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NCLH unveils plans to cut expenses, address liquidity and balance sheet matters

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 27 April 2020 27 April 2020

Norwegian Cruise Line Holding Ltd (NCLH), the world’s third largest listed cruise shipping group, has unveiled plans to cut expenses and to address liquidity and balance sheet related matters in the aftermath of the COVID-19 outbreak

“The Company has swiftly undertaken several proactive measures to mitigate the financial and operational impacts of COVID-19. This action plan includes cost mitigation and cash conservation levers the Company has deployed to preserve and enhance liquidity and is part of an overall plan that, as described below, also contemplates additional sources of capital and liquidity,” NCLH said in a statement.

These measures include:

Reduced Operating Expenses

Meaningfully reducing cruise operating expense which includes reducing expenses associated with crew payroll, food, fuel, insurance and port charges.

The majority of ships in the Company’s fleet are currently transitioning to cold layup.

Significantly reducing or deferring marketing expense in the first half of the year.

Introduced a temporary shortened work week and reduced work hours with commensurate 20% salary reduction for shoreside team members.

Paused employer 401(k) match contribution.

Implemented a company-wide hiring freeze.

Suspended travel for shoreside employees across the organization.

The Company anticipates estimated ongoing ship operating expenses and administrative operating costs combined to range from approximately $70 million to $110 million per month during the suspension of operations.

Reduced Capital Expenditures

The company has identified approximately $515 million of capital expenditure reductions, comprised of:

$345 million, or a nearly 70% reduction of non-newbuild capital expenditures for the remainder of 2020.

Approximately $170 million in expected reduced and deferred capital expenditures for newbuilding related payments through March 31, 2021 which the company is currently finalizing. Upon completion, the company’s next newbuild related payments would not be until April 2021.

Improved Debt Profile

Export Credit Agencies (ECA) and Norwegian’s ECA lenders are working to finalize an industry wide initiative to grant a 12-month debt holiday to provide interim debt service relief for amortization payments and financial covenants.

The company has approximately $540 million of ECA-backed amortization payments due over the next 12-months, of which approximately $385 million of payments related to guaranteed financing by Euler Hermes Aktiengesellschaftthe official ECA of Germany, have already been deferred through April 2021 and associated credit agreements have been amended to incorporate this Debt Holiday. The Company is in the process of finalizing the deferral of the remaining approximately $155 million of payments through March 31, 2021 with its other ECA lenders.

Contractual optionality to extend $230 million Pride of America term loan by one year to January 2022.

Working with lenders and evaluating additional options available to defer or refinance certain of the Company’s existing debt profile.

Balance Sheet and Liquidity Position

In response to COVID-19, the Company secured a new $675 million revolving credit facility on March 5, 2020 and fully drew down on this new facility as well as its existing $875 million revolving credit facility beginning on March 12, 2020 for a total of $1.55 billion.

As at March 31, 2020 the Company’s total debt position was $8.6 billion. As outlined in the Improved Debt Profile section above, the Company is in negotiations to defer a substantial portion of the maturities due within the next twelve months. At March 31, 2020 the Company’s cash and cash equivalents were $1.4 billion and the Company believes it was in compliance with all debt covenants.

These cash conservation measures and the potential deferral of near-term debt amortization and newbuild related payments1, the company now estimates its cash burn to be on average in the range of, approximately $110 million to $150 million per month during the suspension of operations.

This includes ongoing ship operating expenses, administrative operating expenses, interest expense and expected necessary capital expenditures and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings.

 The company is also currently evaluating several additional strategies to enhance its liquidity position. These strategies may include, but are not limited to, pursuing additional financing from both the public and private markets through the issuance of equity and/or debt securities, which may include secured debt. The timing and structure of any transaction will depend on market conditions.

 “Our quick action to proactively and aggressively implement initiatives to preserve cash and enhance liquidity in this uncertain and fluid environment puts us in a stronger position to withstand the adverse financial effects of COVID-19,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “We will not only benefit from the actions taken to strengthen our liquidity profile but will also benefit from a period of reduced capital expenditures with no newbuild deliveries until at least mid-2022.  We will continue to evaluate all additional options to enhance liquidity.”

Outlook

The meaningful and rapidly evolving impacts from the pandemic, the temporary suspension of sailings globally and the uncertainty and fluidity of the ongoing situation, the company withdrew its first quarter and full year 2020 guidance provided earlier this year on its earnings call on February 20, 2020, which excluded known and unknown impacts from COVID-19.

As a consequence of these known and unknown impacts, while the company cannot estimate the impact on its business, financial condition or near- or longer-term financial or operational results with certainty, it expects to report a net loss on both a U.S. GAAP and adjusted basis for the quarter ended March 31, 2020 and the year ending December 31, 2020.

