What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-09 · 139 added, 375 removed, 413 unchanged (55% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Passenger ticket

9 unchanged sentences

Depreciation and amortization

Impairment loss

Total other operating expense

Operating loss

( 1,865,476 )

( 2,937,255 )

Non-operating income (expense)

Interest expense, net

( 1,122,905 )

Other income (expense), net

Total non-operating income (expense)

( 1,065,441 )

Net loss before income taxes

( 1,368,464 )

( 3,292,638 )

Income tax benefit (expense)

( 2,933,866 )

Income tax expense

( 1,370,192 )

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

( 1,370,192 )

( 3,273,581 )

Other comprehensive income (loss):

6 unchanged sentences

( 1,421,293 )

( 3,350,095 )

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(in thousands, except share data)

September 30,

Current assets:

Cash and cash equivalents

Short-term investments

Accounts receivable, net

16 unchanged sentences

Ordinary shares, $ 0.001 par value;

980,000,000 shares authorized, 370,032,455 shares issued and outstanding at September 30, 2021 and 490,000,000 shares authorized, 315,636,032 shares issued and outstanding at December 31, 2020

980,000,000 shares authorized;

419,100,690 shares issued and outstanding at March 31, 2022 and 416,891,915 shares issued and outstanding at December 31, 2021

Additional paid-in capital

Accumulated other comprehensive income (loss)

Retained earnings (deficit)

Accumulated deficit

( 5,779,120 )

( 4,796,406 )

Total shareholders’ equity

4 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

( 1,370,192 )

( 3,273,581 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

Impairment loss

Deferred income taxes, net

(Gain) loss on derivatives

Gain on derivatives

Loss on extinguishment of debt

10 unchanged sentences

Net cash used in operating activities

( 2,152,351 )

( 1,918,626 )

Cash flows from investing activities

Additions to property and equipment, net

Purchases of short-term investments

Proceeds from maturities of short-term investments

Cash paid on settlement of derivatives

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

7 unchanged sentences

Net cash provided by financing activities

Effect of exchange rates on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

( 1,365,666 )

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

4 unchanged sentences

(in thousands)

Three Months Ended September 30, 2021

Comprehensive

Shareholders’

Income (Loss)

Balance, June 30, 2021

( 2,377,800 )

Share-based compensation

Issuance of shares under employee related plans

Net share settlement of restricted share units

Other comprehensive loss, net

Balance, September 30, 2021

( 3,223,685 )

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Comprehensive

2 unchanged sentences

Balance, December 31, 2021

Share-based compensation

Issuance of shares under employee related plans

Common share issuance proceeds, net

Net share settlement of restricted share units

Cumulative change in accounting policy

Other comprehensive loss, net

( 4,796,406 )

( 2,933,866 )

Balance, September 30, 2021

( 3,223,685 )

The accompanying notes are an integral part of these consolidated financial statements.

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(in thousands)

Three Months Ended September 30, 2020

Comprehensive

Shareholders’

Income (Loss)

Balance, June 30, 2020

( 1,253,926 )

Share-based compensation

Issuance of shares under employee related plans

Common share issuance proceeds, net

Net share settlement of restricted share units

Other comprehensive income, net

Balance, September 30, 2020

Balance, March 31, 2022

( 5,779,120 )

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Comprehensive

2 unchanged sentences

Balance, December 31, 2020

( 1,253,926 )

Share-based compensation

2 unchanged sentences

Net share settlement of restricted share units

Beneficial conversion feature

Cumulative change in accounting policy

2 unchanged sentences

( 1,370,192 )

Balance, September 30, 2020

Balance, March 31, 2021

( 1,660,011 )

13 unchanged sentences

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands.

As of September 30, 2021, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027.

Due to the novel coronavirus (“COVID-19”), we temporarily suspended all global cruise voyages from March 2020 until July 2021, when we resumed cruise voyages on a limited basis.

As of March 31, 2022, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027.

Due to COVID-19, we temporarily suspended all global cruise voyages from March 2020 until July 2021, when we resumed cruise voyages on a limited basis.

We refer you to Note 2 – “Summary of Significant Accounting Policies” for further information.

We have six Prima Class Ships on order with expected delivery dates from 2022 through 2027.

We have one Explorer Class Ship on order for delivery in 2023.

We have two Allura Class Ships on order for delivery in 2023 and 2025.

Project Leonardo will introduce an additional six ships with expected delivery dates from 2022 through 2027.

These additions to our fleet will increase our total Berths to approximately 83,000 , which includes additional Berths we plan to add to our Project Leonardo ships, subject to certain conditions.

The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19 could result in additional delays in ship deliveries in the future, which may be prolonged.

These additions to our fleet will increase our total Berths to approximately 83,000 .

Summary of Significant Accounting Policies

1 unchanged sentence

Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across its three brands.

As of the date hereof, 11 of our ships were operating with guests on board as part of our phased return to service.

Significant events affecting travel, including COVID-19, typically have an impact on demand for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions.

We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of the pandemic.

In January 2021, we amended our Senior Secured Credit Facility to further defer certain amortization payments due prior to June 30, 2022 and to waive certain financial and other covenants through December 31, 2022.

In February 2021, we amended certain of our export-credit backed facilities to further defer amortization payments through March 31, 2022, and we amended all of our export-credit backed facilities to suspend certain financial covenants through December 31, 2022.

In connection with such amendments of our Senior Secured Credit Facility and our export-credit backed facilities, our minimum liquidity requirement was increased to $ 200 million and such requirement applies through December 31, 2022.

In March 2021, the Company received additional financing through various debt financings and an equity offering,

collectively totaling approximately $ 2.7 billion in gross proceeds.

From the proceeds, approximately $ 1.5 billion was used to extinguish debt.

In November 2021, the Company executed a $ 1 billion commitment through August 15, 2022 that provides additional liquidity to the Company.

Refer to Note 7 – “Long-Term Debt” for further details of the above transactions.

In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with our ships initially operating at reduced occupancy levels.

The Company continues to execute on the phased relaunch plans for its 28 -ship fleet.

The Company expects to have approximately 75 % of capacity operating by December 31, 2021 with the full fleet expected to be back in operation by April 1, 2022.

The timing for bringing our ships back to service, the level of occupancy on our ships and the percentage of our fleet in service will depend on a number of factors including, but not limited to, the duration and extent of the COVID-19 pandemic, further resurgences and new more contagious and/or vaccine-resistant variants of COVID-19, the availability, distribution, rate of public acceptance and efficacy of vaccines and therapeutics for COVID-19, our ability to comply with governmental regulations, port availability, travel restrictions, bans and advisories, and our ability to re-staff our ships and implement new health and safety protocols.

