Norwegian Cruise Line may go bankrupt?

   May 6, 2020 ,   Cruise Industry

NCLH-Norwegian Cruise Line Holdings announced there was “substantial doubt” about the ability of the company to continue amid the COVID-19 pandemic and warned it might have to seek bankruptcy protection.

The 3rd largest cruise company in the world is headquartered in Miami Florida with service out of Port Tampa Bay. NCLH revealed in a securities filing on Tuesday, May 5, it expected to report net losses for the Q1 (ending on March 31). The company owns 3 cruise lines - Oceania Cruises, RSSC-Regent Seven Seas and NCL-Norwegian Cruise Line.

The filing said:

“If we are not able to fulfill our liquidity needs through operating cash flows and/or borrowings under credit facilities or otherwise in the capital markets, our business and financial condition could be adversely affected and it may be necessary for us to reorganize our company in its entirety, including through bankruptcy proceedings, and our shareholders may lose their investment in our ordinary shares.” 

NCLH shares were down 18% in Tuesday trading. NCLH has seen its market cap plummet from USD 12 billion at the end of 2019 to less than USD 3 billion yesterday. 

Also on Tuesday, it announced a USD 400 million infusions into one of its subsidiaries (Norwegian Cruise Line Corporation Ltd) from private equity firm L Catterton. This new deal gives the firm a seat on NCLH’s board of directors.

NCLH is proposing to sell USD 650 million of exchangeable senior notes due in 2024 in a private offering as senior unsecured notes, as well as an additional USD 600 million in senior secured notes due 2024 in a private offering.

Last month, NCLH also said it had fully tapped a USD 1.55 billion credit facility (from JPMorgan Chase) and its bonds had been downgraded by rating agencies S&P Global and Moody’s. In an April 27 press release, NCLH said that it was burning through USD 110-150 million per month as cruises remain paused. It had also identified around USD 515 million of capital expenditure reductions, including furloughs for 20% of ashore staff announced last week. Still, Tuesday’s filing said that it might not be enough to get through the pandemic.

“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 such an outbreak,” the filing said.

As of March 31, the company had USD 1.8 billion in advanced ticket sales across its 3 brands. That included USD 850 million for sailings that have been canceled through June 30 and USD 350 million for the remainder of this year. Around half of the travelers who had their voyage canceled are opting for a refund over a future credit with the cruise company, further limiting its cash holdings. Bookings for the rest of the year are “meaningfully lower” than for 2019, the company said in a press release in April.

The cruise industry shut down new sailings on March 13, followed by a no-sail order from the CDC that has been extended until at least July 24.

Cruises for the three brands of NCLH are currently canceled through June 30.