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greykitty

Time for NCLH financial-related posts?

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I started a new topic since some posters preferred only non-depressing posts.  I understand the preference, but there isn't a heck of a lot of happy news around, IMO.

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Maybe NCLH will sell off some of the art collection on the ships; adds little to the luxury cruise experience; just hubris.

 

Marc

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4 minutes ago, sierrafloridacruiser said:

Very depressing. Especially for those of us awaiting substantial refunds from Regent-cancelled cruises. 

I'm sorry for your possible financial exposure.  To be clear, I've had nothing at risk, but if I did, I might want to just get an opinion from my attorney as to where I might stand in case of bankruptcy and any strategies I might want to have ready immediately in case things go further south.  That's just me, though.

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Just now, mrlevin said:

Maybe NCLH will sell off some of the art collection on the ships; adds little to the luxury cruise experience; just hubris.

 

Marc

It's the $200,000 bed on the Splendor that had me looking a little askance at the entire description of fittings, etc.  That said, I wonder if anyone 'in the know' knows how the artwork and such are held in ownership?  I've been to some lovely boutique hotels with art that surprised me as being in a 'public area', and then found they were lent from the owner's collection.

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Yes, lent from the owner so that someone else can pay the insurance cost.

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4 minutes ago, greykitty said:

I'm sorry for your possible financial exposure.  To be clear, I've had nothing at risk, but if I did, I might want to just get an opinion from my attorney as to where I might stand in case of bankruptcy and any strategies I might want to have ready immediately in case things go further south.  That's just me, though.

 

If I had an attorney handy, I might ask them.  But I'll just wait it out.  Now I know for sure why they are dragging their feet on refunds.  

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1 minute ago, Wendy The Wanderer said:

 

If I had an attorney handy, I might ask them.  But I'll just wait it out.  Now I know for sure why they are dragging their feet on refunds.  

I will bet you a cyber-nickel that there will soon be reports on the internet describing, in generic terms, 'what happens when a cruise line declares bankruptcy'.  I clearly admit it's a complicated process and creditors often fall into places I didn't expect, but my area didn't deal with bankruptcy much except from afar. 

 

The slow walk on refunds, for all the lines, are IMO a cash hedging strategy.  I've got to admit, I would hate to be any of those poor NCLH customer service people on the phones today.  Talk about being left to hold the bag.

 

I bet a lot of people will be on the phones to their credit card folks this morning as well.  Again, I feel for those customer service people.

 

 

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Here's the full disclosure from NCLH's filings:

 

<<As a result of the impact of the COVID-19 pandemic, our financial statements contain a statement regarding a substantial doubt about the Company’s ability to continue as a going concern.

Our audited financial statements as of and for the year ended December 31, 2019 were prepared on the assumption that we would continue as a going concern. As a result of the factors described above under “COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which adversely affects our ability to obtain acceptable financing to fund resulting reductions in cash from operations. The current, and uncertain future, impact of the COVID-19 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.” These factors have raised substantial doubt about the Company’s ability to continue as a going concern.

Our continuation as a “going concern” is dependent upon, among other things, our ability to increase our liquidity, and our conclusion regarding our ability to continue as a going concern could materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. If we are successful in seeking additional equity or debt financing, as discussed below under the heading “We anticipate needing additional financing, and such financing may not be available on favorable terms, or at all, and may be dilutive to existing shareholders”, we believe the net proceeds received in such financing along with our ability to defer certain debt payments will be sufficient to provide the necessary liquidity meet our obligations during the next 12 months, including the maintenance of minimum levels of liquidity required by certain of our debt agreements. There can be no assurance, however, that we will be able to complete such financing, raise sufficient additional capital or that other factors will improve enough to offset operating losses. The substantial doubt about our ability to continue as a going concern may affect the price of our ordinary shares and the grade of our credit rating, may impact our relationship with third parties with whom we do business, including our customers, vendors, lenders and employees, may impact our ability to raise additional capital and may impact our ability to comply going forward with covenants in our debt agreements. In the event we are unable to secure additional financing, our ability to continue as a going concern over the next twelve months will depend upon a series of factors, including the duration of the layup of our ships, the speed with which, and the extent to which, bookings resume once ships are sailing again, the ability of travel agencies, suppliers and other vendors to resume operations.

