Viking Cruises - WSJ Article

[BrendaEDH]

Interesting article from yesterday's WSJ (paywall article):

"Viking Cruises Seeks $600million in bond offerings..."

 

https://www.wsj.com/articles/viking-cruises-seeks-to-raise-600-million-11589215417

[SrCruizer]

3 hours ago, BrendaEDH said:

Interesting article from yesterday's WSJ (paywall article):

"Viking Cruises Seeks $600million in bond offerings..."

 

https://www.wsj.com/articles/viking-cruises-seeks-to-raise-600-million-11589215417

Would liked to have read the article but must be a WSJ subscriber to do so.

[BrendaEDH]

Also noticed Viking's bond offering mentioned in this Bloomberg article: 

https://www.bloomberg.com/news/articles/2020-05-11/asia-s-high-yield-bonds-are-rallying-as-some-lockdowns-eased

[Baron Barracuda]

58 minutes ago, SrCruizer said:

Would liked to have read the article but must be a WSJ subscriber to do so.

Here you go:

 

Viking Cruises Ltd. on Monday launched a bid  to raise money to help it sustain its business through the coronavirus pandemic.

The company is offering the debt at a sky-high interest rate, people familiar with the matter said, in a sign of the risk of lending to an industry that shut down after having been the source of coronavirus infections.

Los Angeles-based Viking, which specializes in river cruises, has hired BofA Securities Inc., Wells Fargo Securities LLC, Credit Suisse Securities LLC and J.P. Morgan Securities LLC to raise $600 million in new secured bonds due 2025, according to an offering memorandum reviewed by WSJ Pro.

Viking and its banks are marketing the new bonds with a yield of up to 14%, the people said. Proceeds from the offering would go to repay a $74 million loan with the remainder to go toward general corporate purposes.

 

A Viking representative didn’t respond to a request for comment.

Viking said it was the first cruise line to suspend world-wide operations, “which resulted in minimal Covid-19 infections on our cruises.” The company doesn’t expect to resume operations until June 30 at the earliest.

 

The company said it expects the pandemic to keep significantly affecting its business, but is unable to predict how long that impact will continue. Assuming that the suspension of its cruise operations continues through the end of 2020, the company will face $70 million a month in operating costs, finance payments and other expenditures, it said.

The company said that in addition to the monthly costs, it expects it will be required to pay cash refunds to guests who have had their cruises canceled. Viking had $2.4 billion in guest deposits for cruises booked through 2023 at the end of February. The company says “a slight majority” of guests who had booked cruises in 2020 have accepted a voucher to take a cruise later, instead of requesting a cash refund.

For the 2019 season, Viking operated a total of 72 river vessels and six ocean-going cruise-liners. The company was founded by Norwegian billionaire Torstein Hagen in 1997.

Viking has just over $3.3 billion in total debt. Its existing unsecured notes due 2025 traded last week at 68.5 cents on the dollar for a yield of 15.5%, according to MarketAxess.

[Captain_Morgan]

I like the comment about there being a 'slight majority' of people accepting future cruise credits....wonder how many are going to be so accepting after reading that article?

[duquephart]

Desperation?

[Dukefan]

6 hours ago, duquephart said:

Desperation?

I don't think so.   It is a five year bond to bridge the period between now and when they can sail again.  It is for $600 million which is significantly less than either Carnival's or NCL's bonds.   The interesting thing was that their cost during this down time is $70 million a month, much less than I would have guessed especially since they are paying many of their folks that are home partial wages.  It appears to me from reading the details included in the Bloomberg and WSJ articles, that they will probably weather this event.

 

[Captain_Morgan]

Didn't NCL initially say they too needed $600 million but ended up raising over $2 billion?  Albeit NCL didn't go the route of junk bonds and actually managed, from what I've read to get reasonably rated loans despite there being offers for much less desirable alternatives.  I'm sure their cost estimate of $70 million is a rough estimate based on operating cost (i.e. keeping the ships moored with lights on) and not taking into account all of the salaries, but even if it does I would think their number is going to be lower given their smaller crew compliment across their fleet of ocean ships seeing as how the river ship season didn't get started in Europe prior to the global shut down, or did it?

 

The only part of the Bloomberg article that I could see as offering some confidence in their ability to come out the other side is the remark about the target demographic.  Of course it goes without saying that money hasn't disappeared, its just stopped moving as freely as it did pre-pandemic but even then if you've got limited places to spend said money (i.e. destinations for a ship to visit)  I fail to see how businesses will survive in any industry.

 

Just a data point on the cruise industry, I saw both Seabourn and HAL 'retired' their brand presidents which is surely an indication that there is going to be a seismic shift in the industry across all brands in the not too distant future.

 

[Cienfuegos]

 

this is an expensive way to maintain liquidity, but ya gotta do what ya gotta do...

[Dukefan]

Betting on Viking with a 14% plus annual return on your loan is hard to turn down, especially since it is loan with the river ships as collateral and then you add the fact that I believe in their product.   The five year payout also helps.  Looking forward to seeing what the actual bond rate ends up being.

[Baron Barracuda]

Saw they actually sold $675MM through a private placement at 13%.

 

That $70MM monthly cash burn excludes refunds.  With $2.6B in customer deposits on their books if half ask for money back that's a lot of extra cash they will need to come up with.

[Squawkman]

1 hour ago, Dukefan said:

Betting on Viking with a 14% plus annual return on your loan is hard to turn down, especially since it is loan with the river ships as collateral and then you add the fact that I believe in their product.   The five year payout also helps.  Looking forward to seeing what the actual bond rate ends up being.

I totally agree. I believe cruising as Viking does it will survive. No wrongful death lawsuits like CCL.