Breaking Down Cruise Line Financial Terms

The world has been closely monitoring the financial fate of the cruise industry.

With ships unable to sail — and companies unable to generate revenue — we’ve all been getting a crash course in modern-day economics.

If you’re like us, money on such a massive scale is not something you’ve regularly had to think about. So while reading about Carnival’s latest SEC filing or Norwegian’s liquidity, we’ve had to brush up on some of the terminologies.

With that in mind, we offer up a list of words which have been popping up routinely, what they mean, and even some examples of how they apply to the cruise stories you’ll be reading.

A Cruiser’s Guide To Financial Terminology


Balance Sheet
This refers to a company’s financial position, offering an overall picture of assets, liabilities, and the company’s net worth.


Think of a bond as a loan issued by a company looking to raise cash. Depending on the type of bond, the interest rate — also known as a coupon — can be low or extremely high, usually depending on the credit score of the company. Bonds are often used by companies to finance projects and operations.

Common Stock

This is typically what you’re paying for when you buy shares in a company. When a company issues new stock, they’re looking to raise money via its sale. Of course, increasing the amount of stock dilutes the actual value of existing shares.

As an example, Norwegian Cruise Line Holdings issued 36,363,636 additional shares of common stock earlier this year as part of their fundraising efforts. As of this writing, there are currently just over 214 million shares of NCLH outstanding.

Convertible Senior Note

Similar to a bond, this is a loan with an unusually low-interest rate because it has an embedded option to be converted into shares of company stock instead of being paid back. Should a company wind up filing for bankruptcy, holders of this type of note move to the front of the line in terms of being paid. If the company does well, these can be converted to stock, which will have a higher value.

Earlier this month, Carnival Corporation received $2.95 billion worth of convertible senior notes with a 5.75 percent interest rate.

Debt Holiday

This is basically a period of time during which payments do not have to be made toward a debt. European lenders have been using this option to allow struggling cruise lines to defer payments, sometimes for as long as a year. Cruise companies are taking advantage of this through the institutions that originally helped financed their ships.

Both Royal Caribbean and Norwegian Cruise Line were able to boost their on-hand cash by taking advantage of “debt holidays” offered by the French and German banks which helped finance their ships.


This is a payment made to shareholders in return for their investment in the company. These can be paid out quarterly or annually, and they can also be cut off during difficult times.

For example, prior to the financial difficulties which rocked the industry, Carnival Corporation (CCL) paid a dividend of fifty cents per share, per quarter. However, in late April, Carnival announced they would be suspending dividends for the time being.

Export Credit Agency

This type of agency’s primary role as far as cruising is concerned is the underwriting of potentially risky overseas investments. ECA’s can operate as part of a government department, or they can operate as private companies. Germany’s official ECA, Hermes, has financed several Norwegian ships. Hermes recently agreed to defer loan payments on five of those new builds.

Forward-Looking Statements

In regard to financial matters (including Securities And Exchange Commission filings and stock reports), forward-looking statements are essentially predictions about how a company or stock will do in the future.

Given that the future is, of course, unpredictable, these statements are usually accompanied by warnings about the various factors which could impact things moving forward.


The cash (or access to cash) that a company has immediately available to pay debts, including monthly operating costs. This has become a very big issue for cruise lines, given that they continue to have ongoing expenses despite generating no real revenue to speak of.

Private Equity Firms

These are companies that take money raised through a variety of means and invest them in various companies, often in exchange for a management fee, a portion fo the profits or such considerations as a seat on the board of directors.

Recently, Norwegian Cruise Line received $400 million worth of funding from the private equity firm L Catterton. One term of the deal allowed for Catterton to nominate one member and one observer to the board of directors.

Secured Note Offering

This is a low-interest loan or promissory note (essentially a type of bond) that is backed up by assets of equal or more value. This is in direct contrast to a normal bond or unsecured note, which has no assets attached to it and is therefore deemed far riskier and usually comes with a much higher interest rate.

Securities and Exchange Commission (SEC)

The independent agency of the US government that was created in 1934 to protect investors and regulate markets. Much of the financial information coming to light about the various cruise lines is thanks to filings they are making with the SEC.


As the name implies, this is a person or entity which owns stock in a company. It doesn’t matter if you own a single share of stock or millions of shares, you are a shareholder. When it comes to cruise lines there can be additional benefits to owning stock, often including — once a given number of shares have been accrued — onboard credits during future sailings.

Of course, investing in a company is always risky, and that is doubly true when the business is being as hard-hit as the cruise sector is at this moment.

Already, dividends and “perks” are being cut back as companies attempt to save money. More importantly, should a company in which you own stock go belly up, holders of common stock will be the last to get paid during bankruptcy proceedings. Secured and senior debt will get paid first, followed by other debt, and then the shareholder.

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