Norwegian Cruise Line May Go Out of Business

[Hoopster95]

1 hour ago, pinotlover said:

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

 

This^

 

I am not at all knowledgeable with NCLH's balance sheet other than what I've read (on average) from various sources. However, I know about RCL much more, and I believe perhaps their situation/line of thought applies here in this forum....

 

RCI borrowed $2.2 billion ... billion.... from Morgan Stanley at 12.5% ... absolutely astounding! These are junk bond rates. Who accepts a loan at 12.5% in this day and age, and in this business climate? Utter desperation imo.

 

The kicker? My understanding (if someone knows better, please correct me if I'm wrong here) is that the collateral on this loan if it's defaulted is that all of RCI's assets that are not Royal Caribbean... Celebrity, Azamara, Silversea, etc.... are defaulted to Morgan Stanley. I assume that RCI would restructure under Chapter11 with the Royal Caribbean ships only. That's a supposed $20 billion worth of Celebrity/Azamara/etc ships defaulted to Morgan Stanley.

How does the "MSCL" Equinox sound to you (Morgan Stanley Cruise Lines)? 

 

So looking at this from Morgan Stanley's POV:

• We can lend at 12.5% compounded interest, no-brainer return if it gets paid off
• For the huge risk of lending, if $2.2 bullion is defaulted, we could possibly get a perceived $20 billion of assets in return that we can fire-sale off over time and still make a great ROI.
• In fact even if we sell everything off at $4.4 billion, which is only about 25% of the actual book value, we still make a 100% return. Again a no-brainer.

 

From RCI's POV:

• We are in trouble.... deep trouble. Without money, we may as well rip off the bandaid and go bankrupt today.
• No one's going to lend us money unless we bend over, pay massive interest rates and promise everything if we fail.
• "What's the best deal we can get? Is Morgan Stanley truly the best we can do.... anywhere in the world? Anybody?? Please???? Pretty please????? Ok Morgan Stanley, you're the best deal I guess, we're truly desperate so we'll take it."

 

Non-emotionally speaking, if any sane person saw any other business with this line of thought going in this direction financially, they would steer clear away of giving them their hard earned cash.

Edited May 6, 2020 by Hoopster95

[Paulchili]

4 hours 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

 

Unfortunately my degree is in the wrong filed to fully understand that document.

I guess it's good news but no guarantees.

[Paulchili]

48 minutes ago, Hoopster95 said:

RCI borrowed $2.2 billion ... billion.... from Morgan Stanley at 12.5% ... absolutely astounding! These are junk bond rates. Who accepts a loan at 12.5% in this day and age, and in this business climate? Utter desperation imo.

Are you saying that NCLH is in the same situation?

[KirkNC]

11 minutes ago, Paulchili said:

Unfortunately my degree is in the wrong filed to fully understand that document.

I guess it's good news but no guarantees.

Yes, exactly, good news but no guarantees.  It gives them around 12 months of cash.

[1985rz1]

$2 billion secured by NCLH.

 

https://www.cruiseindustrynews.com/cruise-news/22898-norwegian-raises-2-billion-over-1-year-of-cash-if-needed.html

[JVNYC]

Being financially safe is all well and good. The bigger issue is the completely changed product that awaits passengers. I’m not interested in vacationing with a bunch of masks. And let’s begin to discuss the immense cost cutting that will happen. NCLH is notorious for that. This will not be the same cruise line or cruise experience. Period

[Noxequifans]

Not interested in vacationing with a bunch of masks ..... well said.

[LHT28]

52 minutes ago, JVNYC said:

Being financially safe is all well and good. The bigger issue is the completely changed product that awaits passengers. I’m not interested in vacationing with a bunch of masks.

maybe  a road trip is the way to go  ..but in a self contained RV  so you will not need to stop

 We may just do day trips  in our area  or half day trip if no facilities are open 😉

 

[deus]

JMHO - I will be on board with my numerous face masks and gloves and isopropyl.  I cruise for itinearies and people and not for food, entertainment.  I will need a vaccine to get on board though.

 

[Hawaiidan]

1 hour ago, JVNYC said:

Being financially safe is all well and good. The bigger issue is the completely changed product that awaits passengers. I’m not interested in vacationing with a bunch of masks. And let’s begin to discuss the immense cost cutting that will happen. NCLH is notorious for that. This will not be the same cruise line or cruise experience. Period

Totaly agree....  It will be very different...    Food and  inclusive restaurants  and others  will proably revert to pay extra.     I have 1 cruise in 2021...  and realize that probably going to be it for me........ USA road trips after that  Good bye Jaques, Red Ginger   and Balcony  suites.....Hello  Fairfield and Courtyard and  corn dogs for dinner.

