrictions in our

indebtedness and security interest we have already granted.

If we were not able to obtain a waiver, the occurrence of such events may cause our level of secured indebtedness to increase substantially.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors