Norwegian Cruise Line May Go Out of Business

[sunlover12]

This news sounds bad but I'm not going to overreact.  We have 2 Oceania cruises booked for 2021 and it would be nice to go on them. If not, I will be disappointed, but at this point we would only lose the deposits. One of those was booked with a reduced deposit using a FC Certificate.  At least we wouldn't lose full payments.

 

I have developed a strong stomach and nerves of steel through the years and I've learned not to panic when bad financial news hits. I've held my position through all the stock market disruptions going back to Black Monday 1987 and have come out way ahead.  There's definitely going to be big changes in the cruise industry when we come out of this but they will get through it. 

[KirkNC]

It’s really not bad news, in fact if their successful, it’s good news as they will have 12 months of liquidity.  CCL just did a similar cash raise last month.  It doesn’t guarantee they won’t go belly up but it gets them through the next year.

[Hawaiidan]

6 minutes ago, sunlover12 said:

This news sounds bad but I'm not going to overreact.  We have 2 Oceania cruises booked for 2021 and it would be nice to go on them. If not, I will be disappointed, but at this point we would only lose the deposits. One of those was booked with a reduced deposit using a FC Certificate.  At least we wouldn't lose full payments.

 

I have developed a strong stomach and nerves of steel through the years and I've learned not to panic when bad financial news hits. I've held my position through all the stock market disruptions going back to Black Monday 1987 and have come out way ahead.  There's definitely going to be big changes in the cruise industry when we come out of this but they will get through it. 

Total correct attitude..... sit back and do not react...rather  respond to situations

[CanEcosse]

There are 2 separate, but intertwined, topics in this thread.

1) Those looking longer term at what might Oceania, and/or NCLH, look like after some type of restructuring? Bottom line, it will be different and smaller but will not disappear.

2) Those with a very short-term perspective on what will happen to us who are fully paid and waiting on refunds or, in my case, still waiting on a formal cancellation? We don't know. Will they use a restructuring proposal to force us to take a FCC instead of cash? (i.e. rewrite their Ts&Cs). Or would they offer some type of reduced compensation (take it or leave it), or ??

This second element is what the OP started this thread on.

[TrulyBlonde]

49 minutes ago, RJB said:

In a bankruptcy the common stock ends up worthless I believe.   If that is the case what do you do with your paper then?  Maybe you need to buy their bonds which might have some value after they restructure. Am I wrong?  

I am talking about Chapter 11 and a restructuring. As I stated, it is like going to Vegas. However, I have done well gambling on some of these companies that I believe in. It is all a crap shoot, but also fun. Below is some info.

 

Bond Owners 

As noted in Part 2 of this series, bondholders are second in line for proceeds in either reorganization (Chapter 11) or liquidation (Chapter 7). Under the best of circumstances, bond owners may receive pennies on the dollar in Chapter 11 and could possibly receive some of the proceeds from Chapter 7 liquidation. It is unlikely that bondholders will see their original principal returned. Should you buy the stock of a company in bankruptcy? This may seem like an unusual question, but some investors look for companies in Chapter 11 that have a good chance of emerging intact from bankruptcy.

 

If a company comes through Chapter 11 with its original stock intact, it might be an investment worth considering. You should make a determination that the company has a good chance of continuing as a viable entity. Buying stock in a company in bankruptcy usually means you are getting the stock at rock-bottom prices. If the company has a successful turnaround, you may be sitting on very low-priced stock that could register an impressive rise

[clo]

6 hours ago, Carol From California said:

 

The headlines in these four articles:

Norwegian Cruise Lines says there's 'substantial doubt' about its ability to continue operating

 

Norwegian Cruise Line sees ‘substantial doubt’ about its future, warns of possible bankruptcy

Norwegian Cruise Line may go out of business

Norwegian Cruise Line Holdings raises flag it could face bankruptcy

 

I hope that you are correct. Headlines are pretty scary. 

 

I read the headlines the same as you. Doesn't matter who reports what they're saying, does it?

[Paulchili]

31 minutes ago, CanEcosse said:

There are 2 separate, but intertwined, topics in this thread.

1) Those looking longer term at what might Oceania, and/or NCLH, look like after some type of restructuring? Bottom line, it will be different and smaller but will not disappear.

2) Those with a very short-term perspective on what will happen to us who are fully paid and waiting on refunds or, in my case, still waiting on a formal cancellation? We don't know. Will they use a restructuring proposal to force us to take a FCC instead of cash? (i.e. rewrite their Ts&Cs). Or would they offer some type of reduced compensation (take it or leave it), or ??

