SS/RCCL Finances: Improving, Options, Questions??!!

[tgh]

I am enjoying UKCJ's renewed contributions to the list and dislike the appearance of a  personally negative rebuttal.

History is just that and the op's contributions should be judged by their present relevance.

 

[Observer]

5 hours ago, UKCruiseJeff said:

 

Hi Obs,

 

How "doomsday" is it?

 

If with all the power of medical science, when compared to the flu virus for example there is a lot of history and experience worldwide to produce a flu vaccine annually and it is still only 40% effective.  

 

CDC says that the efficacy range of the vaccine for seasonal flu is 40-60%.  So 40% is at the bottom end of the range.  And the seasonal flu vaccine presents particular challenges because authorities must predict many months in advance (in order to manufacture/distribute the vaccine) what strains will be circulating that year.  Though the COVID2 virus will mutate a bit, the nature of the virus will be fairly well understood and the guessing game will not be necessary.

 

5 hours ago, UKCruiseJeff said:

 

With Covid-19 it  seems that you can catch it from people who look perfectly well .... even through simply having some fun with kids.  So avoidance seems tougher. 

 

Great strides are being made in testing and I would imagine there would be even greater progress by the time the industry opens up again.  Especially on smaller ships like those of Silversea, even daily testing of guests and crew could be undertaken.  It would hardly be a great imposition.

  

5 hours ago, UKCruiseJeff said:

 

And if there was just a 40% effective rate, would you be happy to accept those odds on a ship with a few hundred people on a TA crossing if there was say a 10& chance of dying from it ?

 

 

I assume you are positing a 10% chance of dying.  The mortality rate from COVID 19 is nowhere near to that.  This speculative figure seems to be unnecessarily alarmist.

 

[hubofhockey]

4 hours ago, dawntrdr said:

 

I think Mr. Stumble makes a good point.  Many insightful and experienced businesspeople post here.   One suggestion might be to introduce some program to encourage people to keep their cash in the company rather than ask for cash refunds.   For example, assure customers that anyone who makes a reservation with FCC will get the benefit of any discounts, price cuts,  benefits or enticements offered to those who reserve later ("a most favored nation" situation).  Or, give people "interest" on their FCC so that their FCC goes up the longer the cruise line holds the money (this would partially assuage the problem where the FCC on the cruise that you just cancelled won't cover the same cruise next year).

 

Or, a decision could be made to cut costs such as the Silver Box, which, from the comments here,  a lot of people don't seem to relish.

 

They made me a decent deal that incentivized me to move over my Silver Galapagos cruise to the Silver Origin. I second guess myself about not taking my $26K back, but this is supposed to be a special vacation for us.  At the end of the day, I'm betting on Royal Caribbean to be there for its customers.

[Observer]

5 hours ago, UKCruiseJeff said:

 

It's an interesting viewpoint. 

 

If you extrapolated that view and said for the sake of argument, that there was a third of people being "pessimists", another third being "optimists" and the last third being "undecideds" (.... not a bad starting point! ...) then in what was already a competitive market with capacity being added and that therefore had excess capacity it doesn't seem likely to me that even if you could convert all of the the "undecideds" and make them join the band of "optimists" that seems most unlikely to be enough to kick-start an industry.  I think the odds of doing that seem to me not to be something I'd bet on.   I think you'd have to be able to make the product really cheap to do that, an option I don't think available. 

 

I very much agree with you, if you are speaking about an instant re-opening of the industry (say, cruises beginning early June.)  I am not certain that the odds would be the same for cruises in 2022.  A lot can happen in 18 months.  Some of it may be unwanted (a second wave, evidence that one does not gain immunity from having been infected, suggestions that the vaccine would have to be administered more than once, etc.)  Other developments may be very encouraging, as in development of an efficacious vaccine, launch of effective therapeutics, availability of low-cost, easily administered, highly accurate tests.

 

5 hours ago, UKCruiseJeff said:

As a counter argument to my own, at a time of existential crisis there are also exceptional opportunities for extraordinary management to make changes and decisions that could place themselves in a much better position than they might otherwise be. 

 

In times of extreme change there are also extreme opportunities if you can see them and go for them.  It isn't only you that might be weak but so are your competitors.  So how you position yourself and the changes the crisis allows you to make that you might not be able to otherwise do are unique opportunities.  But, so far I see a lot of management but not a lot of exceptional leadership.

 

Jeff 🙂

 

I agree that the cruise experience of the future will likely be different in various ways from the experience of the past.  However, I would be interested to know what in your opinion those "exceptional opportunities" for "exceptional leadership" might be. 

[UKCruiseJeff]

9 minutes ago, Observer said:

 

I assume you are positing a 10% chance of dying.  The mortality rate from COVID 19 is nowhere near to that.  This speculative figure seems to be unnecessarily alarmist.

 

 

 

Hi, thanks.

 

Fine, taking your chosen mid-point of say 50% effective for flu, Covid-19 has already mutated and you seem to have overlooked that we are talking about the virus in the context of elderly people together on a cruise and not knowing at any current moment who might be capable of donating the virus to others.  I cannot see how you can possibly keep the confines of a ship safe from a virus.  Unless for example every passenger was assigned to and followed by a crew member who wiped every banister, every lift button every toilet door handle,  etc etc all day and every day 24/7 each time any item was touched. 

 

Presumably part of the cruise experience is sharing a table at dinner each night with others none of whom will be eating whilst wearing a mask.  Would you still take a cruise if you expected to have your meal in your suite each night for example?  

 

For what it's worth, I should be direct and say I am certainly gloomy and fear that this virus might be just the first of a new breed of virus that has found a way of infecting silently and with increasingly deadly consequences. Something a virus has always wanted!  It may indeed be totally irradicated by a new vaccine supported by treatments and it may shrug it's shoulders and say "fair enopugh ... I give up" and go away never to return in new colours - or it may not.  

 

Also, you dismissed the mortailty rate I suggested but we are not talking about mortality rates of people who can dial 999 and be in an ICU within an hour.  Do you believe that mortality rates for the elderly in the situation where passengers are simply confined to their suites on a TA would be no worst than receiving prompt highly specialist care in a land-based fully staffed  ICU from the moment the condition was confirmed?  I don't think so.

 

No one "knows" but interested in your opinion.

 

 

 

[QueSeraSera]

Personally, I value all of the posts above.  Just read Jeff's as it came in while I was typing this.  I appreciate that we are working together to try and sort this out.  I believe we are all hopeful to cruise again safely.

So let's start putting our heads together to offer some guidance to our cruise line as to what it would take to get us back on board even if we are higher risk, etc.  I've worked on this an hour or so in Microsoft Word which I know is nothing but it has caused me to reach for another glass of wine at this point.  I claim zero expertise here, these are just my thoughts (we used to call this a "straw dog" to invite critique) about what needs to happen before enough of us feel ready to board a flight for our next cruise that SS can make money on a cruise.  My apologies for the length...

This assumes that a highly effective vaccine has not been developed, and that many of us do not suddenly find that we have already been infected and so have reliable immunity already built in.

Steps to our next cruise if no vaccine or no proof that we are immune due to prior exposure:

1.    Widespread availability of 2 independent tests to determine if one is infected with NCV19, or a single exceptionally reliable test.

a.    Consider that Quarantining is due to the lack of available, reliable tests.

b.    The day prior to embarkation, all crew and passengers would be tested.  Failing one is a no go. 

c.    The statistics here depend on the false negative % of results of the tests.  I have seen current numbers of 15% false negatives.  This will need to drop, and I expect it will.    (False positives are costly annoyances, but of no risk to passengers who pass & board.)  Two independent tests that had 15% false negatives would allow 2% chance of a positive slipping through (.15 * .15).  Need to do better.

d.    A future cruise credit or refund would be given if one fails.

e.    While passengers could be tested at home or elsewhere, that could be tough to control.  A safer approach is SS offers (requires?) we buy a package that includes testing and a one-night quarantine in a fine hotel.

f.     If it were determined that a test did not reveal an infection until 3 days after exposure, for example, then hotel stay prior to departure would have to increase appropriately.  I haven’t read anything about this issue.

 

2.    On board, adequate filtration of cabin air to remove all viruses for everyone on board.  This is expensive, but without it – confining to cabin will be ineffective if step 1 fails.  Ample testing capability should be available on board.

 

3.    Crew housing needs to be upgraded to ensure effectiveness of step 2.  I do not know how to specify this, but somewhere within Fincantieri or RCL there are engineers and medical experts who do.  Passenger space will be reduced, crew space increased. Fares will go up, ok.  But sufficient space must be opened for crew protection.

4.    The restaurant and bars will be capacity limited.  Data from the various strategies restaurants will be attempting as the world opens up could guide this.

5.    A reasonably effective cure is available.  Perhaps remdesivir already provides this.  My guess is it will be remdesivir plus another drug or two.

[Observer]

2 hours ago, UKCruiseJeff said:

 

 

Hi, thanks.

 

Fine, taking your chosen mid-point of say 50% effective for flu, Covid-19 has already mutated and you seem to have overlooked that we are talking about the virus in the context of elderly people together on a cruise and not knowing at any current moment who might be capable of donating the virus to others.  I cannot see how you can possibly keep the confines of a ship safe from a virus.  Unless for example every passenger was assigned to and followed by a crew member who wiped every banister, every lift button every toilet door handle,  etc etc all day and every day 24/7 each time any item was touched. 

 

Presumably part of the cruise experience is sharing a table at dinner each night with others none of whom will be eating whilst wearing a mask.  Would you still take a cruise if you expected to have your meal in your suite each night for example?  

To answer your question, of course I wouldn't.

 

You are writing as though cruising begins tomorrow -- with no discernible progress in testing, vaccination, therapeutics.  I would need to be comfortable with at developments in at least two of these three categories before I expect I would cruise. 

 

Please note that I referred to 2022 as a date when cruising might return to something resembling normalcy.  I would not take a cruise this summer, and I do not know that Silversea will offer any.  I believe that things may be very different (and better) a year from now.  If not, I won't be sailing.

 

2 hours ago, UKCruiseJeff said:

For what it's worth, I should be direct and say I am certainly gloomy and fear that this virus might be just the first of a new breed of virus that has found a way of infecting silently and with increasingly deadly consequences. Something a virus has always wanted!  It may indeed be totally irradicated by a new vaccine supported by treatments and it may shrug it's shoulders and say "fair enopugh ... I give up" and go away never to return in new colours - or it may not.  

It may be that I have more confidence than you in the power of medical science and the resilience of humanity.

 

I am old enough to remember the scourge of another virus, polio, which like COVID2 spread from person to person.  For many, it greatly limited acceptable activities in the summer ("polio season").  A vaccine was developed, and in much of the world polio became little more than a sad memory.  The resources being devoted to a COVID2 vaccine are far, far greater than those supported by the March of Dimes for polio.