As of May 7, 2022, all of our ships were operating with guests on board.

Significant events affecting travel typically have an impact on demand for cruise vacations, with the full extent of the impact determined by the length of time the event influences travel decisions.

The level of occupancy on our ships and the percentage of our fleet in service will depend on a number of factors including, but not limited to, the duration and extent of the COVID-19 pandemic, further resurgences and new more contagious and/or vaccine-resistant variants of COVID-19, the availability, distribution, rate of public acceptance and efficacy of vaccines and therapeutics for COVID-19, our ability to comply with governmental regulations and implement new health and safety protocols, port availability, travel restrictions, bans and advisories, our ability to staff our ships, and the impact of other events impacting travel or consumer discretionary spending, such as inflation, the price of fuel, or Russia’s recent invasion of Ukraine and the actions taken by the United States and other governments in response to the invasion.

We believe the ongoing effects of these events on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity.

The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties.

Our principal assumptions for future cash flow projections include:

● Expected gradual phased return to service at reduced occupancy levels, increasing over time until we reach historical occupancy levels;

● Forecasted cash collections primarily upon completion of future voyages and the payment of cash refunds for any further cancellations, in accordance with the terms of our credit card processing agreements (see Note 10 - “Commitments and Contingencies”);

● Expected incremental expenses for resumption of cruise voyages, including the maintenance of and compliance with additional health and safety protocols.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and unpredictable nature of the pandemic, including its magnitude and duration.

Accordingly, the full effect of the COVID-19 pandemic on our financial performance and financial condition cannot be quantified at this time.

We have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be material changes to those estimates in future periods.

We will report a net loss for the three months and year ending December 31, 2021 and expect to report a net loss until we are able to resume regular voyages.

We have taken actions to improve our liquidity, including completing various capital market transactions and making capital expenditure and operating expense reductions, and we expect to continue to pursue other opportunities to improve our liquidity and to refinance our debt to reduce interest expense and extend maturities.

Based on these actions and assumptions regarding the impact of COVID-19, and considering our available liquidity, including cash and cash equivalents of $ 1.9 billion as of September 30, 2021, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months .

● Expected gradual return to historical occupancy levels;

● Expected increase in revenue per passenger cruise day through a combination of both passenger ticket and onboard revenue as compared to 2019;

● Forecasted cash collections in accordance with the terms of our credit card processing agreements (see Note 9 - “Commitments and Contingencies”);

● Expected continued expenses to maintain and comply with additional health and safety protocols;

● Expected increases in fuel prices and the impact of inflation.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and ongoing unpredictable nature of the events, including the magnitude and duration.

Accordingly, the full effect of the COVID-19 pandemic and other events impacting travel and consumer discretionary spending, including Russia’s recent invasion of Ukraine, on our financial performance and financial condition cannot be quantified at this time.

We have made reasonable estimates and judgments of the impact of these events within our financial statements and there may be material changes to those estimates in future periods.

Based on these actions and assumptions regarding the impact of COVID-19 and other events impacting travel and consumer discretionary spending, including Russia’s recent invasion of Ukraine, and considering our available liquidity of $ 3.1 billion as of March 31, 2022, including cash and cash equivalents and our $ 1 billion undrawn commitment, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months .

Basis of Presentation

2 unchanged sentences

Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months;

however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages will be phased in gradually as described under “—Liquidity and Management’s Plan” above.

The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 26, 2021.

however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually.

The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which are included in our most recent Annual Report on Form 10-K filed with the SEC on March 1, 2022.

Revisions to Previously Reported Quarterly Financial Statements

During the fourth quarter of 2021, the Company identified an error in its Consolidated Balance Sheet as of March 31, 2021 and Consolidated Statement of Cash Flows for the three months ended March 31, 2021.

Based on their nature, certain amounts shown as cash and cash equivalents should have been classified as short-term investments.

We have determined that these errors were not material to the previously issued interim financial statements for the period ended March 31, 2021.

As a result of the error, the amounts previously reported as cash and cash equivalents have been reclassified to cash flows from investing activities in the Consolidated Statement of Cash Flows for the three months ended March 31, 2021 as follows (in thousands):

Three months ended March 31, 2021

Cash flows from investing activities

Purchases of short-term investments

Net cash used in investing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at end of period

Loss Per Share

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

( 1,370,192 )

( 3,273,581 )

Basic weighted-average shares outstanding

3 unchanged sentences

Diluted loss per share

For the three months ended September 30, 2021 and 2020, a total of 98.9 million and 124.0 million, respectively, and for the nine months ended September 30, 2021 and 2020, a total of 106.3 million and 63.4 million, respectively, shares have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

For the three months ended March 31, 2022 and 2021, a total of 86.4 million and 120.8 million, respectively, shares have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

2 unchanged sentences

Gains or losses resulting from transactions denominated in other currencies are recognized in our consolidated statements of operations within other income (expense), net.

We recognized a gain of $ 9.9 million and a loss of $ 12.3 million for the three months ended September 30, 2021 and 2020, respectively, and a gain of $ 14.9 million and a loss of $ 2.6 million for the nine months ended September 30, 2021 and 2020, respectively, related to transactions denominated in other currencies.

We recognized a gain of $ 8.4 million and $ 4.8 million for the three months ended March 31, 2022 and 2021, respectively, related to transactions denominated in other currencies.

Depreciation and Amortization Expense

2 unchanged sentences

Accounts Receivable, Net

Accounts receivable, net includes $ 964.7 million due from credit card processors as of September 30, 2021, which is expected to be collected within the next 12 months.

Prior to the resumption of cruise operations, these amounts were classified in other long-term assets as a result of the uncertainty surrounding the timing of their collection.

Accounts receivable, net included $ 426.2 million and $ 1.1 billion due from credit card processors as of March 31, 2022 and December 31, 2021, respectively.

Recently Issued Accounting Guidance

1 unchanged sentence

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform.

impacted by reference rate reform.

The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022.

As of September 30, 2021, we have not adopted any expedients and exceptions under ASU 2020-04.

As of March 31, 2022, we have not adopted any expedients and exceptions under ASU 2020-04.

We will continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements.

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

North America

1 unchanged sentence

Total revenue

Amounts for the comparative three months ended March 31, 2021 are excluded as the information is not meaningful.

North America includes the U.S., the Caribbean, Canada and Mexico.

8 unchanged sentences

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations in the U.S.

Revenue attributable to U.S.-sourced guests has historically approximated 75 - 85 % of total revenue.

