Thoughts on a potential NCL acquisition of Genting Cruise Lines or Dream Cruises?

[Beezo]

6 hours ago, BermudaBound2014 said:

Let me guess- you’re long?  
 

You are glaringly missing several key factors. 

 

 

https://www.nclhltd.com/investors/financial-information/financial-results

 

 

 

The industry is long. They’ve repeatedly stated they have a $1B facility they can tap into, if needed, but don’t intend to. The next quarterly results (currently in progress) will be as equally ugly due to restart costs, but the guidance provided does not include onboard spending and higher than usual fares to offset. My guess is they are being conservative, but given the ships already in service, with reduced capacity, are cash flow positive is a strong indicator. NCL has also held their ground price-wise with the market to sell vs discount to fill methodology which will also drive stronger EPS even 3 quarters from now. Although there is a lot of debt coming due in two years - it will be restructured with better rates, as they recently just did. 
 

However this works out - an interesting area to consider is the Dream ships are currently fully staffed, which would have a reduced restart cost, which could have a tangible and speed up return on investment if a transaction were to happen near term. 
 

[deliver42]

The Dream, as I remember was being built to carry 9000+ passengers. I believe the cabins are super small, and would have to be reconfigured  for the American market to make them acceptable. This would cost additional millions. If you're talking about keeping the ships in China, look what happened to the Epic, which was pulled.

[bigrednole]

I would think it is unlikely. Too much debt and assets most likely will be used to cover that debt. Not a wise move I think.

[phillygwm]

40 minutes ago, bigrednole said:

I would think it is unlikely. Too much debt and assets most likely will be used to cover that debt. Not a wise move I think.

Ironic that this thread co-exists alongside another wondering whether NCL will file for bankruptcy 🙂

 

Edited March 6, 2022 by phillygwm

[BermudaBound2014]

15 hours ago, Beezo said:

The industry is long.
 

 

You sure? 😉

[Uff da]

1 hour ago, BermudaBound2014 said:

 

You sure? 😉

I know you are very pessimistic about the future of cruising, but if the sail away vlogs on YouTube for the new Wonder of the Seas are any indication, people are ready to return to cruising. It sailed with 4200 onboard. Not full capacity, and maybe that was on purpose for the first sailing, but it was packed. Check out the sail away video posted by La Lido Loca. Since Royal doesn't cruise 100% vaxxed, and it's cruising from Florida, it will be interesting to see if this causes a huge Covid outbreak. That will be bad press for the industry. 

[LGW59]

On 3/4/2022 at 11:53 PM, delinquentcanadian said:

Agreed this might not happen. However, it would be a reasonable and good move for NCL is able to score a good deal on those ships, maybe through creative financing strategies like a lease option or something like that.  NCL has experience in running the ships that Dream has and it would be more cost effective if Spirit wasn't the only ship in its class.  NCL just spent $100 million completely overhauling the Spirit in 2020 (seems like they are not as broke as we thought they were), the most extensive renovation of the Norwegian Edge campaign.  It would be economically wise if NCL can reuse the same designs on another identical ship.

 

While other mass market cruise lines like Carnival and RCCL have been focused on offering mega-ships and dropping their late 90s vessels, NCL has a bunch of ships that are below or in the low 100,000 GT range.  This is a niche that they could really develop, and cultivate a "cheap-chic" image with nicer interiors, better food and unlimited drink packages while being family and budget friendly, not too different from Target vs. Walmart. NCL is the only of the big three not to dispose of their ships during the pandemic, so it seems that their business is relatively sound.

 

The Chinese market has always been more difficult to operate in for major cruise lines because of its different cultures and government regulations. NCL tried to break into the market with the Joy only to leave 2 years later due to problems dealing with the CCP's political spats with Korea and Japan, forcing their ships to reroute, and misbehaving passengers who would yell at crew members, litter and spit on carpets (I've sailed out Shanghai so I know first hand). Food waste was also a major issue with the buffets.  Others have complained here on CruiseCritic on how Dream Cruises was the worst cruise line they've sailed on in Australia, how the ship's only main attraction was a massive casino and how the food was sh*t and so on. Worse still, Dream Cruises is the only cruise line that I know of who swipes your key card at complimentary restaurants and only allows one meal per sitting. So if you change your mind after you sat down at the buffet to go to the main dining room instead for dinner, you're out of luck until the next day.  This is obviously a policy geared towards the problems of the Chinese market, but would seriously tarnish the reputation of global brands like NCL.  By acquiring the Dream Cruises banner, NCL can try to profit from the Chinese market while keeping themselves at arms length.