 

I sailed on Whisper from Dublin on the afternoon of 9/11/01.  There was lots of time on that crossing for speculation on the precariousness of travel, the likelihood that people would not fly anymore, etc.  The Port of New York was closed and the ship was diverted to Philadelphia.  My flight from PHL may have had 10% occupancy.  A holiday cruise that December that would otherwise have been fully booked had few guests.  But travel eventually rebounded. 

 

These are desperately sad days.  Many have died.  Many will bear psychic scars from this ordeal.  Many have lost their jobs or their businesses.  I think often of those in the hospitality industry (most immediately our beloved crew) who can least afford the loss of a paycheck, benefits, etc.  

 

But I have hope -- no! confidence -- that we will negotiate these challenges as we have so many others.

 

2 hours ago, UKCruiseJeff said:

 

Also, you dismissed the mortailty rate I suggested but we are not talking about mortality rates of people who can dial 999 and be in an ICU within an hour.  Do you believe that mortality rates for the elderly in the situation where passengers are simply confined to their suites on a TA would be no worst than receiving prompt highly specialist care in a land-based fully staffed  ICU from the moment the condition was confirmed?  I don't think so.

 

Again, I think we have to be clear about timing.  Are we talking only about the current reality?  Are we dismissing the possible development of powerful therapeutics?  

 

In any case, even currently it is hardly accurate to suggest that a person with confirmed COVID19 should instantly receive prompt care in an ICU.  A very, very small percentage of the people with COVID19 end up in an ICU.

 

A pulmenologist who knew of my sailing and who also enjoys cruising on luxury ships remarked last week that s/he thought that a person who presented with symptoms might enjoy better and safer care from the doctor and nurse on a luxury cruise ship than by going to a hospital A&E/ER.  

 

[UKCruiseJeff]

5 hours ago, Observer said:

A pulmenologist who knew of my sailing and who also enjoys cruising on luxury ships remarked last week that s/he thought that a person who presented with symptoms might enjoy better and safer care from the doctor and nurse on a luxury cruise ship than by going to a hospital A&E/ER.  

 

 

Thanks.

 

I find this simply adds weight to TTS's comments elsewhere concerning "confirmation bias".

 

Safe travels.

 

Jeff 🙂

Edited May 10, 2020 by UKCruiseJeff

[TLCOhio]

12 hours ago, Observer said:

I am old enough to remember the scourge of another virus, polio, which like COVID2 spread from person to person.  For many, it greatly limited acceptable activities in the summer ("polio season").  A vaccine was developed, and in much of the world polio became little more than a sad memory.  The resources being devoted to a COVID2 vaccine are far, far greater than those supported by the March of Dimes for polio.

I sailed on Whisper from Dublin on the afternoon of 9/11/01.  There was lots of time on that crossing for speculation on the precariousness of travel, the likelihood that people would not fly anymore, etc.  The Port of New York was closed and the ship was diverted to Philadelphia.  My flight from PHL may have had 10% occupancy.  A holiday cruise that December that would otherwise have been fully booked had few guests.  But travel eventually rebounded. 

 

Agree on the comment from QueSeraSera about the value of posting these various items of information, background and perspectives.  Great sharing by all!!  For me, per above, I do remember taking first the Salk vaccine and then the oral Sabin prevention in the 1950's against polio.  Dr. Salk pioneered these effects near to the east of us in Pittsburgh, while Dr. Sabin worked just two hours SE of us in Cincinnati.  It is not just on the East Coast or West Coast of the U.S. where this top research is successfully done.

 

Correct insight by UK Jeff noting: "Presumably part of the cruise experience is sharing a table at dinner each night with others none of whom will be eating whilst wearing a mask.  Would you still take a cruise if you expected to have your meal in your suite each night for example?"  Many questions to be answered during the coming months!!

 

Not too much major "new" or major in the past week for quick, easy, comprehensive testing; airlines on their way to restoring service/flying schedules; consumer confidence jumping up, etc., etc.  Am I missing any key trends and new signs in recent days?   

 

From Town & Country magazine, I shared on another CC board about this Yahoo news posting yesterda where, they had this headline: “When Will it Be Safe to Travel Again?” with these highlights: “ 'When will travel reopen and what will it look like on day one?' These questions have obsessively preoccupied the entire travel industry since mid-March, when with each passing day it became more clear that the unthinkable was happening:  In so far as travel was concerned, it wasn't just about the loss of leisure and pleasure—it was also livelihoods. The travel industry contributes 10% to the world's GDP and sustains 1 in 12 of all global jobs (around 255 million people). ”.

 

Later in the story, this overview was shared: "The broad answer to when we can travel again boils down to three factors:  When we are allowed to.  When we feel safe doing it.  When the right transportation options are available (airlines with the right routes, ships able to set sail—and no quarantine awaiting us at journey's end).  As Jack Ezon, CEO and founder of the travel agency Embark Beyond, put it: 'In travel, there has always been a high season, a low season, and a shoulder season. We are in a wait-and see season.' "

 

In this lengthy review, here were the observations as to cruises: "The cruise industry has been especially hard hit by the pandemic, with infection spreading quickly on some ships, and cruise lines scrambling to repatriate thousands of passengers and crew. On March 14, the CDC issued a "no sail order," currently in place until July 24.  Since then, industry leaders have been in a huddle, figuring out how to devise and implement new health and sanitation and social distancing protocols—no small feat for ships. Many are not talking yet. And some are saying a bit too much, too soon."

 

Interesting details, comments and background.  Did not realize that tourism and the hospitality industry created so many jobs around the world. 