Revenue attributable to U.S.-sourced guests has approximated 80 - 87 % of total revenue over the preceding three fiscal years.

No other individual country’s revenues exceed 10% in any given period.

1 unchanged sentence

Receivables from customers are included within accounts receivable, net.

As of September 30, 2021 and December 31, 2020, our receivables from customers were $ 7.8 million and $ 1.0 million, respectively.

Beginning in March 2020, our brands launched new cancellation policies to permit our guests to cancel cruises which are not part of the Company’s temporary suspension of voyages up to 15 days prior to departure.

These programs were in place for cruises booked through specific time periods specified by brand, and for cruises scheduled to embark through October 31, 2021.

Certain cruises booked for certain periods will be permitted a 60-day cancellation window for refunds.

Future cruise credits that have been issued are valid for any sailing through December 31, 2022, and we may extend this offer.

As of March 31, 2022, our receivables from customers were $ 53.3 million.

Our cancellation policies permit guests to cancel cruises booked within certain windows for specified time periods up to 15 days prior to departure, and the guests will receive future cruise credits.

Certain cruises booked for certain periods will be permitted a 60-day or 75-day cancellation window for refunds.

Future cruise credits that have been issued are generally valid for any sailing through December 31, 2022, and we may extend this offer.

The future cruise credits are not contracts, and therefore, guests who elected this option are excluded from our contract liability balance;

however, the credit for the original amount paid is included in advance ticket sales or other long-term liabilities as applicable.

however, the credit for the original amount paid is included in advance ticket sales.

Our contract liabilities are included within advance ticket sales.

As of September 30, 2021 and December 31, 2020, our contract liabilities were $ 234.0 million and $ 23.1 million, respectively.

Of the amounts included within contract liabilities, approximately 25 % were refundable in accordance with our cancellation policies.

As of March 31, 2022 and December 31, 2021, our contract liabilities were $ 1.0 billion and $ 161.8 million, respectively.

Of the amounts included within contract liabilities,

approximately 40 % were refundable in accordance with our cancellation policies.

Of the deposits included within advance ticket sales, the vast majority are refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds.

Refunds payable to guests are included in accounts payable.

For the nine months ended September 30, 2021, no revenue recognized was included in the contract liability balance at the

beginning of the period.

The revenue recognized in the nine months ended September 30, 2020 that was included in contract liabilities as of the beginning of the period was $ 0.9 billion.

For cruise vacations that had been cancelled by us due to COVID-19, during the three months ended September 30, 2021 and 2020, approximately $ 0.9 million and $ 15.5 million, respectively, and during the nine months ended September 30, 2021 and 2020, approximately $ 26.9 million and $ 160.4 million, respectively, in costs to obtain these contracts, consisting of protected commissions, including those paid to employees, and credit card fees, were recognized in earnings.

In April 2020, the FASB issued interpretive guidance relating to the accounting for lease concessions provided as a result of COVID-19.

In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract.

The Company has elected to not evaluate leases under the lease modification accounting framework for concessions that result from effects of the COVID-19 pandemic.

In relation to our rights to use port facilities, we have elected the approach consistent with resolving a contingency, which allows us to remeasure the lease liability and recognize the amount of change in the lease liability as an adjustment to the carrying amount of the associated right-of-use asset.

As the full amount of the concession will not be determinable until the force majeure period under the related arrangements have ended, periodic remeasurements will be required.

During the contingency period, we are recognizing lease expense for these port facilities as incurred.

Lease balances were as follows (in thousands):

For the three months ended March 31, 2022, $ 97.0 million of revenue recognized was included in the contract liability balance at the beginning of the period.

For cruise vacations that had been cancelled by us due to COVID-19, during the three months ended March 31, 2022 and 2021, approximately $ 0.3 million and $ 14.8 million, respectively, in costs to obtain these contracts, consisting of protected commissions, including those paid to employees, and credit card fees, were recognized in earnings.

Operating lease balances were as follows (in thousands):

Balance Sheet location

September 30, 2021

March 31, 2022

December 31, 2021

6 unchanged sentences

Other long-term liabilities

Finance leases

Right-of-use assets

Property and equipment, net

Current finance lease liabilities

Current portion of long-term debt

Non-current finance lease liabilities

Long-term debt

During the three and nine months ended September 30, 2021, right-of-use assets obtained in exchange for lease obligations were $ 501.4 million for operating leases to use certain port facilities.

The leases had terms ranging from approximately 20 years to 32 years and incremental borrowing rates ranging from 4.3 % to 5.8 %.

As of September 30, 2021, maturities of lease liabilities were as follows (in thousands):

Remainder of 2021

Present value discount

Present value of lease liabilities

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the nine months ended September 30, 2021 was as follows (in thousands):

Nine Months Ended September 30, 2021

Accumulated other comprehensive income (loss) for the three months ended March 31, 2022 was as follows (in thousands):

Three Months Ended March 31, 2022

Comprehensive

1 unchanged sentence

Accumulated other comprehensive income (loss) at beginning of period

Current period other comprehensive loss before reclassifications

Current period other comprehensive income before reclassifications

Amounts reclassified into earnings

Accumulated other comprehensive income (loss) at end of period

Accumulated other comprehensive income (loss) for the nine months ended September 30, 2020 was as follows (in thousands):

Nine Months Ended September 30, 2020

Accumulated other comprehensive income (loss) for the three months ended March 31, 2021 was as follows (in thousands):

Three Months Ended March 31, 2021

Comprehensive

6 unchanged sentences

(2) Amortization of prior-service cost and actuarial loss reclassified to other income (expense), net.

(3) Includes $ 2.6 million of loss expected to be reclassified into earnings in the next 12 months.

Property and Equipment, net

Property and equipment, net increased $ 68.9 million for the nine months ended September 30, 2021 primarily due to ships under construction and ship improvement projects.

(3) Includes $ 72.9 million of gain expected to be reclassified into earnings in the next 12 months.

Long-Term Debt

Credit Facilities

In January 2021, NCLC entered into an amendment agreement (the “First Amendment”), which amends the Amended and Restated Credit Agreement, dated as of May 8, 2020 (the “Fifth ARCA” and, as amended by the First Amendment, the “Senior Secured Credit Facility”).

The First Amendment provides that, among other things, (a) amortization payments due between the First Amendment effective date and prior to June 30, 2022 (the “First Amendment Deferral Period”) on the Legacy Term Loan A and Term Loan A-1 held by lenders that have consented to such deferral (the “First Amendment Deferring Lenders”) are deferred and such deferred principal amount constitutes a separate tranche of loans (the “Deferred Term Loan A-1”) and (b) the tranche of loans held by certain lenders (the “Fifth ARCA Deferring

Lenders”) on which amortization payments due within the first year after effectiveness of the Fifth ARCA were deferred (the “Deferred Term Loan A”) of First Amendment Deferring Lenders were converted into Deferred Term Loan A-1 loans.