[Jancruz]

On 5/5/2020 at 8:26 AM, mrlevin said:

Mr. Del Rio has experience prepping a cruise line to go into bankruptcy; he might even buy the ships he wants (again) after the bankruptcy.

No he hasnt..get your facts straight

Jancruz1

[Hoopster95]

1 hour ago, Paulchili said:

Are you saying that NCLH is in the same situation?

 

I don't know.... somewhat I assume. Their balance sheets were somewhat equal with respect to 100% debt:asset ratios... CCL's was around 50% and was positioned much better to withstand a lengthy shutdown from the get-go without $2billion loans. I'm definitely not an investment analyst.

 

1985rz1, thank you for that link.... almost the same amount borrowed as RC.

I wonder what the terms are (interest rate) and if default is reached?

[Jim and Monika]

Any idea when they are planning on releasing the new stock offerings? I'm sure the stock price will take a hit when they do. I ask because when CCL offered theirs, the stock price went down significantly.

[clo]

3 hours ago, LHT28 said:

maybe  a road trip is the way to go  ..but in a self contained RV  so you will not need to stop

 We may just do day trips  in our area  or half day trip if no facilities are open 😉

 

We've done a couple of half day trips in the car. Haven't take the motorhome as without any place to actually go it didn't seem to make sense.  Here's what's supposed to be an updated list:

https://www.campendium.com/camping/covid-19-state-by-state-campground-closures-responses/

 

We can be self-contained but it would be nice if there were some there there. We were going to Zephyr Cove on Lake Tahoe but they've now delayed their opening for another ten days or so.

[clo]

3 hours ago, Jancruz said:

facts

Then why don't YOU tell them what's what?

[LHT28]

3 hours ago, Jancruz said:

No he hasnt..get your facts straight

Jancruz1

Jan

not worth your time to respond to such posts

 

Lyn

[pinotlover]

6 minutes ago, Jim and Monika said:

Any idea when they are planning on releasing the new stock offerings? I'm sure the stock price will take a hit when they do. I ask because when CCL offered theirs, the stock price went down significantly.

Different circumstances. They have given notice they will do the release. Since they don’t need the cash immediately, they can do a gradual release over the coming months selling mostly on upticks. No need to do a massive dump on the market.

[Flatbush Flyer]

19 minutes ago, LHT28 said:

Jan

not worth your time to respond to such posts

 

Lyn

Ain't that the truth!

[Hawaiidan]

1 hour ago, Jim and Monika said:

Any idea when they are planning on releasing the new stock offerings? I'm sure the stock price will take a hit when they do. I ask because when CCL offered theirs, the stock price went down significantly.

Jim     you dont make stock offerings when your in financial trouble and facing bankruptcy because anyone who bought stock or bonds prior to the bankruptcy would loose their entire investment.... that is the way it works.   

You buy after bankruptcy when they issue NEW stock as the OLD is WORTHLESS.     But to buy you have to get in line because the premarket traders and hedge funds  who buy 10,000 share + will have priority in the IPO.....

Your looking at an entirely different situation.

 

[TrulyBlonde]

21 minutes ago, Hawaiidan said:

Jim     you dont make stock offerings when your in financial trouble and facing bankruptcy because anyone who bought stock or bonds prior to the bankruptcy would loose their entire investment.... that is the way it works.   

You buy after bankruptcy when they issue NEW stock as the OLD is WORTHLESS.     But to buy you have to get in line because the premarket traders and hedge funds  who buy 10,000 share + will have priority in the IPO.....

Your looking at an entirely different situation.

 

Not necessarily. When AA went into Chapter 11, after the restructuring the old stock was exchanged for the new. I had purchased it at a very low price and upon the reissue sold it at the much higher price. Chapter 7 is different.

 

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

Edited May 6, 2020 by TrulyBlonde
addition

[Sticks5315]

I would like to add a couple of thoughts to perhaps stir the pot. First, not only did Royal Caribbean go to the capital markets for a couple of billion, Carnival(the largest of the three) did also at a very steep price as well. The folks that manage these top tier investment banks are generally very bright and must believe they have a sound investment. ( I do remember Lehman Bros. so there are exceptions.) Secondly, NCL is incorporated in Bermuda which I believe is where they would have to file a bankruptcy action.  The bankruptcy  code in Bermuda may be substantially different than it is in the US.  

