Norwegian Cruise Line Holdings Ltd (NCLH) – together with NCL Corp Ltd – reported a GAAP net loss of $715.2 mill or EPS of minus $2.99 for the second quarter of this year, compared to $240.2 mill income or $1.11 in 2Q19.
The Adjusted Net Loss was $666.4 mill or Adjusted EPS of minus $2.78, in 2Q20, which included $48.8 mill of adjustments primarily consisting of expenses related to non-cash compensation and losses on extinguishment and modifications of debt.
This compares to Adjusted Net Income and Adjusted EPS of $282.1 mill and $1.30, respectively, for 2Q19.
Revenue decreased to $16.9 mill, compared to $1.7 bill in the 2019 period, due to the complete suspension of voyages in the quarter.
Total cruise operating expense decreased 68.5% in 2020 compared to 2019. In 2020, NCLH’s cruise operating expenses were primarily related to the continued payment of protected commissions, as additional sailings were cancelled, crew costs, including salaries, food and repatriation costs, and fuel.
As a consequence of COVID-19, while the company said that it could not estimate the impact on its business, financial condition or near- or longer-term financial or operational results with certainty, but it expects to report a net loss on both a US GAAP and adjusted basis for the third quarter and the full year.
The pandemic has had a significant impact on the company’s financial position and results of operation. If the temporary suspension of sailings is further extended, the company’s liquidity and financial position would likely continue to be impacted.
As of 30th June, 2020, NCLH’s total debt position was $10.3 bill and the company’s cash and cash equivalents were $2.3 bill. The company said it believed it was in compliance with all debt covenants.
In July, 2020, the company closed on a series of capital markets transactions to further boost liquidity and extend its debt maturity profile. As a result of significant demand, over-subscription and the full exercise of the option to purchase additional ordinary shares and partial exercise of the option to purchase exchangeable senior notes, the total amount of gross proceeds were around $1.5 bill.
The triple-tranche transaction consisted of (i) about $288 mill public offering of common equity, (ii) $450 mill 5.375% exchangeable senior notes and (iii) $750 mill 10.25% senior secured notes, the proceeds of which were used in part to repay the existing $675 mill short-term revolving credit facility.
Following these transactions, the repayment of the $675 mill short-term revolving credit facility and customer deposit refunds payable, total pro-forma liquidity was about $2.8 bill as of the end of June, 2020. Total shares issued and outstanding as of 21st July, 2020 were 275.6 mill.
“We continue to adapt to this unprecedented and fluid environment and take swift and proactive measures to reduce costs, conserve cash and enhance our liquidity profile,” said Mark Kempa, NCLH Executive Vice President and CFO. “Our recent capital raises have enabled us to extend our debt maturity profile and secure additional liquidity providing us with a strong foundation to withstand the impact of COVID-19.”
Frank Del Rio, company President and CEO (pictured), said: “In recent weeks, we have taken further action to bolster our liquidity position in response to the COVID-19 global pandemic, including our highly successful $1.5 bill gross triple-tranche capital raise in July, which we believe positions us to withstand a scenario of prolonged voyage suspension.
“Our guests continue to demonstrate their desire for cruise vacations in the future. Looking ahead, we made significant progress in our Roadmap to Relaunch with the formation of our Healthy Sail Panel, comprised of globally recognised public health experts, which is tasked with providing recommendations to advance our public health response to COVID-19 and inform us on the development of a science-backed plan for a safe and healthy return to cruising,” he said.
In July, NCLH announced a collaboration with Royal Caribbean Group to assemble a group of experts, the ‘Healthy Sail Panel’, which is tasked with developing recommendations for cruise lines to advance their public health response to COVID-19, improve safety, and achieve readiness for the safe resumption of operations.
The company has also completed the safe repatriation of the vast majority of its shipboard team members to their homes around the world. To date, the company has worked to repatriate over 21,000 shipboard team members, to over 75 countries, through a combination of chartered and commercial air flights, as well as using some of the ships. The repatriation efforts will be mainly completed within 45 days, the company claimed.
NCLH’s targeted monthly cash burn is on average, about $160 mill during the suspension of operations. This includes ongoing ship operating expenses, administrative operating expenses, interest expense, taxes and expected capital expenditures but excludes cash refunds of customer deposits, as well as cash inflows from new and existing bookings. Also excluded is debt amortisation and newbuild related payments, which are currently deferred through 31st March, 2021.
The company said that the new monthly cash burn estimate was at the high end of the previously disclosed range, due to additional interest expense related to the July capital raise, maintaining more ships in warm layup, due to various port requirements and weather restrictions, increased costs associated with fluctuating travel restrictions for crew and additional marketing investments.