The class of loans constituting the Term Loan A Facility (other than the Deferred Term Loan A) held by the Fifth ARCA Deferring Lenders (the “Term Loan A-1”) and the class of loans constituting the portion of the Term Loan A Facility that is held by lenders other than the Fifth ARCA Deferring Lenders (the “Legacy Term Loan A”) that were held by the First Amendment Deferring Lenders (other than amounts converted into the Deferred Term Loan A-1) constitute a separate tranche of loans (the “Term Loan A-2”), with the same terms as the Legacy Term Loan A and Term Loan A-1 under the Fifth ARCA, except that amortization payments on the Term Loan A-2 shall be deferred during the First Amendment Deferral Period and thereafter such Term Loan A-2 will amortize in an aggregate principal amount equal to approximately 5.88 % per annum and the interest rate for Term Loan A-2 shall be modified as described below.

The Deferred Term Loan A-1 will accrue interest (x) in the case of Eurocurrency loans, at a per annum rate based on LIBOR plus a margin of 2.50 % or (y) in the case of base rate loans, at a per annum rate based on the base rate plus a margin of 1.50 %.

After the end of the First Amendment Deferral Period, the Deferred Term Loan A-1 will amortize in an aggregate principal amount equal to 25 % per annum of the Deferred Term Loan A-1 outstanding immediately after the consummation of the First Amendment, in quarterly installments, and in the case of such payment due on the maturity date, an amount equal to the then unpaid principal amount of the Deferred Term Loan A-1 outstanding.

The Legacy Term Loan A, Term Loan A-1 and Deferred Term Loan A that were held by lenders other than the First Amendment Deferring Lenders constitute separate classes of loans and were unchanged.

The First Amendment resulted in deferred amortization payments aggregating approximately $ 70 million prior to June 30, 2022.

The First Amendment provides that, (a) from the First Amendment effective date to and including December 31, 2022 (the “Covenant Relief Period”) the testing of the loan to value, debt to capitalization and EBITDA to debt service covenants under the Senior Secured Credit Facility will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $ 200 million in free liquidity, certified on a monthly basis.

During the Covenant Relief Period the interest rate for Term Loan A-2 and revolving loans held by Lenders that consented to the First Amendment will be LIBOR plus 2.00 % (or base rate plus 1.00 %) with decreases subject to a leverage-based pricing grid.

The First Amendment also makes certain other changes to the Senior Secured Credit Facility, including tightening certain of the baskets applicable to our ability to make certain asset dispositions, investments and restricted payments.

Additionally, in February 2021, NCLC amended all of its export-credit backed facilities to defer amortization payments aggregating approximately $ 680 million through March 31, 2022 and/or make certain changes in respect of covenants and undertakings contained therein.

The facilities that finance Norwegian Breakaway, Norwegian Getaway, Norwegian Escape, Norwegian Joy, Norwegian Bliss, Norwegian Encore, Seven Seas Explorer, Seven Seas Splendor, Riviera and Marina were amended to provide that, among other things, (a) amortization payments due from April 1, 2021 to March 31, 2022 (the “Second Deferral Period”) on the loans will be deferred and (b) the principal amounts so deferred will constitute separate tranches of loans under the facilities.

The separate tranches of loans will accrue interest at a floating rate per annum based on six-month LIBOR plus a margin as follows:

€ 529.8 million Breakaway one loan (Norwegian Breakaway)

€ 529.8 million Breakaway two loan (Norwegian Getaway)

€ 590.5 million Breakaway three loan (Norwegian Escape)

€ 729.9 million Breakaway four loan (Norwegian Joy)

€ 710.8 million Seahawk 1 term loan (Norwegian Bliss)

€ 748.7 million Seahawk 2 term loan (Norwegian Encore)

Explorer newbuild loan

Splendor newbuild loan

Marina newbuild loan

Riviera newbuild loan

After the end of the Second Deferral Period, the deferred loans will amortize in an aggregate principal amount equal to 20 % per annum of the deferred loans, in semiannual installments.

In addition, all of NCLC’s export-credit backed facilities were amended to provide that, from the effective date of the amendments to and including December 31, 2022, certain of the financial covenants under such facilities will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $ 200 million in free liquidity.

The amendments also made certain other changes to the facilities, including imposing further restrictions on NCLC’s ability to incur debt, create security, issue equity and make dividends and other distributions.

In April 2021, an agreement was executed to defer certain newbuild related debt amortization to July 2022.

The aggregate amount of debt amortization that was deferred was € 31.2 million, or $ 36.1 million based on the euro/U.S.

dollar exchange rate as of September 30, 2021.

The interest rate on the newbuild related debt was increased to 4.5 % per annum.

The amendments of the agreements described above resulted in aggregate modification expenses of $ 52.1 million for the nine months ended September 30, 2021, which is recognized in interest expense, net.

In May 2021, NCLC entered into a € 28.8 million loan facility for newbuild related payments.

The facility bears interest at a rate of 4.5 % per annum.

As of September 30, 2021, € 19.2 million, or $ 22.2 million based on the euro/U.S.

dollar exchange rate as of September 30, 2021, was drawn under this facility, which matures on July 1, 2022.

In July 2021, we amended nine credit facilities for our newbuild agreements and increased the combined commitments under such credit facilities by approximately $ 770 million to cover owner’s supply (generally consists of provisions for the ship), modifications and financing premiums.

Subsequently, in September 2021, excess commitments totaling approximately $ 230 million were cancelled under two of the credit facilities as a result of hedging euro below the rate used to determine the maximum commitments in U.S.

Unsecured Notes

In December 2020, NCLC conducted a private offering of $ 850.0 million aggregate principal amount of 5.875 % senior unsecured notes due March 15, 2026 (the “2026 Senior Unsecured Notes”).

In March 2021, NCLC completed an add-on offering of $ 575.0 million aggregate principal amount of additional 2026 Senior Unsecured Notes.

The 2026 Senior Unsecured Notes pay interest at 5.875 % per annum, semiannually on March 15 and September 15 of each year, to holders of record at the close of business on the immediately preceding March 1 and September 1, respectively.

NCLC may redeem the 2026 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2025, at a price equal to 100 % of the principal amount of the notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole premium.” NCLC may redeem the 2026 Senior Unsecured Notes, in whole or in part, on or after December 15, 2025, at a price equal to 100 % of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the redemption date.