 

Full story at:

https://www.yahoo.com/lifestyle/safe-travel-again-143000520.html

 

THANKS!  Enjoy!  Terry in Ohio

 

Completed last summer Calgary, Jasper/Banff National Parks, Western Canada Rocky Mountaineer rail adventure, Vancouver, sailing up to Alaska, post-cruise excursion to Denali, etc.  Many visuals and details from our first in these scenic areas!  Live/blog at: 

https://boards.cruisecritic.com/topic/2682584-live-terryohio-silver-muse-alaska-canadarockies-pix’s/

[cruiseej]

On 5/9/2020 at 8:14 PM, Observer said:

Great strides are being made in testing and I would imagine there would be even greater progress by the time the industry opens up again.  Especially on smaller ships like those of Silversea, even daily testing of guests and crew could be undertaken.  It would hardly be a great imposition.

 

Hmm… the math is a little tough on that. Take a small ship like the Silver Cloud: you're talking 250 guests and 200 crew, or 450 people to test daily. At roughly $40 per test -- $18,000/day, or a quarter million dollars for a two week cruise. Multiply by 10 ships in the Silversea fleet, some twice as large, and you're looking at ballpark $2 million per week. Plus the costs of the testing machines for each ship and the crew to administer and process the tests. (Assuming the new 15-minute test, that's 5  machines and staff running 24 hours a day to process 450 tests a day for the Cloud; double that for the Muse.) And assuming Silversea could procure roughly 50,000 tests per week. (For scale: that's slightly more than the state of Pennsylvania, with a population of 13 million, is doing now.) Yes, there will be greater availability, and presumably costs will decrease a bit, but the costs are pretty steep -- maybe on the order of  $1,000 per passenger for a 2-week cruise. 

 

On 5/9/2020 at 9:09 PM, QueSeraSera said:

• The day prior to embarkation, all crew and passengers would be tested.  Failing one is a no go. 
• A future cruise credit or refund would be given if one fails.

 

That puts all the burden, and cost, on the cruise line. They can't resell a suite if someone is rejected prior to boarding, so it's a 100% loss of revenue to the cruise line. That could be a massive cost if even a few people test positive. And what would happen to the passenger who tests positive? Under the best conditions, they need to be quarantined for two weeks, and then need a flight home; under worse circumstances, they need medical care in whatever location the positive test takes place. Who will pay for this? The cruise line? The passenger? Insurance? No matter who, customers ultimately will shoulder these costs. There's no get-out-of-jail-free refund or FCC that offsets these costs.

 

On 5/9/2020 at 9:09 PM, QueSeraSera said:

e.    While passengers could be tested at home or elsewhere, that could be tough to control.  A safer approach is SS offers (requires?) we buy a package that includes testing and a one-night quarantine in a fine hotel.

 

Testing only before the cruise isn't sufficient, unless it's a 100% at-sea cruise with no port calls. As @Observer suggests above, cruising as we know it would need to be testing every day of everyone on board. And even then, test processing might take hours, during which time a newly-infected passenger could infect others on the ship before being quarantined. 

 

On 5/9/2020 at 9:09 PM, QueSeraSera said:

2.    On board, adequate filtration of cabin air to remove all viruses for everyone on board.  This is expensive, but without it – confining to cabin will be ineffective if step 1 fails.

 

Wow, that would be a massive task; I don't know if it's even possible to completely re-build the ventilation systems on existing ships. Each room would need its own fresh air intake and exhaust with filters capable of preventing spread of the virus, which is not the way cruise ships are built. On the flip side, this virus isn't generally spread by airborne particles except at close range, so it might not be necessary. 

 

On 5/9/2020 at 9:09 PM, QueSeraSera said:

3.    Crew housing needs to be upgraded to ensure effectiveness of step 2.  I do not know how to specify this, but somewhere within Fincantieri or RCL there are engineers and medical experts who do.  Passenger space will be reduced, crew space increased. Fares will go up, ok.  But sufficient space must be opened for crew protection.

 

Revamping crew quarters to be larger, or single-person rooms would require massive structural changes to a ship -- as well as less passenger space, as you noted. So there's an engineering challenge, a large capital cost, and then the ongoing higher cost of operation.

 

All of these suggested measures are driving the cost of cruising up significantly.

 

On 5/9/2020 at 9:09 PM, QueSeraSera said:

4.    The restaurant and bars will be capacity limited.  Data from the various strategies restaurants will be attempting as the world opens up could guide this.

 

So will 75% of the ship be restricted to dining in their rooms each night if the restaurants operate at 25% capacity? Will there be a waiting list for admission to a bar or lounge? A time limit for your stay? Or will you need to drink alone in your room with room service drinks? Will there be a daily lottery for deck chairs/loungers? Will ship infirmaries and medical staff need to be upgraded to put passenger(s) on a ventilator(s)?  And maintain them if countries around the world won't accept offloading of sick passengers? None of this is sounding like fun, or luxury cruising as we know it!

 

I'm finding it hard to see how much cruising can resume until there's a vaccine. We're booked on a December once-in-a-lifetime cruise to Antarctica with friends, and we're reaching the conclusion we should probably push back a year to December 2021 -- and then spend the next 18 months hoping that Silversea as we know it is still ready to take us there. Sigh.

[SSCAF001]

6 hours ago, cruiseej said:

 

I'm finding it hard to see how much cruising can resume until there's a vaccine. We're booked on a December once-in-a-lifetime cruise to Antarctica with friends, and we're reaching the conclusion we should probably push back a year to December 2021 -- and then spend the next 18 months hoping that Silversea as we know it is still ready to take us there. Sigh.

