Royal Caribbean Cruises Ltd. (NYSE:RCL)

A significant upward trajectory in total debt is evident from 2017 to 2021. The total carrying amount of debt increased from approximately $7.54 billion in 2017 to $21.09 billion by the end of 2021, representing a nearly threefold increase over the five-year period. The most pronounced escalation occurred between 2019 and 2020, during which total debt grew by approximately 75% in a single fiscal year.

Long-Term Debt Expansion

Debt excluding the current portion grew from $6.35 billion in 2017 to $18.85 billion in 2021. A substantial spike is observed in 2020, where long-term debt more than doubled from $8.41 billion in 2019 to $17.96 billion, indicating a heavy reliance on long-term financing to support operations or liquidity during that period.

Short-Term Debt Dynamics

The current portion of long-term debt exhibited volatility, decreasing to $961.8 million in 2020 before surging to $2.24 billion in 2021, suggesting a concentrated maturity schedule in the immediate term. Simultaneously, commercial paper usage peaked in 2019 at $1.43 billion but declined sharply thereafter, becoming absent by the end of 2021.

Structural Debt Composition

The debt profile shifted from a more distributed mix of current and long-term obligations toward a heavy concentration of long-term liabilities. By 2021, long-term debt (excluding the current portion) constituted approximately 89% of the total carrying amount, reflecting a strategic shift toward longer-term capitalization to manage the total debt load.

A substantial upward trajectory in total interest costs incurred is observed between 2017 and 2021, with the total rising from US$ 324,182 thousand to US$ 1,350,553 thousand. This represents a significant increase in the cost of debt servicing over the five-year period, characterized by a moderate growth rate initially followed by a sharp acceleration after 2019.

Net Interest Expense Trend

Interest expense, net of interest capitalized, exhibited consistent growth from 2017 through 2019, moving from US$ 299,982 thousand to US$ 408,513 thousand. However, a dramatic escalation occurred in 2020 and 2021, with expenses reaching US$ 844,238 thousand and US$ 1,291,753 thousand, respectively. The increase between 2019 and 2021 alone exceeds 215%, indicating a substantial expansion of the company's debt obligations or an increase in the weighted average cost of borrowing.

Capitalized Interest Analysis

Capitalized interest costs showed a growth phase between 2017 and 2019, increasing from US$ 24,200 thousand to US$ 56,500 thousand. From 2019 to 2021, these costs stabilized, remaining relatively flat at approximately US$ 59 million. This suggests that while the total cost of debt rose sharply, the volume of interest being allocated to capital projects remained constant.

Composition of Total Interest Costs

The relationship between net interest expense and capitalized interest shifted markedly over the period. In 2017, capitalized interest accounted for approximately 7.5% of total interest costs incurred. By 2021, this proportion decreased to approximately 4.3%, as the growth in net interest expense far outpaced the growth in capitalized costs.

Between 2017 and 2021, a severe deterioration in debt service capacity is evident, characterized by a transition from strong coverage levels to negative ratios.

Adjusted Interest Coverage Ratio (with capitalized interest)

A gradual decline is observed from 2017 to 2019, with the ratio moving from 5.99 to 5.05. This trend culminated in a sharp collapse in 2020, where the ratio fell to -5.48, signifying that earnings were insufficient to cover interest expenses. By the end of 2021, a partial recovery was noted as the ratio improved to -2.97, although it remained negative.

Interest Coverage Ratio (without capitalized interest)

This metric remained relatively stable between 2017 and 2018 at approximately 6.50 before decreasing to 5.75 in 2019. A precipitous drop occurred in 2020, reaching -5.86. Similar to the adjusted ratio, a moderate recovery was observed in 2021, with the ratio rising to -3.11, continuing to reflect a deficit in earnings relative to interest obligations.

The convergence and subsequent plunge of both ratios in 2020 indicate a systemic collapse in operating profitability relative to the cost of debt. The negative values recorded in 2020 and 2021 demonstrate a critical period of financial distress where interest payments could not be supported by operating income, necessitating a reliance on other liquidity sources to sustain debt obligations.