At any time and from time to time prior to December 15, 2022, NCLC may choose to redeem up to 40 % of the aggregate principal amount of the 2026 Senior Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 105.875 % of the principal amount of the 2026 Senior Unsecured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60 % of the aggregate principal amount of the 2026 Senior Unsecured Notes issued remains outstanding following such redemption.

The proceeds from the March 2021 issuance were used to repay the $ 230.0 million Pride of America Credit Facility and the remaining $ 222.6 million of the Jewel Credit Facility.

The repayment of these debt agreements resulted in losses on extinguishment of debt of $ 1.1 million for the nine months ended September 30, 2021, which is recognized in interest expense, net.

In March 2021, NCL Finance, Ltd., an indirect, wholly-owned subsidiary of NCLH and NCLC, additionally conducted a private offering of $ 525.0 million aggregate principal amount of 6.125 % senior unsecured notes due March 15, 2028 (the “2028 Senior Unsecured Notes”).

The 2028 Senior Unsecured Notes pay interest at 6.125 % per annum, semiannually on March 15 and September 15 of each year, to holders of record at the close of business on the immediately preceding March 1 and September 1, respectively.

NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2027, at a price equal to 100 % of the principal amount of the notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole premium.” NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or in part, on or after December 15, 2027, at a price equal to 100 % of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the redemption date.

At any time and from time to time prior to March 15, 2024, NCL Finance may choose to redeem up to 40 % of the aggregate principal amount of the 2028 Senior Unsecured Notes with the net proceeds of certain equity

offerings, subject to certain restrictions, at a redemption price equal to 106.125 % of the principal amount of the 2028 Senior Unsecured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60 % of the aggregate principal amount of the 2028 Senior Unsecured Notes issued remains outstanding following such redemption.

The indentures governing the 2026 Senior Unsecured Notes and 2028 Senior Unsecured Notes include requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness;

In February 2022, NCLC conducted a private offering (the “Notes Offering”) of $ 1,000 million in aggregate principal amount of 5.875 % senior secured notes due 2027 (the “2027 Secured Notes”) and $ 600 million in aggregate principal amount of 7.750 % senior notes due 2029 (the “2029 Unsecured Notes”).

The 2027 Secured Notes are jointly and severally guaranteed on a senior secured basis by Pride of Hawaii, LLC, Norwegian Epic, Ltd.

and Sirena Acquisition.

The 2027 Secured Notes and the related guarantees are secured by a first-priority interest in, among other things and subject to certain agreed security principles, three of our vessels, namely the Norwegian Jade vessel, the Norwegian Epic vessel and the Sirena vessel.

NCLC may redeem the 2027 Secured Notes at its option, in whole or in part, at any time and from time to time prior to February 15, 2024, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date.

NCLC may redeem the 2027 Secured Notes at its option, in whole or in part, at any time and from time to time on or after February 15, 2024, at the redemption prices set forth in the indenture governing the 2027 Secured Notes, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date.

At any time and from time to time prior to February 15, 2024, NCLC may choose to redeem up to 40 % of the aggregate principal amount of the 2027 Secured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 105.875 % of the principal amount of the 2027 Secured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60 % of the aggregate principal amount of the 2027 Secured Notes issued remains outstanding following such redemption.

NCLC may redeem the 2029 Unsecured Notes at its option, in whole or in part, at any time and from time to time prior to November 15, 2028, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date.

NCLC may redeem the 2029 Unsecured Notes at its option, in whole or in part, at any time and from time to time on or after November 15, 2028, at a redemption price equal to 100 % of the principal amount of 2029 Unsecured Notes redeemed, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date.

At any time and from time to time prior to February 15, 2025, NCLC may choose to redeem up to 40 % of the aggregate principal amount of the 2029 Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 107.750 % of the principal amount of the 2029 Unsecured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60 % of the aggregate principal amount of the 2029 Unsecured Notes issued remains outstanding following such redemption.

The indentures governing the 2027 Secured Notes and the 2029 Unsecured Notes include requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness;

(ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments;

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and (vii) consolidate, merge or transfer all or substantially all of their assets.

In November 2021, the Company executed a $ 1 billion commitment through August 15, 2022 that provides additional liquidity to the Company.

If drawn, this commitment will convert into an unsecured note paying interest at 8.0 % per annum, semiannually, and maturing in April 2024.

As of the date hereof, the Company has not drawn under this commitment.

Exchangeable Notes

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which reduces the number of accounting models for convertible debt instruments and enhances transparency in disclosures.

One model which is being eliminated is the bifurcation of embedded conversion features that are not accounted for separately as derivatives.

Each of the 2024 Exchangeable Notes, 2025 Exchangeable Notes, and Private Exchangeable Notes (as defined below) contain or contained conversion options that may be settled with NCLH’s ordinary shares.

As the options will be both indexed to and settled in our ordinary shares, they are not accounted for separately as derivatives.

The Private Exchangeable Notes contained a beneficial conversion feature, which was recognized within additional paid-in capital with an offsetting discount to the carrying amount of the debt.

The discount was amortized to interest expense through December 31, 2020.

On January 1, 2021, we early adopted ASU 2020-06 using a modified retrospective approach.

As a result, the $ 131.2 million beneficial conversion feature previously recognized was reclassified from additional paid-in capital to long-term debt, and the discount amortization of $ 5.6 million was adjusted through retained earnings (deficit).

NCLC has outstanding $ 862.5 million aggregate principal amount of 6.00 % exchangeable senior notes due May 15, 2024 (the “2024 Exchangeable Notes”).

In February 2022, NCLC also conducted a private offering (the “Exchangeable Notes Offering”) of $ 473.2 million in aggregate principal amount of 2.5 % exchangeable senior notes due 2027 (the “2027 2.5% Exchangeable Notes”).

The 2027 2.5% Exchangeable Notes are guaranteed by NCLH on a senior basis.

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The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction.

The 2024 Exchangeable Notes pay interest at 6.00 % per annum, semiannually on May 15 and November 15 of each year, to holders of record at the close of business on the immediately preceding May 1 and November 1, respectively.

NCLC also has outstanding $ 450.0 million aggregate principal amount of 5.375 % exchangeable senior notes due August 1, 2025 (the “2025 Exchangeable Notes”).

The 2025 Exchangeable Notes are guaranteed by NCLH on a senior basis.

Holders may exchange their 2025 Exchangeable Notes at their option into redeemable preference shares of NCLC.

Upon exchange, the preference shares will be immediately and automatically exchanged, for each $ 1,000 principal amount of exchanged 2025 Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate.