When Bahamar, the casino resort, in Nassau, Bahamas got in financial trouble one key investor tried or did file a bankruptcy action in the US but the Bahamian court wouldn't' have it.

I am keeping my deposit in place for my February 2021 cruise.  I think that is enough of an investment at this time! My instincts tell me they will survive.

[Shawnino]

13 minutes ago, Sticks5315 said:

I would like to add a couple of thoughts to perhaps stir the pot. First, not only did Royal Caribbean go to the capital markets for a couple of billion, Carnival(the largest of the three) did also at a very steep price as well. The folks that manage these top tier investment banks are generally very bright and must believe they have a sound investment. ( I do remember Lehman Bros. so there are exceptions.) Secondly, NCL is incorporated in Bermuda which I believe is where they would have to file a bankruptcy action.  The bankruptcy  code in Bermuda may be substantially different than it is in the US.  

When Bahamar, the casino resort, in Nassau, Bahamas got in financial trouble one key investor tried or did file a bankruptcy action in the US but the Bahamian court wouldn't' have it.

I am keeping my deposit in place for my February 2021 cruise.  I think that is enough of an investment at this time! My instincts tell me they will survive.

 

Emphasis mine.

What advantage do you see in that vs. cancelling with the option to re-book if/when things settle down?

[njhorseman]

46 minutes ago, Sticks5315 said:

 Secondly, NCL is incorporated in Bermuda which I believe is where they would have to file a bankruptcy action.  The bankruptcy  code in Bermuda may be substantially different than it is in the US.  

This came up a while back...probably on the NCL board.They are permitted to file in the US as long as they have assets or operations here, which NCLH obviously does. This is apparently not unusual for shipping companies in particular. Here's a reference: http://internationalbusinesslawadvisor.com/foreign-company-chapter-11-bankruptcy/

 

The Baha Mar bankruptcy filing in the US was dismissed by the US judge, who concluded that the best interests of all but one of the parties would be served by the bankruptcy proceeding in the Bahamas, not the US. The Bahamas petitioned for the dismissal and won. A foreign government doesn't have the ability to dismiss an action taken in US court. If the judge had not agreed with the petition the case would have proceeded in the US.

 

https://www.deb.uscourts.gov/sites/default/files/opinions/judge-kevin-j.carey/northshore-dismissal-combined.pdf

 

 

 

Edited May 7, 2020 by njhorseman

[bbwex]

Well, a lot of people have commented, and I might as well throw in my two cents.

 

We had a cruise booked for late October and were leaving our deposit with O until closer to final payment to see what, if anything, they might do to entice us to switch our deposit to another cruise.  The news that NCL might not survive convinced us to request the refund of our deposit now rather than hold out and face the chance of losing it in a bankruptcy, should that happen.

 

There are a lot of headwinds for the entire travel industry, and the cruise industry is the one facing the most turbulent waters if you will pardon the expression.  Looking ahead, the virus could well come back in the fall if it ever leaves in the first place.  Such a recurrence would put a real damper on travel and everything else.  Would you feel safe getting on a plane right now?  Do you know how you will feel about that in the fall or late summer?  As someone has pointed out, it just takes one person to bring it on board and there could be an outbreak on the ship.  Not that it necessarily would be an O ship, but any outbreak on any ship, and a re-run of the passengers trapped for weeks on a ship would put the cruise industry back in a tailspin.  And do you feel comfortable planning to get on a cruise ship in four months, six months, a year?  And will all countries let cruise ships dock, and particularly those with a lot of American passengers where we have been slow to adequately fight the outbreak -- we have become pariahs in the international community no matter which side of the divide you are on in this country.  There is some optimistic talk about a vaccine being available in 2021, but many scientists say that that will require every single thing to go right, otherwise it could be 2022. 

 

I suspect that the cruise industry will still exist, and I suspect that O will try to continue to cater to its many customers. Perhaps costs will go up to maintain the quality of the line, but most O passengers could absorb some additional costs.  Perhaps the R ships will disappear sooner than planned, though they have all been refurbished recently, so there will be some attempt, I would think, to keep them going.  When the dust settles, and many have been making their own guesses in this long thread, we will start to book again -- I have my eye on a cruise or two for 2022.  And I realize that the cruise lines need people like me to hang in there, but I will hang in there as a prospective return cruiser, and not leave my money with them until we see what shakes out.

[clo]

6 minutes ago, bbwex said:

my two cents.

VERY well said and worth far more than that. Thanks.