Norwegian Cruise Line Holdings (NCLH) has issued a stark warning about its ability to meet its financial obligations for the next 12 months.
In a US Securities and Exchange Commission (SEC) filing yesterday, NCLH admitted that it did not currently have sufficient liquidity to meet its obligations for the coming financial year, assuming no additional financing or other proactive measures are taken.
This situation was caused by the COVID-19 pandemic, which closed the cruise lines’ operations, instigated a drop in advance bookings, which could impact on the Group honouring its debt maturities and other obligations.
On a more positive note, NCLH said it was attempting to reinforce its financial position by offerings of new stock, exchangeable and secured notes and a $400 mill private placement has been agreed with private equity firm L Catterton.
The Group also announced plans to raise nearly $1.35 bill in a private placement of other notes, due in 2024, plus up to another $400 mill through the sale of additional shares of stock. This should provide an extra $3 bill in additional cash reserves, NCLH said .
“This strengthens the company’s financial position and ensures it is well positioned to withstand well over 12 months of voyage suspensions,” the Group said in a statement. “While this is not the company’s base case expectation, the company has taken a proactive approach to protect its future given the significant uncertainty and unknown duration of the Covid-19 global pandemic.”
Terms were also been revised on some of the ships’ outstanding debt and work is underway to revise the payments due on the group’s newbuilding projects.
In addition, NCLH said that it was reducing its ship operating costs, including food, fuel, insurance, port charges and the introduction of reduced vessel manning during the suspension of operations.
Among other actions taken is the reduction of marketing expenditure, temporarily shortening of the working week and reduced work hours for shoreside employees, or furloughed employees.
Last week, NCLH announced the furlough of 20% of its onshore staff, while the remaining employees will have their hours and pay reduced by 20%. As at the end of last year, the Group employed 4,000 onshore and 32,000 on board its ships.
NCLH also said it was putting much of its fleet into cold layup for the foreseeable future. For example, the US Port of Virginia has provided berths at Portsmouth Marine Terminal (PMT) for the ‘Norwegian Encore’, ‘Norwegian Bliss’, and ‘Norwegian Spirit’, through 30th June, 2020.
