NCLH takes steps to improve liquidity

2022-02-12T14:05:19+00:00 February 12th, 2022|Finance|

Last week, Norwegian Cruise Line Holdings (NCLH) provided a business update on the impacts of COVID-19 and on its continued resumption of cruise operations.

In the third quarter of 2021, NCLH began a phased relaunch of cruise operations with ships initially operating at reduced occupancy levels. By the end of that quarter, the total number of vessels operating accounted for around 40% of the Group’s berth capacity.

Beginning in December, 2021, the spread of the Omicron variant caused several operational challenges and disruptions, including new travel restrictions and increased protocols in ports of call, which limited port availability.

This led to the cancellation of some voyages in 4Q21 and 1Q22 and the postponement of certain vessels’ restarts. As of last week, 16 out of 28 ships, or 70% of the berth capacity, were operating with guests on board.

One vessel was excluded, which ceased operations at the beginning December, 2021, due to the cancellation of its South Africa and related itineraries, as a result of travel restrictions and other operational challenges, due to the Omicron variant.

NCLH said that it expected to have around 85% of berth capacity operating by the end of 1Q22 with the full fleet expected to be back in operation during the early part of 2Q22.

As part of the Group’s SailSAFE health and safety programme, MCLH’s SailSAFE Global Health and Wellness Council, chaired by former head of the US Food and Drug Administration, Dr Scott Gottlieb, continued to advise the company on health and safety protocols in light of advancements in medicine and technology.

As a result of the impacts of Omicron, as of 6th February, 2022, the company’s cumulative booked position for 1H22 was below the extraordinarily strong levels of 2019, while the second half, when the full fleet is expected to be back in operation, is comparable to the 2019 period.

Concurrently, pricing for the first half, second half and full year 2022 are above the record levels for the same periods in 2019, even when including the impact of future cruise credits (FFCs). Booking trends for 2023 saw continued strong demand for sailings in the medium and longer term with booked positions and pricing higher and at record levels, compared to 2019.

As of 30th September, 2021, MCLH’s total debt was $12.4 bill and liquidity, consisting of cash and cash equivalents and short-term investments, was $1.9 bill.

As a result, NCLH took the following additional actions to enhance the liquidity profile and financial flexibility:

– in November, 2021, NCL Corp (NCLC) entered into a $1 bill commitment through 15th August, 2022 that provides additional liquidity to the company. If drawn, this commitment will convert into an unsecured note maturing in April, 2024. The company has not drawn and currently does not intend to draw under this commitment, at the time of writing.

– in the same month, NCLC issued $1.15 bill aggregate principal amount of 1.125% exchangeable senior notes, due 2027, which included the full exercise of the initial purchasers’ greenshoe option. The initial exchange rate per $1,000 principal amount of the notes is 29.6850 ordinary shares, which is equivalent to an initial exchange price of around $33.69 per ordinary share, subject to adjustment in certain circumstances.

– NCLH also re-purchased $715.9 mill aggregate principal amount of the 6% notes, due 2024 for about $1.4 bill.

– in addition, the company issued 46,858,854 ordinary shares to certain holders of the 2024 notes in a registered direct offering. The proceeds were used to redeem $236.25 mill aggregate principal amount of the 12.25% senior secured notes, due 2024 and $262.50 mill aggregate principal amount of the 10.25% notes, due 2026, including any accrued but unpaid interest, to pay related premiums, fees and expenses and for general corporate purposes, including the re-purchase of a portion of the 2024 notes.

NCLH’s monthly average cash burn for 4Q21 was around $345 mill, slightly lower than the previous estimate of $350 mill.

While the company is unable to estimate the impact of the COVID-19 pandemic on its business, financial condition or near- or longer-term financial or operational results with certainty, NCLH said that it will report a net loss for 4Q21 and the full year and was expected to report a net loss until regular voyages are resumed.

Despite the impact of the Omicron variant on the booking environment and based on current projections and market and public health conditions, the company expected to have positive adjusted net income for 2H22.

A couple of days later, NCL Corp announced that it proposed to sell $1,000 mill aggregate principal amount of its senior secured notes, due 2027 and $600 mill aggregate principal amount of its senior unsecured notes, due 2029 in a private offering.

The notes and the related guarantees will be secured by first-priority interests in, among other things and subject to certain agreed security principles, based on three vessels.

NCLC proposes to sell $435 mill aggregate principal amount of its exchangeable senior notes, due 2027 also in a private offering.

The company said that it intended to use the net proceeds to redeem all of the outstanding 12.25% secured notes and 10.25% secured notes and to make principal payments on debt maturing in the short-term, including, in each case, to pay any accrued and unpaid interest, as well as related premiums, fees and expenses.