MONEY: Cruise line filing raises flag it could face bankruptcy.
Norwegian Cruise Line Holdings Ltd., amended a filing with the Securities and Exchange Commission on Tuesday citing financial losses due to coronavirus mean there is “substantial doubt” the company can “continue as a going concern,” raising the specter of bankruptcy.
The filing from the Miami-based company’s independent registered public accounting firm warns the company expects it will need additional financing to satisfy outstanding debt, and without funds coming in from its three cruise line brands — Norwegian Cruise Line, Oceania and Regent Seven Seas — it will not have enough liquidity to satisfy its financial obligations in the next 12 months.
“There is no guarantee that debt or equity financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations,” according to the filing.
The company announced Tuesday it tentatively has raised $400 million from L Catterton, a consumer-focused private equity group based in Greenwich, Conn. But the new funding is contingent on management raising another $1 billion from institutional investors — through $650 million in debt and $350 million in a common stock offering.
The filing notes that in addition to the suspension of cruising, there has been a decline in advance bookings, and notes it remains under a “no sail order” from the Centers for Disease Control and Prevention that could extend into late July. At present, the three lines have canceled cruises through June 30.
Scott Dahnke, global coCEO of L Catterton, predicted both the company and the now idled cruise line industry would rebound from the crisis driven by the coronavirus pandemic.
“The cruise industry has been very resilient over a long period of time, driven by strong secular tailwinds and a high level of guest satisfaction,” Dahnke said in a statement. “People enjoy cruising, with many guests taking multiple voyages over time. The industry has overcome numerous challenges in the past, and we expect that the industry will rebound and prosper with even further enhancements to their already rigorous health and safety protocols in place in the future.”
L Catterton will have the right to nominate a member to Norwegian’s board of directors, as well as an observer who would monitor the board.
Frank Del Rio, president and chief executive officer, called L Catterton “the ideal partner for our company as they recognize the remarkable resilience the cruise industry has demonstrated over the past 50 years, appreciate the longterm global demand for cruise vacations, and value our company’s long track record of growth, execution and success.”
The company’s investor relations department did not immediately respond to several emailed questions that focused on the company’s expense reduction plans and the cash burn rate of any new money it receives in the future.
The filing says the company plans more action to increase its liquidity including attempts to extend debt maturities, delay financial obligations with its lenders and reduce operating costs as well as looking at financial transactions that would provide net proceeds that would be sufficient.
But all of those efforts are not guaranteed, the statement warns.
“There can be no assurance, however, that the company will be able to complete any such financing transaction, raise sufficient additional capital, finalize additional amortization deferrals or that revenues will increase rapidly enough to offset operating losses that will provide with sufficient liquidity to satisfy its obligations over the next twelve months or maintain minimum levels of liquidity as required by certain of our debt agreements.”
The company’s three cruise lines amount to 28 ships including Regent Seven Seas Splendor which debuted this year and Norwegian Encore which debuted in 2019.
Norwegian Cruise Line is the third largest line in the world and sails from Port Canaveral and PortMiami.
The company’s stock closed down more than 22% at $11.18 a share.