Norwegian Cruise Line May Go Out of Business

[Gittargo]

Bad news that it could happen and is being considered. Wonder if one could make a case with American Express for refund due to goods not received. At any rate, I will be optimistic that they will find a solution for their financing problem.

[GICNJC]

One needs to read the SEC filing.   They have the liquidity to operate until January.   As they are negotiating for 1.4 bilion additional credit for 2021 to 2022 operating seasons the are required to file notice with the SEC.  IN THE LEGAL REQUIREMENTS OF THAT NOTICE THEY MUST DECLARE ALL RISKS THEY MAY FORSEE.  If successful in getting loans they will survive while other major line go  down the tubes.  What they are doing is fiscally responsible 

[JVNYC]

1 hour ago, pinotlover said:

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

Delete

Edited May 5, 2020 by JVNYC

[KirkNC]

4 minutes ago, GICNJC said:

One needs to read the SEC filing.   They have the liquidity to operate until January.   As they are negotiating for 1.4 bilion additional credit for 2021 to 2022 operating seasons the are required to file notice with the SEC.  IN THE LEGAL REQUIREMENTS OF THAT NOTICE THEY MUST DECLARE ALL RISKS THEY MAY FORSEE.  If successful in getting loans they will survive while other major line go  down the tubes.  What they are doing is fiscally responsible 

Thank you, someone gets it!

Edited May 5, 2020 by KirkNC

[EasyGoingGuy]

Was reading all of this, and when someone mentioned Amer Air it reminded me that they went through Chapter 11 reorganization in 2011 and through it all people held and used paid-for future tickets. From a statement they issued at the time.. we "are continuing to:  ... Honor reservations, tickets, Gift Cards and vouchers, and make exchanges and refunds as usual".  Possibly NCLH (Oceania) might take the same path?

[Paulchili]

30 minutes ago, KirkNC said:

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

I read all the links above and there was only one short mention of refunds as being part of their financial obligations.

Otherwise I mostly see things like this:

 

“There can be no assurance, however, that the company will be able to complete any such financing transaction, raise sufficient additional capital, finalize additional amortization deferrals or that revenues will increase rapidly enough to offset operating losses that will provide with sufficient liquidity to satisfy its obligations over the next twelve months or maintain minimum levels of liquidity as required by certain of our debt agreements.”

 

Are the refunds part of their obligations or is it mostly paying back loans, keeping the ships "in shape", paying the reduced staff, etc?

 

[kiawahdon]

For a prior O cruiser who is looking at booking again, today’s news really put cold water on booking until the dust settles. Among the concerns any knowledgeable traveler or travel agent would have consider include:

1. If my cruise goes forward, what can I expect on the ship? Will the cash issues of O negatively impact the passengers’ experience with respect to service, food, excursions, etc?

2. If I cancel the cruise under O’s Covid-19 liberal cancelation policy for sailings before 9/30, will my FCC be worth anything given  O’s possible bankruptcy? What is my risk of being an unsecured creditor ultimately getting nothing in a multi-year bankruptcy?

 

There are other legitimate concerns for anyone considering booking, but the above 2 will certainly slow new bookings to a crawl Even before one factors in the impact of Covid-19.

[Classiccruiser777]

23 minutes ago, kiawahdon said:

For a prior O cruiser who is looking at booking again, today’s news really put cold water on booking until the dust settles. Among the concerns any knowledgeable traveler or travel agent would have consider include:

1. If my cruise goes forward, what can I expect on the ship? Will the cash issues of O negatively impact the passengers’ experience with respect to service, food, excursions, etc?

 

If it happens I’ll give a full report of our August 15 Insignia cruise.

 

[tocruiseguy]

19 minutes ago, kiawahdon said:

For a prior O cruiser who is looking at booking again, today’s news really put cold water on booking until the dust settles. Among the concerns any knowledgeable traveler or travel agent would have consider include:

1. If my cruise goes forward, what can I expect on the ship? Will the cash issues of O negatively impact the passengers’ experience with respect to service, food, excursions, etc?

2. If I cancel the cruise under O’s Covid-19 liberal cancelation policy for sailings before 9/30, will my FCC be worth anything given  O’s possible bankruptcy? What is my risk of being an unsecured creditor ultimately getting nothing in a multi-year bankruptcy?

 

There are other legitimate concerns for anyone considering booking, but the above 2 will certainly slow new bookings to a crawl Even before one factors in the impact of Covid-19.

Good points.    The fact they state that they have 12 months of liquidity is a positive, from NCL  “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.”  If they have liquidity for 12 months that is a good thing.

 

However as you state, consumer confidence in booking future cruises and providing deposits is going to be a problem until they start sailing again.  Maybe they need to go to a no deposit or very low deposit business model for a while.  Also, this kind of news isn't just going to impact NCL it will impact the outlook on the entire industry.  

 

It surprises me that the US government isn't assisting cruise lines even just for the number of head office positions that they have in the US.  NCL's headquarters are in Miami.  

[CintiPam]

1 hour ago, KirkNC said:

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.  

Two of the four sources posted by the OP indicate that indeed is a result of the accountants “going concern” opinions regarding the company, including CNN Business.  

[Hoopster95]

All cruise lines, not just NCL, have exactly two choices:

1. Go bankrupt right away

2. Try to sail before they do go bankrupt in 10 months (12-13 for RCL, 1 1/2 yrs for CCL).

 

There's no in between. So anyone with high stakes holdings in this company, and all high level management, will definitely try to sail before their capital dries up. Or why not just go bankrupt today and get it over with?

 

How they jump all the CDC hurdles, and other governmental shut downs/restrictions is beyond me at this time. Add in that it looks like the USA is hell bent on killing another 100,000 or so Americans by "getting back to normal", I guess opening a port or two to give a cruise a try will also occur. If the cruise lines are sure that they will not/cannot sail, it's best they bankrupt now... they can forfeit all the outstanding FCC's and deposits without having to pay them back and save a whole ton of cash.

 

I see one of the big three try to sail first (CCL, NCL or RCI). What are the chances one out of the 1200 passengers on Marina for example gets on a ship and is a carrier of C19? And how many compromised 60+ yr olds with Diabetes, heart issues, obesity are getting on the ship? How about asymptomatic cruisers that have never been tested yet? What are the chances that just one cruiser ... ONE ... gets infected? Then how does the ship quarantine? How does NCL/Marina get the other 1199 passengers home? I dare say the logistic hurdles are insurmountable with the current CDC rules in place.

 

This is going to be a really rough go for any of the cruise lines. The very second one ship declares an infection, it will create the biggest media firestorm you will ever see regarding public perception... only one error and they are goners imo.

 

One error, 500 ships worldwide sailing with approx 1,000,000 people sailing every 7 days on average... one error in one million every single week, that's all they need. Those are astronomical odds to overcome until a vaccine/antibody testing/etc can be found with 100% certainty that every single person walking up every gangway on every ship is immune and/or not infected.

 

 

Interesting times

Edited May 6, 2020 by Hoopster95

[Hoopster95]

Another thought just crossed my mind....

Seeing the USA divisive on "getting back to normal" vs. exercising a continued social distancing, if there's a huge spike in C19 deaths in the US over the next couple of months, I wonder how many countries, including the Caribbean islands, will look at the USA as a major problem and not allow any Americans into their ports or airports?

 

Unfortunately, I can see the political game of "opening up early" to save the economy as having a chance of killing the cruise lines in itself.

[tocruiseguy]

47 minutes ago, Hoopster95 said:

Another thought just crossed my mind....

Seeing the USA divisive on "getting back to normal" vs. exercising a continued social distancing, if there's a huge spike in C19 deaths in the US over the next couple of months, I wonder how many countries, including the Caribbean islands, will look at the USA as a major problem and not allow any Americans into their ports or airports?

 

Unfortunately, I can see the political game of "opening up early" to save the economy as having a chance of killing the cruise lines in itself.

Agree with you, the small Caribbean countries will not allow cruise ships to dock if there is anyone on a cruise ship with even a runny nose.  I don't blame them.  BTW an unnecessary resurgence from opening up too early will cause substantial grief in much more than just the cruise line industry.  

[clo]

1 hour ago, Hoopster95 said:

This is going to be a really rough go for any of the cruise lines. The very second one ship declares an infection, it will create the biggest media firestorm you will ever see regarding public perception... only one error and they are goners imo.

 

One error, 500 ships worldwide sailing with approx 1,000,000 people sailing every 7 days on average... one error in one million every single week, that's all they need. Those are astronomical odds to overcome until a vaccine/antibody testing/etc can be found with 100% certainty that every single person walking up every gangway on every ship is immune and/or not infected.

