Expensive $Loans$ for CCL Corp?

[LocoLoco1]

Here’s hoping higher Re-Fi rates for CCL won’t sink plans for new ships. 

[Guest ldtr]

1 hour ago, LocoLoco1 said:

Here’s hoping higher Re-Fi rates for CCL won’t sink plans for new ships. 

You mean the ships that CCL has stated are not going to be ordered for several years?  CCL has made it clear  about new orders.  The existing orders already have funding, mostly in the form of loan guarantees from the countries in which the building firms are located.

 

CCL will go to the market for loans as needed for general operations and to refinance existing loans coming to term, but usually not an issue for already ordered ships.

Edited March 17, 2023 by ldtr

[YXU AC*SE]

Verbatim from Josh Weinstein on CCL's last quarterly results call.

 

"Turning to capital expenditures, we actively manage down our spend by over $500 million during 2022, and we've taken a hard look at 2023 and beyond and reshaped investment spending by $300 million annually for a cumulative reduction of $1.7 billion. We have reprioritized project lists and hurdle rates to reflect the current environment while absolutely maintaining our commitment to excellence, compliance, protecting the environment, and the safety and well-being of our guests, team members, and communities we serve. Going forward, we are committed to using our expected cash flow strength to repair the balance sheet over time, and we'll be disciplined and rigorous in making newbuild decisions accordingly.

 

"We have just four ships on order through 2025, plus our second incredible Seabourn luxury expedition ship to be delivered in 2023. This is our lowest order book in decades. We don't expect any new ships in 2026 and anticipate just one or two new builds each year for several years thereafter."

 

Scott.

[LocoLoco1]

‘Reshaped investment spending’…. Sounds like sumbuddy told CCL to go on a Slimfast diet. Here’s hoping I can look forward to sailing with a cruiseline rolling in the $dough$. That sounds more fun. 

[HappyInVan]

45 minutes ago, LocoLoco1 said:

 Here’s hoping I can look forward to sailing with a cruiseline rolling in the $dough$. That sounds more fun. 

 

Would you be willing to pay their price?

 

I just don't see the point of HAL enlarging their fleet. They're struggling to fill their ships, even with $1 and $25 deposits. FYI, I'm booked on an Alaska cruise in May. Last week, the price of the Vista stateroom dropped to the price I paid for a VF cabin. After the cheap deposits, and before the upsells.

 

That's a mistake I won't make again.

[Colorado Klutch]

1 minute ago, HappyInVan said:

 

Would you be willing to pay their price?

 

I just don't see the point of HAL enlarging their fleet. They're struggling to fill their ships, even with $1 and $25 deposits. FYI, I'm booked on an Alaska cruise in May. Last week, the price of the Vista stateroom dropped to the price I paid for a VF cabin. After the cheap deposits, and before the upsells.

 

That's a mistake I won't make again.

 

Call HAL and ask them to refund you the difference or apply the difference as onboard credit. Worst that could happen is they say, "No". I've talked to people who did this and it worked. 

[OlsSalt]

Seeing how selling their wonderful older, smaller ships gave new life to other cruise lines, good to hear they are holding on to the very few they now have left. They are still very valued ships to have kept in the HAL inventory.  

 

That might have been a strategic error on HAL's part "early-covid".

[LocoLoco1]

Accountant-speak:‘Going forward we are committed to using our expected cash-flow strength to repair the balance sheet over time, and we will be disciplined and rigorous in making new-build decisions accordingly.’  TRANSLATION: ‘We’ve been put on a Lo-Cal diet by our lenders.

[OlsSalt]

Somebody has to pay off the loans caused by the CDC instant shut down of the entire cruise industry, As foreign flagged vessels, Uncle Sam was able to turn his back on these CDC fallouts.  It was a very odd time for the global cruise industry.

 

The amount of money to keep them afloat for two years, with no paying customers was certainly a crummy business plan.  Of course we will need to pay more to get less, unless someone else can explain the economics to me better.

[HappyInVan]

28 minutes ago, OlsSalt said:

The amount of money to keep them afloat for two years, with no paying customers was certainly a crummy business plan.  Of course we will need to pay more to get less, unless someone else can explain the economics to me better.

 

Actually, I wouldn't blame the CDC for CCL's woes. The industry went on a growth spurt from 2008 when 2-Year Treasury rates fell below 2% (10-Year below 3.5%). Carnival launched 9 ships from 2009. The latest (launched 2022) cost $1 billion at 183k GT.

 

During the pandemic, CCL had to seek financing at junk bond rates (10%). Even today after all the talk of sailing at full capacity, CCL is trading at $8.50 (all time high of $69 in 2017). 

 

FYI, NCLH's market cap is half of CCL; while revenue is only 35% of CCL. This is the market's verdict on surplus capacity and the viability of CCL. So, banish the thoughts of building grand new ships until operating profits can catch up with interest payments.

[OlsSalt]

2 hours ago, HappyInVan said:

..........

 

FYI, NCLH's market cap is half of CCL; while revenue is only 35% of CCL. This is the market's verdict on surplus capacity and the viability of CCL. So, banish the thoughts of building grand new ships until operating profits can catch up with interest payments.

 

Music to my ears that CLL will be forced drop building bigger ships.

 

Talk about a failed business plan for the cruise industry -generic bus trips, generic bus routes and fewer ports who even want these behemoths. As much fun as wearing Zuckerbergs Meta-Universe glasses.

 

Sea travel was first for sheer transportation and commerce, then travel with more onboard creature comforts, then on to some crazed idea that bigger, better, more novel and almost totally removed from actually being at sea itself was the state of "sea travel".  Bah!

 

Shades of the over-built PanAm fall from airline industry dominance,  all playing out again. 

[LocoLoco1]

Agreed. Competitor’s PLUS Carnival’s number of berths available tells me it will be cuthroat out there for quite some time. NCL replaced Frank DelRio, CEO today. 

[BermudaBound2014]

Of course we can look directly at the CDC for the current financial shape of all three major traded cruise lines. Not only did they shutter the entire industry for 18 months, but they continued to stiffle recovery with protocols that were not applied evenly to other travel sectors. 

 

In addition, CCL is not talking about ships sailing at full capacity. That's just the rumor mill you read about on CC. It wasn't until all protocols were finally removed last fall that CCL saw occupancy reach close to 80%. They don't expect full occupancy until the summer of 2023 (and I don't believe that anymore than I believed they would turn a financial profit by second quarter of 2022). FWIW, NCLH isn't much better. On a side note, RCL has managed to secure 96% occupancy and remains the strongest of the three.

 

CCL just sold a Seabourn Odyssey ship to a Japanese company. I suspect this just another in what will be a long line of downsizing. Rumors have been circulating for several months that they plan to sell the remainder of the Seabourn fleet to the Saudies. This is where I believe CCL has a slight edge over NCLH. CCL controls well over 50% of berths, so they have lots of room to part out ships/lines on their path to recovery.

 

I know I've been saying this repeatedly, but I think the cruise industry can be liken to the story of the 3 bears. CCL is just too big. NCLH is just to small. And the cruise line in the middle (RCL) is sitting in the strongest position (and even that is remarkably weak). 

 

CCL reports Q1 on Tuesday March 27th. 

 

 

 

 

 

Edited March 20, 2023 by BermudaBound2014