Thanks for your comments. I fully agree with you that there is almost no way cruising can resume before a vaccine is developed, tested and administered to a huge number of people. And unfortunately, according to the most optimistic serious scientists, it will be at least 18 months from now to get the vaccine. So at least 2 years before a significant number of people being vaccinated. I am afraid there there will be no cruise for the rest of 2020 and the entire 2021. 2022? Let's see. But by that time, many cruising companies will have either disappeared or completely restructured their business models. I am very much afraid of losing 100% of the deposits I have made for 3 SS cruises in 2020 and 2021. I really hope I am wrong.

[Tothesunset]

1 hour ago, SSCAF001 said:

Thanks for your comments. I fully agree with you that there is almost no way cruising can resume before a vaccine is developed, tested and administered to a huge number of people. And unfortunately, according to the most optimistic serious scientists, it will be at least 18 months from now to get the vaccine. So at least 2 years before a significant number of people being vaccinated. I am afraid there there will be no cruise for the rest of 2020 and the entire 2021. 2022? Let's see. But by that time, many cruising companies will have either disappeared or completely restructured their business models. I am very much afraid of losing 100% of the deposits I have made for 3 SS cruises in 2020 and 2021. I really hope I am wrong.

Hard to gainsay any of the above. 

 

The creeping cancellations on all cruise lines perpetuate the forlorn hope that cruising will start again this year, maybe at the end of the current round of cancellations. And even if they do, good luck getting travel insurance to include Covid-19, getting sick at sea with CV and getting home again without quarantining. And that's without a winter second peak. 

[TLCOhio]

9 minutes ago, Tothesunset said:

The creeping cancellations on all cruise lines perpetuate the forlorn hope that cruising will start again this year, maybe at the end of the current round of cancellations. And even if they do, good luck getting travel insurance to include Covid-19, getting sick at sea with CV and getting home again without quarantining. And that's without a winter second peak. 

 

Great above points by TTS as to the challenges for getting decent/solid travel insurance, plus the risks of being quarantined, if and if, etc. Many risks and concerns.   Also, appreciate the other good and insightful comments, questions and wisdom shared by others.

 

In my view, Seabourn has been much more realistic and honest in saying now that they do not expect to start sailing any of their five luxury ship until the period of mid-October and early November.  Clearly, Silversea and other cruise line are not even close to having the needed testing tools, good airline connections, countries being open, etc., etc., in order to resume a reasonable and safe level of customer offerings. Plus, having its key audience of those age 60+ being reasonably confident that the health risks will be minimal during airline flights and on these ships with hundreds of passengers and staff grouped together. 

 

From a posting to the PR Newswire last night, this release had this headline: “Royal Caribbean Announces Pricing Of $3.32 Billion Senior Secured Notes” with these highlights: “Royal Caribbean Cruises announced that it has priced its private offering of $1.0 billion aggregate principal amount of 10.875% Senior Secured Notes due 2023 and $2.32 billion aggregate principal amount of 11.500% Senior Secured Notes due 2025.  The Notes and the related guarantees will be secured by 28 of the Company's vessels and material intellectual property of the Company. The obligations under the Notes and the related guarantees will be secured by the collateral in an amount not to exceed permitted capacity under the Company's existing indebtedness. The Company expects to use the net proceeds from the offering of the Notes to repay its $2.35 billion 364-day senior secured term loan agreement with Morgan Stanley.”

 

At an interest rate of around 11%, these are not cheap and easy loans.  Plus, as I read it, they are putting up their 28 ships as collateral.  But, RCCL does not currently own all of those ship free and clear.   There is sizable debt outstanding for many (or most?) of these ships.  Right?  The good news, for now, is that RCCL has cash, but at what price, when and how will it be paid back?   

 

PR Newswire link at:

https://www.wsj.com/articles/PR-CO-20200513-917258

 

THANKS!  Enjoy!  Terry in Ohio

 

Sydney to NZ/Auckland Adventure, live/blog 2014 sampling/details with many exciting visuals and key highlights.  On page 23, post #571, see a complete index for all of the pictures, postings.  Now at 230,005 views.

www.boards.cruisecritic.com/showthread.php?t=1974139

[SSCAF001]

16 minutes ago, TLCOhio said:

 

Great above points by TTS as to the challenges for getting decent/solid travel insurance, plus the risks of being quarantined, if and if, etc. Many risks and concerns.   Also, appreciate the other good and insightful comments, questions and wisdom shared by others.

 

In my view, Seabourn has been much more realistic and honest in saying now that they do not expect to start sailing any of their five luxury ship until the period of mid-October and early November.  Clearly, Silversea and other cruise line are not even close to having the needed testing tools, good airline connections, countries being open, etc., etc., in order to resume a reasonable and safe level of customer offerings. Plus, having its key audience of those age 60+ being reasonably confident that the health risks will be minimal during airline flights and on these ships with hundreds of passengers and staff grouped together. 

 

From a posting to the PR Newswire last night, this release had this headline: “Royal Caribbean Announces Pricing Of $3.32 Billion Senior Secured Notes” with these highlights: “Royal Caribbean Cruises announced that it has priced its private offering of $1.0 billion aggregate principal amount of 10.875% Senior Secured Notes due 2023 and $2.32 billion aggregate principal amount of 11.500% Senior Secured Notes due 2025.  

Dear TLCOhio

Do we know whether this $3.32 billion bonds have been fully subscribed yet? Is this supposed to happen this morning USA time? My hope is that if it is successful, RCL will announce at least a 6-month time frame cancellation, allowing us to ask for a full refund of our deposit.