Excellent words. And I just read a piece about a UCSF epidemiologist saying that for CA alone, if they could give 50,000 vaccinations a day it would take 800 sites to do this. So like a year, year and a half to vaccinate every body. I hadn't really thought about that. Once there's a 'good' vaccination, with a large enough production, it will be a long time before the 'average josephine' can get a shot. 

[Hoopster95]

6 minutes ago, clo said:

Excellent words. And I just read a piece about a UCSF epidemiologist saying that for CA alone, if they could give 50,000 vaccinations a day it would take 800 sites to do this. So like a year, year and a half to vaccinate every body. I hadn't really thought about that. Once there's a 'good' vaccination, with a large enough production, it will be a long time before the 'average josephine' can get a shot. 

 

There's a huge percentage of people that will not get infected, they are immune for some reason.

Rather than a vaccine, if there was a 100% fool proof immunity test, the cruise lines, airlines, hotels, etc can only allow those who are immune to travel... you'd be on board with other immune cruisers.

 

I am missing something... we live in such a high technological era. I'm not a doctor/scientist/etc. Perhaps something can seemingly come out of nowhere to us regular folk in the next couple of months that will create a light at the end of the tunnel so to speak.

 

 

Edited May 6, 2020 by Hoopster95

[CintiPam]

46 minutes ago, Hoopster95 said:

 

Perhaps something can seemingly come out of nowhere to us regular folk in the next couple of months that will create a light at the end of the tunnel so to speak.

 

 

We all need that very badly right now. I pray it happens.

[cscurlock]

2 hours ago, Hoopster95 said:

All cruise lines, not just NCL, have exactly two choices:

1. Go bankrupt right away

2. Try to sail before they do go bankrupt in 10 months (12-13 for RCL, 1 1/2 yrs for CCL).

 

There's no in between. So anyone with high stakes holdings in this company, and all high level management, will definitely try to sail before their capital dries up. Or why not just go bankrupt today and get it over with?

 

How they jump all the CDC hurdles, and other governmental shut downs/restrictions is beyond me at this time. Add in that it looks like the USA is hell bent on killing another 100,000 or so Americans by "getting back to normal", I guess opening a port or two to give a cruise a try will also occur. If the cruise lines are sure that they will not/cannot sail, it's best they bankrupt now... they can forfeit all the outstanding FCC's and deposits without having to pay them back and save a whole ton of cash.

 

I see one of the big three try to sail first (CCL, NCL or RCI). What are the chances one out of the 1200 passengers on Marina for example gets on a ship and is a carrier of C19? And how many compromised 60+ yr olds with Diabetes, heart issues, obesity are getting on the ship? How about asymptomatic cruisers that have never been tested yet? What are the chances that just one cruiser ... ONE ... gets infected? Then how does the ship quarantine? How does NCL/Marina get the other 1199 passengers home? I dare say the logistic hurdles are insurmountable with the current CDC rules in place.

 

This is going to be a really rough go for any of the cruise lines. The very second one ship declares an infection, it will create the biggest media firestorm you will ever see regarding public perception... only one error and they are goners imo.

 

One error, 500 ships worldwide sailing with approx 1,000,000 people sailing every 7 days on average... one error in one million every single week, that's all they need. Those are astronomical odds to overcome until a vaccine/antibody testing/etc can be found with 100% certainty that every single person walking up every gangway on every ship is immune and/or not infected.

 

 

Interesting times

A lot of truth in this post.  Cruise lines should really consider going bankrupt now and shedding all the FCCs and debt.  Then just wait and rebrand after a vaccine comes around.  

[clo]

19 minutes ago, cscurlock said:

A lot of truth in this post.  Cruise lines should really consider going bankrupt now and shedding all the FCCs and debt.  Then just wait and rebrand after a vaccine comes around.  

Hmm, interesting.

[KirkNC]

9 hours ago, CintiPam said:

Two of the four sources posted by the OP indicate that indeed is a result of the accountants “going concern” opinions regarding the company, including CNN Business.  

Of course the accountants were involved in advising which risks to list but  it’s still part of the disclosure process related the stock and debt offering.  A going concern opinion is a paragraph in the annual audit, a completely different and far more serious animal.

[KirkNC]

11 hours ago, Paulchili said:

I read all the links above and there was only one short mention of refunds as being part of their financial obligations.