 

The Global Class ships also present a unique opportunity for NCL to complete with the juggernauts like Carnival and RCCL. NCL have been pretty aggressive in adding unique and increasingly over-the-top amenities in recent years, (go carts at sea is a great example). If completed, the Global Dream would feature a fully fledged amusement park on the top deck that includes a roller coaster, bumper cars and more. NCL taking owner ship with the global class ships would put them in competition with the new Carnival Excellence Class ships. NCL has the real potential  to lure away their customers by offering equivalent amenities while also providing first class experience like the Haven, high quality restaurants like Cagney's and generous Free At Sea packages, all of which are absent on Carnival. NCL has a chance here to kick their asses.

 

TLDR:.NCL and Genting have a connected history, the latter being the owner of the former in the 2000s. Would be awesome as a cruise ship nerd myself to see all the Breakaway and Leo class ships united under one company 🙂

Quite a novel

[At Sea At Peace]

18 hours ago, Beezo said:

They’ve repeatedly stated they have a $1B facility they can tap into, if needed, but don’t intend to.

 

It, the LOC facility, expires in August 2022.

 

18 hours ago, Beezo said:

The next quarterly results (currently in progress) will be as equally ugly due to restart costs, but the guidance provided does not include onboard spending and higher than usual fares to offset.

 

They are, $400M Net Loss and Cash Burn.  Ugly.

 

The guidance DOES INCLUDE ONBOARD SPENDING, it increased and passenger revenues decreased (as comparative percentages) inversely. 

 

If ships can't stop at ports they stop at private islands or add sea days; i.e., onboard spending.

 

18 hours ago, Beezo said:

My guess is they are being conservative, but given the ships already in service, with reduced capacity, are cash flow positive is a strong indicator.

 

Guessing cruise lines would be conservative in their press release outlook is, well....

 

Cash flow is a strong indicator, it is projected at $400M a month 'negative.'

 

18 hours ago, Beezo said:

Although there is a lot of debt coming due in two years - it will be restructured with better rates, as they recently just did. 

 

Yes, they replaced debt with cheaper debt.  They also incurred costs of billions to buy out exchangeable debt.

 

They, NCL, is not buying anyone.

 

 

Edited March 6, 2022 by At Sea At Peace

[BermudaBound2014]

6 hours ago, Uff da said:

I know you are very pessimistic about the future of cruising, but if the sail away vlogs on YouTube for the new Wonder of the Seas are any indication, people are ready to return to cruising. It sailed with 4200 onboard. Not full capacity, and maybe that was on purpose for the first sailing, but it was packed. Check out the sail away video posted by La Lido Loca. Since Royal doesn't cruise 100% vaxxed, and it's cruising from Florida, it will be interesting to see if this causes a huge Covid outbreak. That will be bad press for the industry. 

Discussing the inaugural sailing of the worlds biggest cruise ship does not clearly represent the industry. Based on what I’m seeing, the Wonder of the Seas is not selling well. At all.  
 

Perhaps the inaugural sailing did well, but for a brand new ship- biggest in the industry, future prices are not indicative of high demand and if you look deeper, RCL is practically giving away the rest of the oasis class. 
 

The first photo is for harmony of the seas. 7 days, typical Caribbean itinerary. Wonder of the seas is the second photo. These prices are exceptional for the spring break time frame. Historically speaking, an oasis class during the spring break time frame should run near $1500 pp in a balcony. Higher for an inaugural season. If ships were selling well, prices would be higher. Supply and demand. I expect prices will drop significantly in May. 

