Norwegian Cruise Line Holdings (NCLH) appears to be looking to sell a stake of the company to an investment house that is bullish on the cruise and travel industry.
According to a Reuters report, the cruise line has hired Goldman Sachs Group to explore financial alternatives which might help them weather the current economic storm battering the industry.
Even though the line is headquartered in the United States, their ships are incorporated offshore, leaving them out of the $2.3 trillion stimulus package. With an infusion of government cash extremely unlikely, Norwegian, along with competitors Royal Caribbean International and Carnival Corporation, have been left looking for ways to boost their liquidity.
How Each Cruise Line Is Dealing With The Crisis
Norwegian Cruise Line Holdings
Even before the industry-wide shutdown, Norwegian took the precautionary measure of securing a $657 million loan by putting one of their ships, the Norwegian Epic, up as collateral. On March 12, a day before the global suspension of cruising was announced, they extended their credit line to $1.5 billion for working capital.
Currently, Norwegian is spending approximately $150 million per month to keep their ships in operating order.
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Using vessels for collateral isn’t unheard of in the cruise industry. In the past, Norwegian has put up ships in a similar fashion, including Norwegian Pearl, Norwegian Gem, Norwegian Sun, Norwegian Spirit, Norwegian Star and Norwegian Jewel.
Given that Carnival Corporation (CCL) has 105 ships across their brands — including Holland America Line and Princess Cruises, among others — it’s not surprising that they are burning through the most cash. It’s reportedly costing Carnival approximately $900 million per month to keep their ships afloat, despite there being virtually no revenue coming in.
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In late-March, Carnival Corporation borrowed $4 billion in secured loans at a 12% interest rate, and raised an additional $2 billion through a new issuance of common stock and loans.
In addition, the Kingdom of Saudi Arabia recently purchased 43.5 million shares of Carnival Corporation stock through its Public Investment Fund, giving the organization an 8.2% stake in the company.
Royal Caribbean Cruises Limited
Meanwhile, Royal Caribbean (RCL) is reportedly burning through $400 million per month while their ships are docked. The company has already tapped $2.2 billion in short-term debt to weather the financial storm. Like its peers, the company said they are taking necessary steps to reduce their 2021 capital operating and expenditure expenses.
In mid-April, the company laid off 26% of its workforce.
Given the current state of the cruise industry and the amount of uncertainty on the horizon, one thing is certain, cash is needed to keep these companies afloat.
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