Norwegian Cruise Line sees ‘substantial doubt’ about its future, warns of possible bankruptcy as it seeks to raise $2 billion

- Advertisement -
KEY POINTS
  • Norwegian Cruise Line said there is “substantial doubt” about its ability to continue as a “going concern” as the coronavirus pandemic wreaks havoc on the industry.
  • The company also announced it expects to report a loss for the quarter ended March 31 and on the year.
  • Separately, the company announced Tuesday morning that L Catterton, a private equity fund, invested $400 million in NCL Corporation, a subsidiary of Norwegian.
- Advertisement -
- Advertisement -
- Advertisement -

Norwegian Cruise Line warned on Tuesday that it may have to seek bankruptcy protection, saying there’s “substantial doubt” about its ability to continue as a “going concern” as the coronavirus pandemic wreaks havoc on the industry.

Shares of the company fell more than 19% in early trading on the news.

In a securities filing, Norwegian said it was in compliance with all of its debt agreements as of March 31, but it couldn’t guarantee that it may need to seek waivers from its lenders. If it cannot amend its credit agreements, the company said it is at risk of default, which would trigger immediate repayment of most of its debt and derivatives contracts. That puts it at risk of bankruptcy.

The company also announced that L Catterton, a private equity fund, invested $400 million in NCL Corp., a subsidiary of Norwegian. Under the agreement, L Catterton will be entitled to nominate one member to the board.

“We are pleased to execute this agreement with L Catterton, the largest and most global consumer-focused private equity firm in the world,” CEO of Norwegian Frank Del Rio said in a statement.

The company hopes to raise another $1.6 billion from issuing a mix of stock and bonds. The L Catterton investment is contingent on the company raising at least $1 billion from other investors.

The coronavirus 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, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price,” the filing said. “These factors have raised substantial doubt about the company’s ability to continue as a going concern.”

It said if it’s not able to maintain enough liquidity, “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.”

The company also announced it expects to report a loss for the quarter ended March 31 and on the year.

The coronavirus pandemic has brought the global travel industry, and the cruise industry in particular, to a standstill across the world. Norwegian, the smallest of the three major publicly traded cruise companies, said it had roughly $6 billion in long-term debt obligations as of Dec. 31.

In March, the company fully drew down an $875 million revolving credit facility and a separate $675 million revolving credit line. The latter matures on March 4, 2021.

In early March, as the virus spread rapidly among some cruise passengers, the State Department warned Americans against traveling by cruise ship. On March 14, the Centers for Disease Control and Prevention issued a no-sail order for cruise ships, extending it on April 9 until July 24.

“This is the first time that we have completely suspended cruise voyages, and as a result of these unprecedented circumstances, we are not able to predict the full impact of such a suspension on our company,” Norwegian said.

The company is preparing to provide cash refunds for passengers whose cruises were canceled. While the company is also offering 125% future cruise credits, it said “approximately half of the guests who have had their voyages cancelled and who have contacted us have requested cash refunds.”

Even if guests accept the credit, the company warned of diminished future revenue when the company can resume sailing.

“We cannot predict when any of our ships will begin to sail again or when ports will reopen to our ships,” it said. “Moreover, even once travel advisories and restrictions are lifted, demand for cruises may remain weak for a significant length of time and we cannot predict if and when each brand will return to pre-outbreak demand or pricing.”

The company also said it is cutting capital expenditures by $515 million and has furloughed 20% of its shoreside staff.

The news comes after competitor Carnival Corp., the world’s largest cruise company, announced Monday that its Carnival Cruise Line will resume some North American sailings on Aug. 1.

Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

Greggs: Bakery fails in bid for 24-hour Leicester Square storeon July 30, 2022 at 10:44 am

A council says the chain's plans for its West End store to stay open all night are "half-baked".A council says the chain's plans for...

Euro 2022: England defender Lucy Bronze’s inspiring letter to herselfon July 21, 2022 at 12:23 pm

Before England's thrilling Euro 2022 quarter-final win against Spain, Lionesses defender Lucy Bronze wrote herself a letter.Before England's thrilling Euro 2022 quarter-final win against...

Could super-sized heat pumps make gas boilers extinct?on March 18, 2022 at 2:02 am

The cities turning to huge heat pumps to provide warmth to thousands of homes and businesses.

Surfside tower collapse: Final victim identified from rubbleon July 26, 2021 at 9:55 pm

The family of Estelle Hedaya say they have confirmation she is the 98th victim of the Surfside disaster.image copyrightMichelle Borriello/FacebookThe family of the final...

AMC Entertainment Seeks Debt Relief In Distressed Bond Swap

Theater chain AMC Entertainment Holdings Inc. is seeking to tame its debt load by asking subordinated bondholders to accept a steep haircut on existing...
Home of Science
Follow me