The exchange rate will initially be 53.3333 ordinary shares per $ 1,000 principal amount of 2025 Exchangeable Notes (equivalent to an initial exchange price of approximately $ 18.75 per ordinary share).

The maximum exchange rate is 66.6666 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events.

The exchange rate referred to above is also subject to

adjustment for any stock split, stock dividend or similar transaction.

The 2025 Exchangeable Notes pay interest at 5.375 % per annum, semiannually on February 1 and August 1 of each year, to holders of record at the close of business on the immediately preceding January 15 and July 15, respectively.

As of December 31, 2020, NCLC also had outstanding $ 414.3 million aggregate principal amount of exchangeable senior notes due June 1, 2026 (the “Private Exchangeable Notes”), which amount included interest that had accreted to the principal amount, which were held by an affiliate of L Catterton (the “Private Investor”).

The Private Exchangeable Notes accrued interest at a rate of 7.0 % per annum for the first year post-issuance (which accreted to the principal amount).

Holders were able to exchange their Private Exchangeable Notes at their option into redeemable preference shares of NCLC.

Upon exchange, the preference shares would be immediately and automatically exchanged, for each $ 1,000 principal amount of exchanged Private Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate.

The exchange rate was initially approximately 82.6446 ordinary shares per $ 1,000 principal amount of Private Exchangeable Notes (equivalent to an initial exchange price of $ 12.10 per ordinary share).

The maximum exchange rate was 90.9090 and reflected potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events.

In March 2021, NCLH completed an equity offering that resulted in 52,577,947 ordinary shares being issued for gross proceeds of $ 1.6 billion.

Approximately $ 1.0 billion of the cash proceeds from the offering were used to repurchase the Private Exchangeable Notes and extinguish the debt.

The resulting loss on extinguishment, which is recognized in interest expense, net, was $ 600.4 million for the nine months ended September 30, 2021.

The following is a summary of NCLC’s convertible debt instruments as of September 30, 2021 (in thousands):

The 2027 2.5% Exchangeable Notes pay interest at 2.5 % per annum, semiannually on February 15 and August 15 of each year, to holders of record at the close of business on the immediately preceding February 1 and August 1, respectively.

NCLC has used, or will use, the net proceeds from the Notes Offering and the Exchangeable Notes Offering to redeem (the “Redemption”) all of the outstanding 2024 Senior Secured Notes and 2026 Senior Secured Notes and to make scheduled principal payments on debt maturing in 2022, including, in each case, to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.

Simultaneously with the Redemption, and pursuant to certain provisions contained in the indentures governing the 2026 Senior Unsecured Notes and the 2028 Senior Unsecured Notes, each of the guarantors party to such indentures were released from their obligations thereunder.

The resulting losses on extinguishments, which are recognized in interest expense, net, were $ 188.4 million for the three months ended March 31, 2022.

Exchangeable Notes

The following is a summary of NCLC’s exchangeable notes as of March 31, 2022 (in thousands):

Financing Fees

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2025 Exchangeable Notes

The remaining period over which the unamortized deferred financing fees will be recognized as non-cash interest expense is 2.6 years and 3.8 years for the 2024 Exchangeable Notes and 2025 Exchangeable Notes, respectively.

The following is a summary of NCLC’s convertible debt instruments as of December 31, 2020 (in thousands):

2027 1.125% Exchangeable Notes

2027 2.5% Exchangeable Notes

The following is a summary of NCLC’s exchangeable notes as of December 31, 2021 (in thousands):

Unamortized Debt

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2025 Exchangeable Notes

Private Exchangeable Notes

In addition, as of December 31, 2020, we had recognized a $ 19.3 million premium for payment-in-kind interest as additional paid-in capital for the Private Exchangeable Notes.

As a result of the extinguishment of the Private Exchangeable Notes, we derecognized the amounts recorded as additional paid-in capital.

The following provides a summary of the interest expense of NCLC’s convertible debt instruments (in thousands):

Ended September 30,

2027 1.125% Exchangeable Notes

The following provides a summary of the interest expense of NCLC’s exchangeable notes (in thousands):

Three Months Ended

Coupon interest

Amortization of deferred financing fees

Prior to the adoption of ASU 2020-06, interest expense, including amortization of debt discounts and coupon interest, recognized related to the convertible debt instruments was $ 29.5 million and $ 42.0 million for the three and nine months ended September 30, 2020, respectively.

The effective interest rate is 7.07 % and 5.97 % for the 2024 Exchangeable Notes and 2025 Exchangeable Notes, respectively.

As of September 30, 2021, the if-converted value above par was $ 812.9 million on available shares of 62.7 million and $ 191.0 million on available shares of 24.0 million for the 2024 Exchangeable Notes and the 2025 Exchangeable Notes, respectively.

The effective interest rate is 7.07 %, 5.97 %, 1.64 % and 3.06 % for the 2024 Exchangeable Notes, 2025 Exchangeable Notes, 2027 1.125% Exchangeable Notes and 2027 2.5% Exchangeable Notes, respectively.

Debt Repayments

The following are scheduled principal repayments on our long-term debt including finance lease obligations as of September 30, 2021 for each of the following periods (in thousands):

The following are scheduled principal repayments on our long-term debt including finance lease obligations as of March 31, 2022 for each of the following periods (in thousands):

Remainder of 2022

Debt Covenants

We have received certain financial and other debt covenant waivers through December 31, 2022 and added new free liquidity requirements.

At September 30, 2021, taking into account such waivers, we were in compliance with all of our debt covenants.

During the year ended December 31, 2021, we received certain financial and other debt covenant waivers, added new free liquidity requirements and modified other financial covenants.

As of March 31, 2022, taking into account such waivers, we were in compliance with all of our debt covenants.

If we do not continue to remain in compliance with our covenants, including following the expiration of any current waivers, we would have to seek additional amendments to our covenants.

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We do not anticipate non-performance by any of our significant counterparties.

As of September 30, 2021, we had fuel swaps which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 366 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023 .

On January 1, 2021, our fuel swaps designated as hedges for marine gas oil maturing through December 31, 2021 were dedesignated as cash flow hedges.

As of September 30, 2021, we had, in aggregate with previously dedesignated fuel swaps, approximately 153 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2022 .

As of September 30, 2021, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros.

As of March 31, 2022, we had fuel swaps, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 347 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023 .

As of March 31, 2022, we had approximately 164 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2023 .

As of March 31, 2022, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros.

The notional amount of our foreign currency forward contracts was € 2.4 billion, or $ 2.7 billion based on the euro/U.S.

dollar exchange rate as of September 30, 2021.