 I don’t believe cruising is going anywhere permanently. I suspect  Evolution 🙂

 

 

Edited March 7, 2022 by BermudaBound2014

[Beezo]

5 hours ago, At Sea At Peace said:

They are, $400M Net Loss and Cash Burn.  Ugly.

 

The guidance DOES INCLUDE ONBOARD SPENDING, it increased and passenger revenues decreased (as comparative percentages) inversely. 

Just a heads up regarding this - from earnings presentation: 

 

“In Q1 2022, cash burn is expected to be ~$390M/month. This cash burn rate does not include expected cash inflows from new and existing bookings or contribution from ships in operation.”

 

If the cruises are cash flow positive, it should assist with driving down monthly cash burn rate, which is higher this quarter to restart. 

 

https://d1io3yog0oux5.cloudfront.net/_8e965c80a3c8158d40b38f40fcb42b03/nclhltd/db/1111/11219/file/NCLH+Q4+2021+Earnings+Call+Presentation_Final.pdf

Edited March 7, 2022 by Beezo

[Uff da]

1 hour ago, BermudaBound2014 said:

Discussing the inaugural sailing of the worlds biggest cruise ship does not clearly represent the industry. Based on what I’m seeing, the Wonder of the Seas is not selling well. At all.  
 

Perhaps the inaugural sailing did well, but for a brand new ship- biggest in the industry, future prices are not indicative of high demand and if you look deeper, RCL is practically giving away the rest of the oasis class. 
 

The first photo is for harmony of the seas. 7 days, typical Caribbean itinerary. Wonder of the seas is the second photo. These prices are exceptional for the spring break time frame. Historically speaking, an oasis class during the spring break time frame should run near $1500 pp in a balcony. Higher for an inaugural season. If ships were selling well, prices would be higher. Supply and demand. I expect prices will drop significantly in May. 

 I don’t believe cruising is going anywhere permanently. I suspect  Evolution 🙂

 

 

I get what you're saying. But at the same time, 4,200 people is probably the biggest crowd on a ship since the pandemic, and that's a good thing. It's going to take people getting on ships and posting on YouTube, FB,  insta, and twitter for people to realize it's okay. The industry is going to have to do what it has to do to get people onboard. Sitting at a dock somewhere and paying those fees wasn't helping them either. Unlike you, I think most people will go back once they feel it's safe. I did. Every time word of mouth spreads, it's good for the future of cruising. 
And by the way, aside from spring breakers, who in their right mind would book a cruise during spring break???  😉 

[BermudaBound2014]

@Uff da I certainly respect your opinion and acknowledge that you make some good points, I truly wish you happy sailing (outside of spring break of course  :)) 

[At Sea At Peace]

9 hours ago, Beezo said:

Just a heads up regarding this - from earnings presentation: 

 

“In Q1 2022, cash burn is expected to be ~$390M/month. This cash burn rate does not include expected cash inflows from new and existing bookings or contribution from ships in operation.”

 

If the cruises are cash flow positive, it should assist with driving down monthly cash burn rate, which is higher this quarter to restart. 

 

https://d1io3yog0oux5.cloudfront.net/_8e965c80a3c8158d40b38f40fcb42b03/nclhltd/db/1111/11219/file/NCLH+Q4+2021+Earnings+Call+Presentation_Final.pdf

 

This is the thing about press releases and slide shows, they entice and yet parse making interpretation based on each readers desired perspective (almost a confirmation bias no matter what side one believes).

 

So, agree with the quote (from the press release slide by the public company), this cash burn rate does not include expected cash inflows from new and existing bookings or contribution from ships in operation.”  

 

Then to your interpretation (which is fine), "If the cruises are cash flow positive, it should assist with driving down monthly cash burn rate, which is higher this quarter to restart."

 

Then my take, if your interpretation could have been supported by the company's actual data, THEY would have made that further statement in THEIR press release slide.

 

They did not.  If contributions from ships in operation are cash flow positive (again, they didn't state that they were), and THEY further do not assert that or at what amount (break even?), how much could that help?

 

Again, they are desperate to 'self pump' at this point in time.  If they could have made the leap to make the interpreted statements that you suggest in your perspective they would have (without consequences under SEC regulations).  They did not.

