Tag Archives: NCLH

S&P Upgrades Norwegian Cruise Line Credit Rating

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Norwegian Bliss in Ponta Delgarda, Azores photo credit Spacejunkie2 Flickr Account

Norwegian Cruise Line Holdings today announced that S&P Global Ratings (S&P) has recently upgraded NCLC’s (NCL Corporation, a subsidiary of Norwegian Cruise Line Holdings) issuer credit rating and issue-level ratings.

NCLC’s issuer credit rating has been upgraded to B+, marking a notable improvement in the company’s creditworthiness, according to a press release.

In addition, S&P has raised the issue-level ratings on NCLC’s existing secured and unsecured debt. The company’s senior secured debt ratings were raised to BB/BB- and its unsecured debt rating was upgraded two notches to B.

S&P highlighted several factors for the upgrade, including NCLC’s current forward-booked position, increased capacity, occupancy recovery, and higher pricing providing good revenue and cash flow visibility for 2024. In addition, S&P noted that the Company’s leverage will benefit from higher revenue, EBITDA, and cash as it generates a full year of operations from its 2023 ship deliveries, without incurring incremental ship delivery debt in 2024.

Further enhancing its financial position, on March 7, 2024, the company successfully completed the refinancing of its $650 million backstop commitment. This commitment has been refinanced from a secured to an unsecured commitment, and as part of this refinancing, the company has repaid its $250 million 9.75% senior secured notes due 2028, eliminating its highest interest rate debt.

“The upgraded ratings are an important recognition of the strength of our business and our ability to reduce leverage,” commented Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. He continued, “Our recent refinancing, which reduces interest costs while releasing the related collateral, is a clear demonstration of our commitment to de-levering and improving our balance sheet.”

NCLH: Measured Cruise Capacity Growth at 28%

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A key cornerstone of Norwegian Cruise Line Holdings’ long-term strategy is measured capacity growth, said Harry Sommer, president and CEO, speaking on the company’s year-end and fourth quarter earnings call.

He pointed to the company’s newbuild pipeline of five ships and its 2023 to 2028 capacity growth, which represents 28 more supply for the company’s trio of brands in Norwegian, Oceania and Regent.

That averages out to a compound annual growth rate of five percent, he advised.

“Historically, capacity growth has led to outsized revenue and EBITDA growth and we expect this capacity growth to be no different and deliver meaningful top and bottom line growth,” Sommer noted.

“We believe that these measured capacity additions will enable us to further enhance our long-term profitability and continue to significantly strengthen our balance sheet while providing guests new and innovative experiences,” he said.

“We continue to experience strong and resilient customer demand across all three of our brands. The strong momentum we saw in 2023 has continued into 2024 with an all-time high booked position and pricing buoyed by strong wave season demand. This has led to some of the best booking weeks in the company history, which began with successful Black Friday and Cyber Monday promotions.

“In general, we continue to see healthy demand across all markets, brands and products.”

NCLH Concentrating on Product, People and Partnerships

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Harry Sommer, president and CEO of Norwegian Cruise Line Holdings, said his strategy is built on the three Ps: product, people and partnerships.

Speaking aboard the brand new Regent Seven Seas Grandeur, Sommer said he was not worried about the influx of new luxury cruise competition, pointing to new tonnage from The Ritz-Carlton Yacht Collection and Explora Journeys, but instead was focused on competing with luxury hotels.

“We are super focused and passionate on delivering an unrivaled product to our guests across all three brands,” said Sommer. “The three brands are different. NCL is in the contemporary space. Oceania is in the upper premium and foodie space that we created, and Regent is in the ultra-luxury space.

“When you know your main mission in life is to deliver an outstanding product to guests it really focuses everyone on what they are doing,” Sommer continued.

Since taking the helm at Norwegian Cruise Line Holdings earlier this year, Sommer said he had visited about half of the ships in the company’s 32-ship fleet and has plans to visit the rest in 2024. He said when he’s aboard he makes time to meet with the captain, general manager and also talks to crew and guests.

“I sit down with guests and ask them what they like, and about challenges and what we can improve,” Sommer explained, noting he held a forum aboard the Grandeur, talking to some of Regent’s most loyal guests and asking for feedback.

The second P in his arsenal is for people, with Sommer noting the company’s 40,000 employees both shipboard and shoreside.

For partnerships, Sommer pointed to the high commission rates Regent pays its travel advisor partners, and said the company was committed to being the easiest and most profitable cruise line to do business with.

“I know the commissions we give the trade are the highest by far in the industry mostly due to our all-inclusive packaging,” Sommer said. “We essentially pay commission on everything.”