As of September 30, 2021, we had an interest rate swap, which is used to hedge our exposure to interest rate movements and manage our interest expense.

The notional amount of our outstanding debt associated with the interest rate swap was $ 0.2 billion as of September 30, 2021.

dollar exchange rate as of March 31, 2022.

The derivatives measured at fair value and the respective location in the consolidated balance sheets include the following (in thousands):

September 30,

Balance Sheet Location

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Other long-term assets

Accrued expenses and other liabilities

Other long-term liabilities

Foreign currency contracts

Prepaid expenses and other assets

Other long-term assets

Accrued expenses and other liabilities

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Accrued expenses and other liabilities

Other long-term liabilities

Total derivatives designated as hedging instruments

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Other long-term assets

Accrued expenses and other liabilities

Other long-term liabilities

Total derivatives not designated as hedging instruments

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The following table discloses the gross and net amounts recognized within assets and liabilities (in thousands):

September 30, 2021

March 31, 2022

December 31, 2021

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(Loss) into Income (Expense)

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Fuel contracts

Other income (expense), net

Foreign currency contracts

Depreciation and amortization

Interest rate contracts

Interest expense, net

Total gain (loss) recognized in other comprehensive loss

Location of Gain

(Loss) Reclassified

from Accumulated

Amount of Gain (Loss) Reclassified

Amount of Gain (Loss)

Other Comprehensive

from Accumulated Other

Recognized in Other

Income (Loss) into

Comprehensive Income

Comprehensive Loss

Income (Expense)

(Loss) into Income (Expense)

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021

Fuel contracts

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The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020

( Expense), net

Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)

Fuel contracts

Foreign currency contracts

Interest rate contracts

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) as a result that a forecasted transaction is no longer probable of occurring

Fuel contracts

Amount of gain recognized in income as a result of failing effectiveness tests

Fuel contracts

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

( Expense), net

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021

( Expense), net

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Fuel contracts

Amount of gain recognized in income as a result of failing effectiveness tests

Fuel contracts

The effects of derivatives not designated as hedging instruments on the consolidated statements of operations include the following (in thousands):

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Three Months Ended

Nine Months Ended

September 30,

Location of Gain (Loss)

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Long-Term Debt

As of September 30, 2021 and December 31, 2020, the fair value of our long-term debt, including the current portion, was $ 14.2 billion, which was $ 1.6 billion higher and $ 2.2 billion higher, respectively, than the carrying values, excluding deferred financing costs.

The difference between the fair value and carrying value of our long-term debt is due to our fixed and variable rate debt obligations carrying interest rates that are above or below market rates at the

measurement dates as well as the beneficial conversion feature recognized on the Private Exchangeable Notes as of December 31, 2020.

As of March 31, 2022 and December 31, 2021, the fair value of our long-term debt, including the current portion, was $ 13.1 billion and $ 12.5 billion, respectively, which was $ 0.7 billion and $ 0.1 billion lower, respectively, than the carrying values, excluding deferred financing costs.

The fair value of our long-term revolving and term loan facilities was calculated based on estimated rates for the same or similar instruments with similar terms and remaining maturities.

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Employee Benefits and Compensation Plans

In January 2013, NCLH adopted the 2013 Performance Incentive Plan, which provided for the issuance of up to 15,035,106 of NCLH’s ordinary shares pursuant to awards granted under the plan.

In May 2016, the plan was amended and restated (“Restated 2013 Plan”) pursuant to approval from the Board of Directors and NCLH’s shareholders.

Among other things, under the Restated 2013 Plan, the number of NCLH’s ordinary shares that may be delivered pursuant to all awards granted under the plan was increased by an additional 12,430,000 shares to a new maximum aggregate limit of 27,465,106 shares.

In May 2021, the Restated 2013 Plan was further amended and restated to increase the number of NCLH ordinary shares that may be delivered by 4,910,000 shares to 32,375,106 shares.

Share Option Awards

The following is a summary of option activity under NCLH’s Restated 2013 Plan for the nine months ended September 30, 2021:

Number of Share Option Awards

Weighted-Average Exercise Price

(in thousands)

Outstanding as of January 1, 2021

Forfeited and cancelled

Outstanding as of September 30, 2021

Restricted Share Unit Awards

In June 2021, NCLH granted 3.1 million time-based restricted share unit awards to our employees, which primarily vest in substantially equal installments each March 1 over three years .

Additionally, in June 2021, NCLH granted 0.7 million performance-based restricted share units to certain members of our management team, which vest upon the achievement of certain pre-established performance targets established through 2023 and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, 2024.

The following is a summary of restricted share unit activity for the nine months ended September 30, 2021:

In March 2022, NCLH granted 4.8 million time-based restricted share unit awards to our employees, which primarily vest in substantially equal installments over three years .

Additionally, in March 2022, NCLH granted 1.9 million performance-based restricted share units to certain members of our management team, which vest upon the achievement of certain pre-established performance targets established through 2024 and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, 2025.

The following is a summary of restricted share unit activity for the three months ended March 31, 2022:

Average Grant

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Forfeited or expired

Non-vested as of September 30, 2021

Non-vested as of March 31, 2022

The compensation expense recognized for share-based compensation for the periods presented include the following (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Payroll and related expense

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Ship Construction Contracts

Project Leonardo will introduce an additional six ships, each ranging from approximately 140,000 to 156,300 Gross Tons with approximately 3,215 to 3,550 Berths, with expected delivery dates from 2022 through 2027.

For the Regent brand, we have an order for one Explorer Class Ship to be delivered in 2023, which will be approximately 55,000 Gross Tons and 750 Berths.

For the Norwegian brand, we have six Prima Class Ships on order, each ranging from approximately 140,000 to 156,300 Gross Tons with approximately 3,215 to 3,550 Berths, with expected delivery dates from 2022 through 2027.

Regent brand, we have an order for one Explorer Class Ship to be delivered in 2023, which will be approximately 55,000 Gross Tons and 750 Berths.

For the Oceania Cruises brand, we have orders for two Allura Class Ships to be delivered in 2023 and 2025.

Each of the Allura Class Ships will be approximately 67,000 Gross Tons and 1,200 Berths.

The combined contract prices of the nine ships on order for delivery as of September 30, 2021 was approximately € 7.6 billion, or $ 8.8 billion based on the euro/U.S.

dollar exchange rate as of September 30, 2021.

The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19 and/or Russia’s recent invasion of Ukraine could result in additional delays in ship deliveries in the future, which may be prolonged.