This second element is what the OP started this thread on.

That is my question as well as I had posted above.

 2 topics - those with no dog in fight at present except what O may look like after it's over and those that have money owed to them by O (some fairly substantial amounts, not only deposits).

[RJ2002]

Not surprisingly, there are similar threads over on the Regent board.  Here is an interesting post from a retired auditor regarding the NCLH regulatory filings.  He quoted some verbiage from the NCLH filing about existing bookings made via credit cards:

 

 

"The Company also has agreements with its credit card processors that govern approximately $1.6 billion at December 31, 2019 in advance ticket sales that have been received by the Company relating to future voyages. These agreements allow the credit card processors to require under certain circumstances, including the existence of a material adverse change, excessive chargebacks and other triggering events, that the Company maintain a reserve which could be satisfied by posting collateral. The Company is in discussions regarding the nature of collateral, if any, relating to these agreements."

 

 

 

edit:  Another poster subsequently commented that this is perfunctory language in this type of filing, so we'll see.

Edited May 5, 2020 by RJ2002
additional comment

[Paulchili]

1 hour ago, pinotlover said:

If they take the bankruptcy route the CC probably can’t help you

Is this what you mean? Below is an excerpt from CSR benefits (is O a "Common Carrier"?):

What’s Not Covered?

• • Default of the Common Carrier resulting from Financial Insolvency or Financial Insolvency of a Travel Agency, Tour Operator, or Travel Supplier

https://cdn.f9client.com/api3/file/1130287/inline/BGC10893_Sapphire_Reserve.pdf?__gda__=exp=1588728753~acl=/api3/file/1130287/inline/BGC10893_Sapphire_Reserve.pdf*~hmac=c0b422596018033f1a89e03fe033afa33b2ba910432befc71668d2e3643c1663

Edited May 5, 2020 by Paulchili

[Paulchili]

12 minutes ago, RJ2002 said:

"The Company also has agreements with its credit card processors that govern approximately $1.6 billion at December 31, 2019 in advance ticket sales that have been received by the Company relating to future voyages. These agreements allow the credit card processors to require under certain circumstances, including the existence of a material adverse change, excessive chargebacks and other triggering events, that the Company maintain a reserve which could be satisfied by posting collateral. The Company is in discussions regarding the nature of collateral, if any, relating to these agreements."

In English please 

[CintiPam]

When a company’s accountants issue a “going concern” letter, it is very serious.  What that means is that the accountants are saying that unless additional money is raised, they fear the ongoing business as a whole will be insolvent within 12 months.  If things do not work out, normally you file for bankruptcy and you reorganize your debt.  Shareholders get screwed but the company may survive, just not with the same ownership.  Of course, other unsecured creditors get screwed as well.

 

Note that there often is prolonged “discussion” with the company’s outside accountants before a “going concern” is issued and filed.

 

Written by a “recovering” (happily retired) public company securities attorney.

 

Edited May 5, 2020 by CintiPam

[LHT28]

7 minutes ago, CintiPam said:

When a company’s accountants issue a “going concern” letter, it is very serious.  What that means is that the accountants are saying that unless additional money is raised, they fear the ongoing business as a whole will be insolvent within 12 months.  If things do not work out, normally you file for bankruptcy and you reorganize your debt.  Shareholders get screwed but the company may survive, just not with the same ownership.  Of course, other unsecured creditors get screwed as well.

 

Note that there often is prolonged “discussion” with the company’s outside accountants before a “going concern” is issued and filed.

 

Written by a “recovering” (happily retired) public company securities attorney.

 

Thank Pam for the insight

it is all above my  head  & financial status 😉

 I just hope  they can stay alive

 

Maybe FDR was just smart enough to go for the cash infusion now  than wait until things  are a lot worse

JMO

[pinotlover]

Looks like they have lined up another $2 billion of liquidity via Goldman Sachs or have plans to do so.

[CintiPam]

Once the independent accountants tell a company it is issuing/filing a “going concern” letter, the company really has no choice but to go out looking for money and publicly disclose it is doing so.  In order to find that money, you in return have to provide very attractive terms, particularly if you are a cruise line getting no support from the US government.

Edited May 5, 2020 by CintiPam

[RJ2002]

18 minutes ago, pinotlover said:

Looks like they have lined up another $2 billion of liquidity via Goldman Sachs or have plans to do so.

