Norwegian Cruise Line says there’s ‘substantial doubt’ about its ability to continue as a ‘going concern’


Workers near a cruise ship of the Norwegian Cruise Line which is in dry dock receiving hull maintenance and interior modernization work.

Gerald Julien | AFP | Getty Images

Norwegian Cruise Line said there is “substantial doubt” about its ability to continue as a “going concern” as the coronavirus pandemic wreaks havoc on the industry, warning that it may need to seek bankruptcy protection if it cannot line up enough financing in the coming months.

The coronavirus outbreak, “including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price,” the company said in a securities filing published Tuesday. “These factors have raised substantial doubt about the company’s ability to continue as a going concern.”

Norwegian said it was in compliance with all of its debt agreements as of March 31, but it couldn’t guarantee that going forward and may need to seek waivers from its lenders. If it cannot amend its credit agreements, the company said it is at risk of default, which would trigger immediate repayment of most of its debt and derivatives contracts. That puts it at risk of bankruptcy.

If it’s not able to maintain enough liquidity, “our business and financial condition could be adversely affected and it may be necessary for us to reorganize our company in its entirety, including through  bankruptcy proceedings, and our shareholders may lose their investment in our ordinary shares,” the company said. 

The company also announced it expects to report a loss for the quarter ended March 31 and on the year.

Separately, the company announced Tuesday morning that L Catterton, a private equity fund, invested $400 million in NCL Corporation, a subsidiary of Norwegian. Under the agreement, L Catterton will be entitled to nominate one member to the company’s board of directors.

Shares of the company fell more than 11% in early trading on the news.

The coronavirus pandemic has brought the global travel industry, and the cruise industry in particular, to a standstill across the world. With tight credit markets and the economic toll of Covid-19 remaining unclear, Norwegian, the smallest of the three major publicly traded cruise companies, said it’s concerned about whether it will be able to find financing to help it weather a potentially prolonged situation without any revenue.

The company said it had roughly $6 billion in long-term debt obligations as of Dec. 31. In March, the company fully drew down an $875 million revolving credit facility and a separate $675 million revolving credit line. The latter matures on March 4, 2021.

In early March, as the virus spread rapidly among some cruise passengers, the State Department warned Americans against traveling by cruise ship. On March 14, the U.S. Centers for Disease Control and Prevention issued a no-sail order for cruise ships, extending it on April 9 until July 24. 

“This is the first time that we have completely suspended cruise voyages, and as a result of these unprecedented circumstances, we are not able to predict the full impact of such a suspension on our company,” Norwegian said.

The company is preparing to provide cash refunds for passengers whose cruises were canceled. While the company is also offering 125% future cruise credits, it said it “approximately half of the guests who have had their voyages cancelled and who have contacted us have requested cash refunds.”

Even if guests accept the credit, the company warned that would mean diminished future revenue when the company can resume sailing.

“We cannot predict when any of our ships will begin to sail again or when ports will reopen to our ships,” the company said. “Moreover, even once travel advisories and restrictions are lifted, demand for cruises may remain weak for a significant length of time and we cannot predict if and when each brand will return to pre-outbreak demand or pricing.”

The company is also cutting capital expenditures by $515 million, it said, and it hopes to raise about $2 billion, including the investment by L Catterton, as well as through public stock offerings and bond issuance. The company added that it has furloughed 20% of its shoreside staff.

The news comes after competitor Carnival Corp., the largest cruise company in the world, announced Monday that its Carnival Cruise Line will resume some North American sailings on Aug. 1.



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