[TLCOhio]

4 minutes ago, SSCAF001 said:

Dear TLCOhio   Do we know whether this $3.32 billion bonds have been fully subscribed yet? Is this supposed to happen this morning USA time? My hope is that if it is successful, RCL will announce at least a 6-month time frame cancellation, allowing us to ask for a full refund of our deposit.

 

Am listening now to the quarterly financial presentation for NCL.  Interesting comments and info items for that major cruising company.  NCL indicated that when they did their bond offerings that the investor interest was strong and that those bonds were "over-subscribed".  My recollection is that RCCL had a similar experience in being able to gain this added "cash" without too much market resistance   Why?  At around an 11% return, lots of Wall Street types are seeking high rates of interest yield, especially compared to the current stock market uncertainty and low returns on other financial instruments.  But, as always, getting an 11% pay-out involves other risks and questions. 

 

THANKS!  Enjoy!  Terry in Ohio

[UKCruiseJeff]

10 minutes ago, SSCAF001 said:

Dear TLCOhio

Do we know whether this $3.32 billion bonds have been fully subscribed yet? Is this supposed to happen this morning USA time? My hope is that if it is successful, RCL will announce at least a 6-month time frame cancellation, allowing us to ask for a full refund of our deposit.

 

It is pretty complicated and scary. 

 

The owners of the bonds will effectively own a cruise line if defaulted.  Also Royal Caribbean’s filings indicated that it held $2.4 billion in customer deposits as of March 31, 2020.  The longer that the future of cruising looks uncertain the increasing the percentage will be of those requesting refunds rather than FCC.  One must also start to aggregate numbers to try and visualise the future.  11% to service debt, FCC of 25% discount without incremental revenue (ie the FCC is used to finance current operations not ring-fenced) ... etc

 

..... and ....

 

"There are concerns that the industry could be crippled permanently. Moody’s and Standard & Poor’s both took rating actions on Wednesday after the announced deal:

• Moody’s downgraded the ratings of Royal Caribbean (and Silversea Cruise Finance Ltd.), including its senior unsecured rating to ‘Ba2’ from ‘Baa3’, senior secured rating to ‘Baa3’ from ‘Baa2,’ and short term commercial paper rating to non-Prime from P-3. Moody’s also assigned a ‘Ba1’ rating and a ‘Baa3’ rating to planned secured note issuance and the credit outlook is “negative” after it initiated a review for downgrade back on March 11, 2020.
• Standard & Poor’s rates its senior unsecured notes at ‘BBB-‘ and said that its ‘BB’ issuer credit rating are unchanged. The ratings agency’s ‘Negative Outlook’ reflects high uncertainty in the base-case recovery assumptions for late in 2020 and into 2021.

A fourth twist is regarding customer deposits and future credits. Royal Caribbean’s filings indicated that it held $2.4 billion in customer deposits as of March 31, 2020. That sum includes roughly $800 million of future cruise credits related to prior trip cancellations through June 11, 2020. There are still many customers who have had cancelled voyages on Royal Caribbean and other operators who are not sure what they want to do nor what will become of their credits if the financial pressure from the recession carries over into 2021 or beyond."

[Stumblefoot]

4 hours ago, SSCAF001 said:

My hope is that if it is successful, RCL will announce at least a 6-month time frame cancellation, allowing us to ask for a full refund of our deposit.

Highly unlikely as the purpose of the new debt offering Is to repay the recently issued $2.35 billion 1-year loan with Morgan Stanley.  And, while the remaining value of the new offering will be used for “general corporate purposes”, rest assured that boiler plate language means most likely the remaining funds will be used to pay off $400MM of debt that matures later this year, as well as $900 million in 2021.  
 

As you can see, this offering’s purpose isn’t isn’t to accomplish what you hoped for, but rather to extend debt maturities farther into the future, thereby improving overall liquidity of the corporation.

 

One last thing, upon release of the first quarter earnings report, we should learn more about the $1.0B - $1.3B write down of Silversea and other assets that was announced in the bond offering.

Edited May 14, 2020 by Stumblefoot
Added SS Write Down

[SSCAF001]

Highly unlikely as the purpose of the new debt offering Is to repay the recently issued $2.35 billion 1-year loan with Morgan Stanley.  And, while the remaining value of the new offering will be used for “general corporate purposes”, rest assured that boiler plate language means most likely the remaining funds will be used to pay off $400MM of debt that matures later this year, as well as $900 million in 2021.  
 
As you can see, this offering’s purpose isn’t isn’t to accomplish what you hoped for, but rather to extend debt maturities farther into the future, thereby improving overall liquidity of the corporation.
 
One last thing, upon release of the first quarter earnings report, we should learn more about the $1.0B - $1.3B write down of Silversea and other assets that was announced in the bond offering.

Thanks. At least if the proceed of this offering can allow RCL and its subsidiaries to survive 18 months with 0 revenue, it will give me some hope to get the cash refunds for my three booked cruises.


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[Stumblefoot]

9 minutes ago, SSCAF001 said:

At least if the proceed of this offering can allow RCL and its subsidiaries to survive 18 months with 0 revenue, it will give me some hope to get the cash refunds for my three booked cruises.

Based on my back of envelope calculations, the company has only enough liquidity at this time with $0 future revenue to survive 2020 (not 2021) based on a $275MM monthly burn rate and $2.45 billion in cash and cash equivalents on hand.

 

As expensive as the new bond offering is, should it close successfully next Tuesday, I believe RCL will have to issue even more expensive debt to survive 2021 even if they are able to restart operations in late summer / early fall.

[UKCruiseJeff]

44 minutes ago, SSCAF001 said:

Thanks. At least if the proceed of this offering can allow RCL and its subsidiaries to survive 18 months with 0 revenue, it will give me some hope to get the cash refunds for my three booked cruises.