 

Again, over on the Regent board, someone commented that they likely would not have brought up GS unless the options were promising.  I'm hoping that is the case.

[FolsomMike]

4 hours ago, Noxequifans said:

Interesting thread. Don;t have financial expertise but I'll add my two cents. Another key issue is the psychological impact of the latest virus. Specifically, those picture of cruise ships waiting for authorities to permit docking and disembarkation were significant. The market impact was devastating. 

Exactly...this is no normal bankruptcy. This is the result of an unprecedented global health crisis that first came to most folks attention with reports of hundreds of stranded cruise ship passengers. It also puts in stark relief the inherent risks of cruising. I’ve loved cruising for decades but I have my doubts if I’ll ever cruise again and I’m sure I’m not alone. 

[Hawaiidan]

13 minutes ago, CintiPam said:

Once the independent accountants tell a company it is issuing/filing a “going concern” letter, the company really has no choice but to go out looking for money and publicly disclose it is doing so.  In order to find that money, you in return have to provide very attractive terms, particularly if you are a cruise line getting no support from the US government.

I would suspect that Goldman  would be getting both interest  and a part of the company to own as well

[CintiPam]

8 minutes ago, Hawaiidan said:

I would suspect that Goldman  would be getting both interest  and a part of the company to own as well

My understanding is that Goldman is arranging/putting together the credit, for which you get a huge cash fee when the various financings close, getting expenses and a small fee upfront.  I did not read anywhere that it is participating itself.  I think it only is acting as a placement agent, not an underwriter, but I only have read business press articles, not the actual filings.

Edited May 5, 2020 by CintiPam

[Hawaiidan]

1 minute ago, CintiPam said:

My understanding is that Goldman is arranging the credit, acting as the company’s arranger, for which you get a huge cash fee when the various financings close, getting expenses and a small fee upfront.  I did not read anywhere that it is participating itself.  I think it only was acting as a placement agent, not an underwriter. 

 Ah....... not educated in that level  of $$$......Thanks for the learning experience.   This whole world situation is a learning situation  where  the un-thinkable  becomes a reality no one could have prepared for  its depth.  Every day is new.

[Gittargo]

8 hours ago, Carol From California said:

It's all over the news. A few links below. What will happen to those of us who have deposits with Oceania and with those who are waiting for refunds? Will the credit card company refund if Oceania doesn't? 

 

https://www.cnbc.com/2020/05/05/norwegian-cruise-line-says-theres-substantial-doubt-about-its-ability-to-continue-as-a-going-concern.html

 

https://www.cnn.com/2020/05/05/business/norwegian-cruise-line/index.html

 

https://www.businessinsider.com/norweigan-cruise-lines-warns-of-substantial-doubt-continue-operating-business-2020-5

 

https://www.orlandosentinel.com/coronavirus/jobs-economy/os-bz-norwegian-cruise-line-holdings-sec-filing-concern-20200505-p5l5wcqz2je67bbbsnvxwcsqym-story.html

 

[Gittargo]

Carole, this is bad news for those of us with future cruise credits, thank you for sharing. Yikes!

[KirkNC]

1 hour ago, CintiPam said:

When a company’s accountants issue a “going concern” letter, it is very serious.  What that means is that the accountants are saying that unless additional money is raised, they fear the ongoing business as a whole will be insolvent within 12 months.  If things do not work out, normally you file for bankruptcy and you reorganize your debt.  Shareholders get screwed but the company may survive, just not with the same ownership.  Of course, other unsecured creditors get screwed as well.

 

Note that there often is prolonged “discussion” with the company’s outside accountants before a “going concern” is issued and filed.

 

Written by a “recovering” (happily retired) public company securities attorney.

 

But its not a going concern letter or opinion.  Its a risk disclosure in a document for securities and debt offering, a completely  different animal then an audit opinion.  I was a CFO at a bank, I know the difference.  

Edited May 5, 2020 by KirkNC

[KirkNC]

7 minutes ago, Gittargo said:

Carole, this is bad news for those of us with future cruise credits, thank you for sharing. Yikes!

So you would rather not have them raise $2.0 billion??  Where do you think your refund will come from??

[Gittargo]

I would love them to raise it and to be able to sail but concerned about losing what we have paid. What makes you think I would want them to go under?

[KirkNC]

1 minute ago, Gittargo said:

I would love them to raise it and to be able to sail but concerned about losing what we have paid. What makes you think I would want them to go under?

Because you said it was bad news, I quoted you in my response.