The combined contract prices of the nine ships on order for delivery as of March 31, 2022 was approximately € 7.7 billion, or $ 8.5 billion based on the euro/U.S.

dollar exchange rate as of March 31, 2022.

We have obtained export credit financing which is expected to fund approximately 80 % of the contract price of each ship, subject to certain conditions.

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However, if any such events were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.

Class Actions

On March 12, 2020, a class action complaint, Eric Douglas v.

Norwegian Cruise Lines, Frank J.

Del Rio and Mark A.

Kempa, Case No.

1:20-CV-21107, was filed in the United States District Court for the Southern District of Florida, naming the Company, Frank J.

Del Rio, the Company’s President and Chief Executive Officer, and Mark A.

Kempa, the Company’s Executive Vice President and Chief Financial Officer, as defendants.

Subsequently, two similar class action complaints were also filed in the United States District Court for the Southern District of Florida naming the same defendants.

On July 31, 2020, a consolidated amended class action complaint was filed by lead plaintiff’s counsel.

The complaint asserted claims, purportedly brought on behalf of a class of shareholders, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and alleged that the Company made false and misleading statements to the market and customers about COVID-19.

The complaint sought unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, on behalf of a purported class of purchasers of our ordinary shares between February 20, 2020 and March 10, 2020.

On April 10, 2021, the case was dismissed and closed, and the plaintiffs no longer have the right to appeal.

Investigations

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The complaint filed by Havana Docks Corporation (the “Havana Docks Matter”) alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea (the “Garcia-Bengochea Matter”) alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government.

The complaints further allege that the Company “trafficked” in those properties by embarking and disembarking passengers at these facilities.

The complaints further allege that the Company “trafficked” in those properties by embarking and disembarking passengers at these facilities, as well as profiting from the Cuban Government’s possession of the property.

The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.

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Discovery in the Havana Docks Matter has now concluded and appropriate motions for summary judgment have been filed.

Trial for the Havana Docks Matter is scheduled for March 2022.

On September 1, 2020, the Court entered an order staying all case deadlines and administratively closed the Garcia-Bengochea Matter pending the outcome of the appeal in a related case brought by the same plaintiff.

On March 21, 2022, the court in the Havana Docks Matter issued an order granting the plaintiff’s motion for summary judgment on the issue of liability and scheduled a trial on damages only for September 2022.

The Company has filed a motion for interlocutory appeal seeking to have the appellate court review the district court’s order granting summary judgment and that motion remains pending.

On September 1, 2020, the court in the Garcia-Bengochea Matter entered an order staying all case deadlines and administratively closed the case pending the outcome of an appeal in a related case brought by the same plaintiff.

We believe we have meritorious defenses to the claims and intend to vigorously defend these matters.

As of September 30, 2021, we are unable to reasonably estimate any potential contingent loss from these matters due to a lack of legal precedent.

As of March 31, 2022, we are unable to reasonably estimate any potential loss or range of losses from these matters.

The ability to make such estimates and judgments can be affected by various factors including, among other things:

lack of legal precedent, stage of the proceedings, legal uncertainties inherent within the litigation process and involvement of numerous parties.

However, if the plaintiffs prevail in the final outcome of these matters, there may be a material adverse impact on the Company’s financial condition or results of operations and cash flows.

In the normal course of our business, various other claims and lawsuits have been filed or are pending against us.

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We have evaluated our overall exposure with respect to all of our threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure.

We are currently unable to estimate any other potential contingent losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery.

We are currently unable to estimate any other potential losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery.

However, based on our current knowledge, we do not believe that the aggregate amount or range of reasonably possible losses with respect to these matters will be material to our consolidated results of operations, financial condition or cash flows.

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Other Contingencies

The Company also has agreements with its credit card processors that govern approximately $ 1.5 billion in advance ticket sales at September 30, 2021 that have been received by the Company relating to future voyages.

The Company also has agreements with its credit card processors that govern approximately $ 1.7 billion in advance ticket sales at March 31, 2022 that have been received by the Company relating to future voyages.

These agreements allow the credit card processors to require under certain circumstances, including the existence of a material adverse change, excessive chargebacks and other triggering events, that the Company maintain a reserve which would be satisfied by posting collateral.

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Any cash reserve or collateral requested could be increased or decreased.

As of September 30, 2021, we had cash reserves of approximately $ 1.2 billion with credit card processors recognized in accounts receivable, net or other long-term assets.

Subsequent to September 30, 2021, $ 388.3 million in cash reserves have been released to the Company.

required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity.

As of March 31, 2022, we had cash reserves of approximately $ 1.1 billion with credit card processors, of which approximately $ 426.2 million is recognized in accounts receivable, net and approximately $ 665.3 million in other long-term assets.

As of March 31, 2022, a portion of the cash reserves is classified as long-term due to a change in terms to a static reserve, as currently required by a credit card processor, subject to periodic review.

We may be required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity.

Other Income (Expense), Net

For the three and nine months ended September 30, 2021, other income (expense), net consisted of income of $ 4.7 million and $ 57.5 million, respectively, primarily related to gains on fuel swaps not designated as hedges and foreign currency exchange.

For the three and nine months ended September 30, 2020, other income (expense), net consisted of an expense of $ 23.7 million and $ 32.3 million, respectively, primarily due to losses from foreign currency exchange and losses on fuel hedges released into earnings as a result of the forecasted transactions no longer being probable.

For the three months ended March 31, 2022 and 2021 other income (expense), net consisted of income of $ 38.1 million and $ 27.2 million, respectively, primarily due to gains on fuel swaps not designated as hedges and foreign currency exchange.

Supplemental Cash Flow Information

For the nine months ended September 30, 2021 and 2020, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 64.6 million and $ 29.1 million, respectively.

For the three months ended March 31, 2022 and 2021, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 17.4 million and $ 20.8 million, respectively.

Related Party Disclosures

NCLC, as issuer, NCLH, as guarantor, and U.S.

Bank National Association, as trustee, were all parties to an indenture, dated May 28, 2020 (the “Indenture”) related to the Private Exchangeable Notes, which were held by the Private Investor.

The terms of the Private Exchangeable Notes are more fully described under Note 7 — “Long-Term Debt”.

Bank National Association, as trustee, were all parties to an indenture, dated May 28, 2020 (the “Indenture”) related to the Private Exchangeable Notes, which were held by an affiliate of L Catterton (the “Private Investor”).

Based on the initial exchange rate for the Private Exchangeable Notes, the Private Investor beneficially owned approximately 10 % of NCLH’s outstanding ordinary shares as of December 31, 2020.

8 unchanged sentences

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 1. Financial Statements