Norwegian Cruise Line raises $2B to avert bankruptcy.
Financially troubled Norwegian Cruise Line Holdings Ltd. of Miami raised more than $2 billion from private investors to avert a possible trip to bankruptcy court, the company announced Wednesday.
In a Securities and Exchange Commission filing this week, the company warned investors that its business was in jeopardy after being forced to stop sailings due to the coronavirus pandemic.
But those concerns appear to have evaporated after a private equity firm stepped forward to commit $400 million, and other lenders and investors committed to provide another $2 billion through debt and stock purchases.
The money, the company said, provides a year’s worth of breathing room to operate as the economy attempts to shake off the threats posed by the pandemic. In mid-March, the industry came to a halt after a “no sail” order imposed by the federal Centers for Disease Control and Prevention.
“This significantly strengthens the company’s financial position and liquidity runway and it now expects to be positioned to withstand well over 12 months of voyage suspensions in a potential downside scenario,” Norwegian said Wednesday of the new money. “While this is not the company’s base case expectation, the company has taken a swift and proactive approach to protect its future given the significant uncertainty and unknown duration of the
COVID-19 global pandemic.”
Norwegian operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises with a combined fleet of 28 ships that sail to more than 490 destinations worldwide. The company intends to add nine ships to its fleet through 2027.
All three lines had canceled cruises through June 30. Rival companies have announced tentative resumptions of sailings later in the summer. Carnival Cruise Line, for example, said it would start sailings with eight ships out of PortMiami, Port Canaveral and Galveston, Texas, on Aug. 1.
Once Norwegian closes its transactions, the company expects to have approximately $3.5 billion, the company said in a statement Wednesday.
The amount includes money it already had at its disposal. Norwegian closed out March with $1.4 billion in cash, according to the Wedbush Securities firm of Los Angeles, which closely monitors the cruise line industry. The firm also estimated the company had $1.8 billion in advance ticket sales. But as passengers canceled cruises in droves, a large question loomed over how the company could withstand a barrage of demands for refunds.
In a note to investors, Wedbush said Norwegian “now has the cash in place to survive until mid-to-late 2021 even under a worst case” scenario. It called the effort to raise new money “no small feat given the gauntlet that they needed to run through in recent months to ensure the company’s survival.”
Over 24 hours, Norwegian announced the initial commitment of $400 million from L Catterton, a private equity firm based in Grennwich, Conn. The deal was contingent on raising another $2 billion from other investors and lenders. L Catterton is entitled to place a representative on Norwegian’s board of directors; it may also name an observer to monitor the board’s actions.
After the stock markets closed Tuesday, the company announced its debt and stock offerings had attracted enough interest to become over-subscribed. So management increased the values of all of them.
Norwegian’s stock traded up by more than 1.1% to $11.30 on Wednesday.