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Hi,

 

Your positive mental attitude is inspiring.  🙂

 

Anyone who has been “in business” with angst induced sweat-soaked cash-flow spreadsheets will know how quickly the runway can run out of tarmac.  

 

Every month that refunds are made and FCC funded last year and avoids further depleting current operating expenditure but adds to future +25% real revenue reduction liabilities - COMPOUND - is a double whammy and the more horrifying it looks. Each month you return more refunds whilst depleting future revenue opportunity when you “reopen:  by the amount of FCC+25%. you offer.  The numbers are far too large for me to calibrate.  But what I do see is that every month that refunds are made whilst future inflated unfunded bookings deplete new revenue opportunity the less hopeful  it all seems.  And that implies that normality does restart soon.

 

Imagine you were employed and giving back half of your LAST YEARS earnings back to your employer that you have already spent last year, and whilst having no current income but still paying the curent mortgage and stuff - and asking that you keep the other half of last years income in exchange for working 25% more for no extra income next year.  So giving back last years income and retaining a bit to work for 25% more for free next year. That is a very tough cashflow ask. 

 

These cashflow actions in a way reminds me of Billy Bunter who when asking for a loan was always hoping for a postal order from pater. 

 

Safe travels all.

 

Jeff 🙂

 

Edited May 14, 2020 by UKCruiseJeff

[SSCAF001]

Based on my back of envelope calculations, the company has only enough liquidity at this time with $0 future revenue to survive 2020 (not 2021) based on a $275MM monthly burn rate and $2.45 billion in cash and cash equivalents on hand.
 
As expensive as the new bond offering is, should it close successfully next Tuesday, I believe RCL will have to issue even more expensive debt to survive 2021 even if they are able to restart operations in late summer / early fall.

Thanks. Not so encouraging news! But realistic I guess. I cannot imagine a resumption of cruising in 2020 and probably quite limited in 2021.


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[QueSeraSera]

Interesting to hear all of your thoughts.  I mean it! I might disagree on a few, but I respect the thought given by all.

Put yourself in the position of SS - what would you do?  You've heard all the doomsday predictions, your best accountants are on LinkedIn looking for jobs elsewhere, you just accepted a 11+% loan.  You'd rather loan your kids money than hear they got such a rate.  Quit?  no way!

If its me, I'm reading every report of testing, cures, vaccines, etc.  I'm ignoring politicians an all sides, listening to scientists, doctors & nurses, and historians.  The overriding need is some revenue to survive until the vaccine arrives, or folks feel safe if they have prior exposure.

There are customers anxious to cruise again, even if the experience costs 50% more, shore excursions are limited, dining options are limited (no need to think people will have to eat in their rooms) etc etc.  I don't know enough about the business to imagine what and how its going to happen.  But I can't wait to see what the bright minds at SS & the other lines come up with, and I'm just hoping I don't get priced out of the market 🙂

[TLCOhio]

On 5/14/2020 at 8:10 PM, QueSeraSera said:

There are customers anxious to cruise again, even if the experience costs 50% more, shore excursions are limited, dining options are limited (no need to think people will have to eat in their rooms) etc etc.  I don't know enough about the business to imagine what and how its going to happen.  But I can't wait to see what the bright minds at SS & the other lines come up with, and I'm just hoping I don't get priced out of the market 🙂

 

Super appreciate these above excellent comments and insightful follow-up from SSCAF001, UK Jeff, Stumblefoot and our Virginia "neighbor".   From QueSeraSera, your thoughttful posting offers a perfect "CONTRAST" as to the trade-offs facing consumers as the cruise lines seek to draw customers back.  

 

Which of your two comments will work out to be most true?  Is it "customers anxious to cruise again, even if the experience costs 50% more"??  Or, "I'm just hoping I don't get priced out of the market"?   That's a key part of their biggest challenge!!   Silversea, Royal Carib, etc., need recover fro hundreds of millions of dollars in lost costs, but how quickly?  And, still be reasonable enough to get a sizable number of folks to book, pay up,  etc.  Personally for us, it's about the routings, itineraries and ports, PLUS, being at a reasonable cost/value level.  Many questions and challenges, including as to when and if CDC modifies it current late July "no-sail" order. 

 

From the respected Barron's publication associated with the Wall Street Journal, they posted last night this headline: “For Cruise Operators, Debt Has Been a Lifeline—and a Burden” with these highlights: “In normal times, cruise operators navigate the high seas. To stay afloat during the coronavirus pandemic, these companies now have to navigate new waves of debt.  The Big Three U.S. cruise operators— Carnival, Royal Caribbean Cruises and Norwegian Cruise Line —have been shut down since mid-March due to the pandemic and have taken a number of steps to shore up capital as they burn through cash. Whenever the cruise companies do resume operations, their challenges will include paying higher interest, in some cases double digits, on the billions of debt they’ve raised. And their ratios of net debt to earnings before interest, taxes, depreciation, and amortization figure to spike.  'They’ve all raised capital to bolster their liquidity,' says Pete Trombetta, lodging and cruise analyst at Moody’s. 'The next concern is what does this recovery look like and when can they start operating in earnest?' ”

 

Here are some added details outlined by their writer: "At the end of its most recent fiscal year, Carnival had net debt to Ebitda of about 2 times, according to FactSet. That compares with 3.5 times for Royal Caribbean and 3.8 times for Norwegian.  Those ratios will increase significantly whenever sailings do resume and these companies will face higher debt costs as they gradually restore operations.  The companies should throw off enough cash flow to service their debt once sailings resume at a decent clip. But the higher interest payments will pressure earnings, which aren’t expected to return to normalized levels for several years, possibly until 2023.  Moody’s this past week downgraded its rating on Royal Caribbean’s senior unsecured debt to Ba2, which is junk status, from Baa3, at the low end of the investment-grade range. Its secured debt remains at investment grade, though it dropped by one wrung to Baa3 from Baa2."   

