Tag Archives: insolvent

Under stress, NCL Holdings hit a liquidity grand slam

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Arnie Weissmann (left) and Frank Del Rio at Travel Weekly’s CruiseWorld in 2018. Photo Credit: Jamie Biesiada

In the first of two parts of a wide-ranging interview with Travel Weekly editor in chief Arnie Weissmann, Norwegian Cruise Line Holdings CEO Frank Del Rio gave the back story on closing a $2.4 billion round in tough times. Part 2: Del Rio on relaunching and the importance of travel advisors in cruising’s recovery. 

On March 13, Norwegian Cruise Line Holdings CEO Frank Del Rio learned that to stem the spread of Covid-19 on cruise ships, the Centers for Disease Control and Prevention (CDC) had issued a no-sail order, effectively halting cruising out of U.S. ports.

No cruising, no revenue. No revenue, no assurance of the liquidity needed to survive for an unknowable amount of time. “I knew our world was going to change,” Del Rio told Travel Weekly in an interview on Thursday.

Del Rio sees the journey from potential ruin to bountiful liquidity as a testimony to the resiliency of cruising and NCLH’s unique position in the cruising ecosystem.

On Wednesday, Del Rio finished what would be considered a remarkable round of funding even during the best of times. His underwriter, Goldman Sachs, told him it was the first simultaneous “quad” it had seen: releasing a private placement memorandum and at the same time announcing three different kinds of public capital. And, as icing on the cake of the $2.23 billion initially announced, an oversubscription in each tranche triggered what Wall Street calls a “greenshoe” event, allowing additional shares to be sold, bringing the total above $2.4 billion.

Wall Street heavyweights get green light to start their own stock ...

What should have been an unqualified grand slam was temporarily dampened when some investors and media noticed two sentences in a 59-page public filing on Tuesday which seemed to disclose “substantial doubt” about the company’s ability to continue “as a going concern,” and another warning that, should investment not be forthcoming, “it may be necessary for us to reorganize our company in its entirety, including through bankruptcy proceedings.”

The language, Del Rio said, was a “mandatory, technical accounting reporting requirement that our auditor, Price Waterhouse, was required to issue in conjunction with the offering memorandum.” Though the details the following day about the success of the offering would render the point moot, NCL stock dropped 22% the day before the full scope of the investments were announced.

The $2.4 billion, combined with $1.1 billion in cash the company already had, “probably gives us the biggest liquidity cushion — the longest runway — of any company in the cruise space,” Del Rio said. “I challenge you to find another company in any industry that can say that they can withstand a 100% cessation of operations with zero revenue for more than 18 months.”

When this is all over, Del Rio asserts, “Norwegian will be one of the survivors, one of the success stories. This was truly a team effort. Yesterday I addressed them all, and it was a very emotional moment because what was being saved was a great institution. We invented the cruise industry more than 50 years ago and I would be damned if, under my watch, that was going to change.”

Norwegian Cruise Line Flags ‘Going Concern’ Over Ability to Stay Afloat

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Norwegian Jade photo credit Dave Jones

Norwegian Cruise Line Holdings Ltd., the world’s third-largest cruise operator, raised doubts about its ability to keep running as a business on Tuesday, the first in the sector to signal it may succumb to the coronavirus crisis.

The company’s shares slumped about 20% as it also launched a $1.6 billion offering of shares and bonds in a scramble to raise money, and announced a $400 million investment in a subsidiary from a private equity firm.

Norwegian Cruise and rivals Carnival Corp and Royal Caribbean Cruises have been among the most high-profile victims of the pandemic after deadly outbreaks on some cruise ships led to extended port quarantines in Japan and California.

Norwegian, which has suspended its sailings through June 30, has not yet announced a relaunch date. On Monday Carnival said it plans to resume some cruises beginning Aug. 1, pending continued efforts to coordinate with government officials.

The cruise industry was left out of a $2.3 trillion U.S. stimulus package for troubled companies as the major players are all incorporated outside the United States.

“COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which adversely affects our ability to obtain acceptable financing,” Norwegian said, also flagging substantial doubt about its ability to continue as a “going concern.”

The company said that as of April 24, advanced bookings for the remainder of the year were “meaningfully lower than the prior year, with pricing down mid-single digits.” Norwegian’s shares have lost almost 80% of their market value this year.

The Miami-headquartered company faces class-action lawsuits alleging that it made false and misleading statements to the market and customers about COVID-19 and its impact on its business – allegations it says are without merit.

In March, the Florida Attorney General announced an investigation related to Norwegian’s marketing to customers during the coronavirus outbreak, based on allegations it downplayed the severity and highly contagious nature of the virus in an effort to sell cruises.

Other attorneys general and governmental agencies are conducting similar investigations, according to the company.

Norwegian said it does not have sufficient liquidity to meet its obligations over the next 12 months.

Since the start of the crisis, the company has borrowed $1.55 billion under credit facilities. At the end of last year, it had about $6 billion of total long-term debt obligations and cash and cash equivalents of $252.9 million.

A subsidiary of Norwegian Cruise got a $400 million investment from consumer-focused private equity firm L Catterton on Tuesday. It had been in talks with several private equity firms.

Shares of Carnival were down 4.3% and shares of Royal Caribbean were down 5.6% on Tuesday. (Reporting by Helen Coster in New York and Ankur Banerjee and Nivedita Balu in Bengaluru; Editing by Saumyadeb Chakrabarty, Sweta Singh and Tom Brown)