Otherwise I mostly see things like this:

 

“There can be no assurance, however, that the company will be able to complete any such financing transaction, raise sufficient additional capital, finalize additional amortization deferrals or that revenues will increase rapidly enough to offset operating losses that will provide with sufficient liquidity to satisfy its obligations over the next twelve months or maintain minimum levels of liquidity as required by certain of our debt agreements.”

 

Are the refunds part of their obligations or is it mostly paying back loans, keeping the ships "in shape", paying the reduced staff, etc?

 

Yes refunds are part of their current liabilities, if you go to NCL’s financial statements they are listed as customer deposits.

[KirkNC]

While on this board many are assuming NCL is going bankrupt, the investment community appears to think differently as apparently NCL’s equity and debt are over subscribed so they have increased the offering.  Here is the announcement, be warned it has the REQUIRED risk factor disclosures.

 

https://www.globenewswire.com/news-release/2020/05/06/2028074/0/en/NCL-Corporation-Ltd-Announces-Upsizing-and-Pricing-of-750-000-000-of-Exchangeable-Notes-and-675-000-000-of-Senior-Secured-Notes.html

 

 

 

[njhorseman]

1 hour ago, KirkNC said:

While on this board many are assuming NCL is going bankrupt, the investment community appears to think differently as apparently NCL’s equity and debt are over subscribed so they have increased the offering.  Here is the announcement, be warned it has the REQUIRED risk factor disclosures.

 

https://www.globenewswire.com/news-release/2020/05/06/2028074/0/en/NCL-Corporation-Ltd-Announces-Upsizing-and-Pricing-of-750-000-000-of-Exchangeable-Notes-and-675-000-000-of-Senior-Secured-Notes.html

 

 

 

No doubt about it...with all the steps NCLH has just taken to shore up its liquidity...the two note offerings, the common stock offering and the investment made by the private equity firm, all done in addition to the debt holiday they had already negotiated with lenders, puts the company in a far stronger position to survive the uncertainties of the next year. 

 

 

[floridatravelersforlife]

I can understand the fervor for bonds.  When bankruptcy occurs the bondholders will be first in line for control of the ships - the major asset.  The vessels can be resold for huge profits versus the bondholders' investment.  It's a win -win for the Hedge Funds.  

[pinotlover]

30 minutes ago, floridatravelersforlife said:

I can understand the fervor for bonds.  When bankruptcy occurs the bondholders will be first in line for control of the ships - the major asset.  The vessels can be resold for huge profits versus the bondholders' investment.  It's a win -win for the Hedge Funds.  

Doubt this is true. What the bond holders got were bonds, with a sufficient Interest rate to overcome the perceived risks. 

Those bond holders don’t want a bunch of old ships delivered to them. Princess laughed all the way to the bank when they dumped the last of their R ships!

 

In a current market of over capacity, the last thing anyone wants are those ships! They believe that NCLH will be able to pay the debt with future operations. Additionally, they liked the return which is far higher than most other currently available instruments.

Edited May 6, 2020 by pinotlover

[the more ports the better]

I have a small pile of NCL stock (sold high at the beginning of COVID and loaded back up at the bottom) plus, I have a final payment for a Sept sailing coming up so I’m paying attention.  

I think NCL is missing the boat.  They could be offering perks that would supersede a reorganization along with stock purchases to their million or so loyalty members

 

If they offered business class upgrades and a few more dollars in onboard credit to my account that would be guaranteed after a reorganization, I would roll the dice and purchase a few more shares.  I could lose the investment but it would pay off in airfare over time.  Maybe an upgrade for every 100 shares purchased plus a bonus OBC in addition to the current shareholder credit.  Some people would by 100 shares but I bet there would be a large group buying 1000 or more shares if the deal was sweet enough.

 

That would motivate people to sail and to select O choice air.  NCL could work out a deal with a few airlines for reduced rates to guarantee business so it would cost little to them.  Certainly less than servicing debt.

 

Most of us are missing at least one sailing, if not more.  If that $10k or so (for Oceania and Regent clients) that we didn’t spend on the vacation was invested in NCL stock, they could receive a substantial investment as a piece of the puzzle to keeping them “afloat”.  I’d be “onboard”

 

Its a win win for raising capital and getting people back on ships and an enhanced experience for cruisers.