 

Oh, those minor details such as unsecured versus secured debt??!!

 

Full story at:

https://www.barrons.com/articles/for-cruise-operators-debt-has-been-a-lifelineand-a-burden-51589580949

 

THANKS!  Enjoy!  Terry in Ohio

 

Amazon River-Caribbean 2015 adventure live/blog starting in Barbados. Many visuals from this amazing river and Caribbean Islands (Dutch ABC's, St. Barts, Dominica, Grenada, San Juan, etc.).  Now at 66,280 views:

www.boards.cruisecritic.com/showthread.php?t=2157696

[tgh]

 It seems to me that there is this useful postulation  :  Almost all the established  cruise companies need to/will go broke.

When the industry seeks to recommence they would be easy meat for fast moving well funded start ups as the pre-existing debt load would be crippling

If they fold thoughtfully , most of the structure can be quickly refinanced and remarketed with bright shiny new clothes.

The petri dish odium will be buried with the old names and marketing will send out a clean fresh healthy spin

Welcome to the new Silversea, Seabourn et al ; welcome to healthy green clean sustainable ( your adjective) cruising

 

The sooner the first one  moves to call in the cleaners ,   the sooner the rest can follow and the whole  debt tsunami can be flushed down the gurgler

In business , rolling over when the debt load gets out of hand is common , however  in this case there may be a lot of noisy hand wringing by their newly fleeced and previously loyal ,  well heeled vociferous,  customer base.

 

Yes they will lose a large percentage of their fleeced previous clientele, but they can also change the target demographic to a younger , less experienced group with no memory of past cruising glories.

 

So that's my spin … wishin' and hopin' arguments welcomed as rebuttals so we can grasp them and continue to live in hope….

 

 

[UKCruiseJeff]

53 minutes ago, tgh said:

 It seems to me that there is this useful postulation  :  Almost all the established  cruise companies need to/will go broke.

When the industry seeks to recommence they would be easy meat for fast moving well funded start ups as the pre-existing debt load would be crippling

If they fold thoughtfully , most of the structure can be quickly refinanced and remarketed with bright shiny new clothes.

The petri dish odium will be buried with the old names and marketing will send out a clean fresh healthy spin

Welcome to the new Silversea, Seabourn et al ; welcome to healthy green clean sustainable ( your adjective) cruising

 

The sooner the first one  moves to call in the cleaners ,   the sooner the rest can follow and the whole  debt tsunami can be flushed down the gurgler

In business , rolling over when the debt load gets out of hand is common , however  in this case there may be a lot of noisy hand wringing by their newly fleeced and previously loyal ,  well heeled vociferous,  customer base.

 

Yes they will lose a large percentage of their fleeced previous clientele, but they can also change the target demographic to a younger , less experienced group with no memory of past cruising glories.

 

So that's my spin … wishin' and hopin' arguments welcomed as rebuttals so we can grasp them and continue to live in hope….

 

 

 

 

To me, in simple terms the cash-flow issue is the real biggy - perhaps the eventual show-stopper.  It isn't just that no cash is coming and whilst last years revenue is being handed back but whilst that happens the other half of last years spent cash that is left of the current month's cancellations becomes forward liability ie FCC that is compounded with all of FCC filling the forward debt books.  This has an accelerating impact on reducing how much you can actually sell and get real cash for when you eventually open up for business again because the growing stock of FCC liability  will be adding to the number of cruises that the lines will effective from a cash-flow viewpoint be offering not just for free but at 25% less than free if you get my drift.  People will probably want to get their bookings in quickly and use their FCC at a faster rate than a slightly slower fresh customer-cash demand and it's new cash that will be most needed.

 

So perhaps sixty or seventy percent of a full cruise might effectively be free but the percentage increases each month of delay of reopening as you build up more FCCs.   Or perhaps do the lines capacity control and refuse to accept more than a percentage of FCC for any particular cruise.  There is nothing preventing it.  This will increasingly leave less and less capacity for cash customers as more FCC is added to the pool.  So each months delay is in many ways is very much more than just an already terrible double whammy.

 

I'm still finding it difficult to visualise how a traditional line could operate in the future.  It's my sense that it just feels to me like the world has got fed up with this lockdown a touch too quickly and with governments concerned about their economies there is a chance we might be un-self-isolating a little too quickly.  The opening of schools is good for kids but this must accelerate contagion and kids infect their parents and grandparents.  The consequence of premature ending to sensible measures might be that the R number returns to above 1 and we start seeing an increase in cases then we will see a whole load of countries bringing in fresh immigration strategies which are easy to announce but slower to remove.  None of this helps open travel up. If world-lockdown does turn out to be seen to have been relaxed to quickly it might be the last nail and final straw.  I see what is now starting to happen in places like India with some alarm.

 

Perhaps there might be some buying of some ships for niche opportunties.  Perhaps someone might try long-term residences ie The World.  Perhaps someone might try "time-share".  Perhaps a very small line doing 7 day's Mediterranean rotations.  But at the moment I cannot visualise how a restart happens for all or most or many of the current lines, in what may be a very fragile hostile environment.

 

Safe times all.

 

Jeff 🙂

 

Edited May 16, 2020 by UKCruiseJeff