 

The Company has identified approximately $515 million of capital expenditure reductions, comprised of approximately $345 million of reduction from planned 2020 non-newbuild capital expenditures and are in negotiations to further reduce our capital expenditures for newbuild related payments by approximately $170 million (which reduction does not take into account the impact on timing of payments in connection with newbuilds as a result of the potential delays in ship deliveries discussed above). If successful, the Company’s next newbuild-related payments would not be until April 2021. We have also identified various projects and initiatives to reduce our ship operating costs and selling, general and administrative expenses, which we expect will result in reduced cash outflows and cost savings. We are undertaking meaningful reductions in ship operating expense including food, fuel, insurance, port charges and reduced crew manning of vessels during the suspension, resulting in lower crew payroll expense. Some other initiatives already implemented include the significant reduction or deferral of marketing expenditures in the first half of 2020, the implementation of a company-wide hiring freeze, the introduction of a temporary shortened work week and reduced work hours with commensurate 20% salary reduction for shoreside team members, a pause in our 401(k) matching contributions, corporate travel freezes for shoreside employees and a temporary furlough of approximately 20% of our shoreside employees through July 31, 2020. In addition, the majority of the vessels in the Company’s fleet are currently transitioning to cold layup,to further reduce operating expenses during the suspension. The steps we have taken to reduce operating costs, including furloughing a substantial number of our shoreside employees, and further steps we may take in the future to reduce costs, may negatively affect our brand reputation, guest loyalty and ability to attract and 

 

 

retain employees, and our reputation and market share may suffer as a result. If our furloughed employees do not return to work with us when the COVID-19 pandemic subsides, including because they find new jobs during the furlough, we may experience operational challenges that could negatively affect results and guest experience and loyalty. Further, any reputational damage from the furlough could lead employees to depart the Company and could make it harder for us to recruit new employees in the future. Even after the COVID-19 pandemic subsides, we could still experience long-term impacts on our operating costs as a result of attempts to counteract future outbreaks of COVID-19 or other viruses, for example, the industry may be subject to enhanced health and safety requirements or other measures.>>

 

At the same time, the company issued a press release saying that it raised a bunch of cash:

 

<<On May 5, 2020, NCLH issued a press release announcing that it had commenced an underwritten public offering of $350 million of its ordinary shares, par value $0.001 per share (the “Equity Offering”). A copy of the press release is attached hereto as Exhibit 99.3 and is incorporated by reference herein.

 

On May 5, 2020, NCL Corporation Ltd. (“NCLC”), a subsidiary of NCLH, also issued a press release announcing a proposed private offering (the “Exchangeable Notes Offering”) of $650 million aggregate principal amount of exchangeable senior notes due 2024 (the “Exchangeable Notes”) and a proposed private offering (the “Secured Notes Offering” and, together with the Equity Offering and the Exchangeable Notes Offering, the “Offerings”) of $600 million senior secured notes due 2024 (the “Secured Notes” and, together with the Exchangeable Notes, the “Notes”). A copy of the press release is attached hereto as Exhibit 99.4 and is incorporated by reference herein.

 

The Company and NCLC intend to use the net proceeds from the Offerings for general corporate purposes. None of the Offerings are conditioned upon the completion of any of the other offerings.

 

The Exchangeable Notes are being offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act. The Secured Notes are being offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act and, outside the United States, only to non-U.S. investors pursuant to Regulation S. The Notes will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

 

This report does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offering, solicitation or sale would be unlawful.>

 

For what it's worth: Going concern letters/comments don't mean they'll go kaput; companies are required to bend over backwards to show the worst case scenario based on what they know when they issue the comments. That said, the bigger question: How safe are those deposits on future cruises, like the one we're booked on for late 2021? 🙅🏽‍♀️🤷🏼‍♂️😱

 

Best,

Herb

 

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NCLH had over $1B of "Goodwill" on their balance sheet at start of year; without this Goodwill balance sheet would have looked terrible.  Now, they are beginning to write off this Goodwill in preparation for bankruptcy, they need to show significantly more liabilities than assets.  Unfortunately, this is looking to be a retelling of the Renaissance story.  Someone (could it be same person) is going to look to buy ships cheap after this is over.