 

All opinions, perspectives and interpretations count.  Time will tell.  👍

 

Which brings us back to the thread and the context.  NCL will not be, and doesn't have the financial capability to, buy anyone, including Genting or Dream.

Edited March 7, 2022 by At Sea At Peace

[kenns]

With the World Dream now going to auction - does anyone think that NCL will take a serious look at it? 

 

The ship is practically identical to the Breakaway + class but with some obvious differences. I bet the actual sale price doesn't scare them, but rather, the cost to renovate and turn the ship into an "American" cruise ship would be a likely deal breaker. 

[njhorseman]

2 hours ago, kenns said:

With the World Dream now going to auction - does anyone think that NCL will take a serious look at it? 

 

The ship is practically identical to the Breakaway + class but with some obvious differences. I bet the actual sale price doesn't scare them, but rather, the cost to renovate and turn the ship into an "American" cruise ship would be a likely deal breaker. 

There's absolutely no way NCL would be interested

 

NCL needs to hold on to every penny of its cash on hand right now. It can't fill the ships it already has sailing so the last thing it needs right now is additional capacity. NCL also has sister ships to the recently-launched Prima on order...ships of its own design, not a ship that would require extensive and expensive redoing to meet NCL's requirements.

Edited December 9, 2022 by njhorseman

[Beezo]

On 12/9/2022 at 12:30 PM, kenns said:

With the World Dream now going to auction - does anyone think that NCL will take a serious look at it? 

 

The ship is practically identical to the Breakaway + class but with some obvious differences. I bet the actual sale price doesn't scare them, but rather, the cost to renovate and turn the ship into an "American" cruise ship would be a likely deal breaker. 

I would say, depending how much they could get it for. I doubt it, but if the price is right and the field of bidders are all low-balling, stranger things have happened.

 

As I’ve said before, lots of synergies with similar fleet-types. This goes for Genting Dream, World Dream, and Explorer Dream. 

[njhorseman]

32 minutes ago, Beezo said:

I would say, depending how much they could get it for. I doubt it, but if the price is right and the field of bidders are all low-balling, stranger things have happened.

 

As I’ve said before, lots of synergies with similar fleet-types. This goes for Genting Dream, World Dream, and Explorer Dream. 

Are you aware that NCL is struggling to stay in business, isn't filling its ships, and raising prices wherever they can to generate more income? The last thing it needs to do is buy another ship and then have to pay a ton of money to renovate it.  

NCL doesn't even want to build ships that large any longer. The new Prima and its sisters that NCL have on order are smaller than the BA and BA+ classes that they had been building.

[kenns]

Makes complete and perfect sense. I knew they were hurting, but didn't realize it was that bad - so much so that they are struggling to fill their existing ships. 

 

They made some big announcements today as well - new Brand Presidents for Oceania and Regent and a 9% RIF including some big names at all 3 brands. 

[phillygwm]

It would need to be at firesale prices to make it attractive to NCL.  As others have stated, they're burdened with a lot of debt and capacity isn't 100% on most sailings.  Would demand increase dramatically if a ship were at an underutilized port?  I'm not sure that's the case.

Edited December 15, 2022 by phillygwm

[www3traveler]

The annoucement I saw this morning said a 9% reduction of workforce--shoreside.  Did not say anything about on ship personnel.

[cruiseny4life]

Here's a link with details on the RIF: https://cruiseindustrynews.com/cruise-news/2022/12/norwegian-cruise-line-holdings-laying-off-9-of-shoreside-workforce/#:~:text=As part of this initiative,roles%2C” the company said in

 

@www3traveler is correct that it appears to be just shoreside employees.

[kenns]

correct, corporate employees only 

[Beezo]

The World Dream’s auction ended 12/21. Curious to know the outcome of where she is going. 

[Beezo]

Well this just got a bit more interesting....

 

https://www.seatrade-cruise.com/finance/world-dream-appears-limbo-following-singapore-auction-updated

 

So it sounds like Resorts World did not bid, nor did Trey Hickey/KKR who were very active in the beginning.