 

Marc

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I think we can agree that a going concern opinion is never issued lightly by the public accountant.   

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Just now, greykitty said:

I think we can agree that a going concern opinion is never issued lightly by the public accountant.   

 

Especially after Arthur Andersen and Enron.

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I would suggest all who have their deposit or FCC that was originally on a credit card, immediately dispute the charges. You will get your money back via your bank getting involved.

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2 minutes ago, wristband said:

Carnival said on Monday that it planned to begin cruising again on some of its ships as early as August. A spokeswoman for Norwegian said the company hoped to begin cruising in July.

 

Did she say it with a straight face?  They haven't even repatriated their crews; does she really think they can get new crews in place by July?

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None of this sounds good.  Even if they survive the product will be remarkably different.  Cost cutting through the roof!  Certainly not worth those prices. 

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Posted (edited)
17 minutes ago, greykitty said:

I think we can agree that a going concern opinion is never issued lightly by the public accountant.   

 

I think we agree. Importantly, this was not a going concern letter issued by the accountants; it was a risk cited by the company. W/o question the issue for all of these cruise lines is very up in the air. My biggest concern is how all of this will impact service, quality, ingredients, fares, etc etc - even on the higher-end ships. I remember sailing Regent when it was owned by private equity; that wasn't a fun time...for us. We also sailed it in recent years and it quickly became our favorite cruise line. But nobody knows how all of this will shake out. 

Edited by bizinsider

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It could also be a little hint at what they are planning to do in the future as far as raising funds/new ownership stake.

 

This can't be all the news...it never is.

 

 

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2 minutes ago, JVNYC said:

None of this sounds good.  Even if they survive the product will be remarkably different.  Cost cutting through the roof!  Certainly not worth those prices. 

 

That's the part that concerns me. On all of these lines. My guess is the companies themselves don't know. And we haven't even mentioned the impact of a second wave, if there is one.

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As I type, 70,000 crew are still stranded on cruise ships in US waters which are still not allowed to dock in US ports.  Would it be a good idea to first have a plan how the cruise lines will remove the crew on land and send them home, then sanitize the ships with a new crew brought on...before allowing new passengers to board in 7 weeks?

 

What about the CDC "no sail" order for ships in US ports until at least August?  And who in their right mind will board a cruise ship in July with Covid-19 spreading and spiking like wildfire in Texas and Florida (projection today: 3,000 US deaths in May)?

 

As Jackie Gleason would say, "This is crazy, man, crazy!"

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I thought I saw that pwc reissued its report.  In any event, this is not the best of financial news.  I think we can all agree that’s fact, not opinion.   It will not be a fun day for most involved financially with the entity.  

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Today the Company has launched a series of capital markets transactions, led by Goldman Sachs, which are expected to raise approximately $2 billion. These transactions are expected to consist of 1) $350 million public offering of common equity, 2) $650 million exchangeable senior notes offering, 3) $600 million senior secured notes offering and 4) $400 million private placement from global consumer-focused private equity firm L Catterton.

Contingent on completion of the transactions, the Company expects to have approximately $3 billion of liquidity. This strengthens the Company’s financial position and ensures it is well positioned to withstand well over 12 months of voyage suspensions in a potential downside scenario. While this is not the Company’s base case expectation, the Company has taken a proactive approach to protect its future given the significant uncertainty and unknown duration of the COVID-19 global pandemic. 

 

Just got this in my email.

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For all of you due a large refund, I truly hope it all works out. The consumer always gets screwed over when there is a bankruptcy. I hope it doesn’t come to that. 

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1 hour ago, btreklaw said:

I would suggest all who have their deposit or FCC that was originally on a credit card, immediately dispute the charges. You will get your money back via your bank getting involved.

I'm genuinely considering that. I have insurance on it as well, so I should be covered either way.

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