The COVID-19 outbreak has had a significant impact on the company’s financial position and results of operation. If the temporary suspension of sailings is further extended, the company’s liquidity and financial position would likely continue to be significantly impacted.

 

 

Wärtsilä develops expedition cruise ship design for Chinese owner

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 23 April 2020 23 April 2020

The technology group Wärtsilä’s in-house ship design capabilities have been recognised with an order to develop a customised design for up to six new luxury expedition cruise vessels capable of carrying 200 passengers, the Helsinki based company said in a statement.

The ships will be owned and operated by Amundsen Expeditions and are targeted primarily at the growing Chinese market. The design order with Wärtsilä was signed in the third quarter of 2019. “The ships are designed to operate efficiently in both tropical and polar waters.

Because of the harsh environment and often remote location of the cruise destinations, special attention has been given to ensuring the ships’ operational reliability,” says Markku Miinala, General Manager, Ship Design Sales, Wärtsilä Marine.

The Wärtsilä team has worked in close cooperation with Amundsen Expeditions to develop a concept that meets the owner’s precise specifications and requirements. The vessels are designed to be fitted with a complete package of Wärtsilä solutions, including Wärtsilä 32 engines, selective catalytic reduction (SCR) systems for the abatement of nitrogen oxide (NOx) emissions, electric propulsion, the Wärtsilä Nacos Platinum bridge system for navigation and communication, as well as Wärtsilä automation solutions.

The eventual supply package is likely to be supported by a 10-year maintenance agreement, which will ensure the safety, reliability, and efficiency of the vessels, while providing cost assurances for budgeting purposes.

“The design emphasises Wärtsilä’s strength as a complete solutions provider. Our one-stop-shop capability, which allows the ship design to be combined with a complete package of onboard solutions, enables a truly integrated design. This results in the various onboard systems working seamlessly in harmony to provide the optimal level of reliability and efficiency, while keeping cost and time considerations under control,” says Maikel Arts, General Manager, Cruise Business, Wärtsilä Marine.

“We have great respect for Wärtsilä’s experience and broad portfolio of high quality solutions. This is important to us as these cruise ships are highly complex and require advanced design expertise. The cruise ships will feature all outside guest cabins, presidential suites, winter gardens and the latest environmental equipment. We appreciate Wärtsilä’s ongoing support in this project,” says Captain Rajko Zupan of Amundsen Expeditions, who has been actively involved in the ship’s design since the inception of the project.

Wärtsilä is a leading supplier to the cruise industry. With a network of dedicated experts available worldwide, the company can support its cruise customers wherever they operate. In addition to its portfolio of efficient and reliable solutions, Wärtsilä also offers the latest in ship design, cyber-security, enhanced sustainability performance, and future-proof operations.

NCLH said to be looking at PIPE deal to raise equity

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 20 April 2020 20 April 2020

Norwegian Cruise Line Holding (NCLH), the world’s third larges listed cruise shipping group, has hired Goldman Sachs, the investment bank, to raise equity through private investment in public equity (PIPE) deal, Reuters reports.

“Among the options Norwegian Cruise (Holding) is considering is a stake sale known as private investment in public equity (PIPE), the sources said. The company is in talks with several private equity firms about a PIPE deal, the sources added,” Reuters reported.

Commenting on the news, the UK based investment website The Motley Fool said such a deal would be quite similar to what Carnival Company & plc did recently, raising a huge equity stake from investors in early April.  

“Of course, Carnival also raised even more in debt than it did in equity. In doing so, Carnival didn't dilute its shareholders as much, but the company carries a heightened risk due to its new debt burden,” the report said.

“Should Norwegian go the all-equity route, it might dilute shareholders even more, but it could be less risky than taking on lots of high-yield debt as Carnival has,” it continued.

 

Holland America Line reflects on history and resilience on Its 147th anniversary

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Written by Teijo Niemelä Teijo Niemelä

Category: Top Headlines Top Headlines

Published: 17 April 2020 17 April 2020

Holland America Line reflects on history and resilience on Its 147th anniversary Holland America Line is commemorating its 147th anniversary Saturday, April 18, 2020, by honoring its rich legacy, taking care of each other in the present and looking forward to its next chapter. With travel paused globally, the premium cruise line is reflecting on the resilience that has been exhibited throughout the company’s history, enduring challenging times many times before and emerging even stronger thanks to loyal guests, dedicated crew and employees, and the support of travel advisors.

Founded April 18, 1873, as the Netherlands-American Steamship Company, the brand has welcomed more than 150 ships throughout the years. A third Pinnacle-class ship, Ryndam, is under construction at the Fincantieri shipyard in Italy and scheduled for delivery in late spring 2021. While the cruise line has paused its global operations through June 30, only one other time in company history did operations cease. During World War II, all passenger voyages stopped, and ships were called to serve in the Allied war effort.

“It’s important during these challenging times to still celebrate important milestones, and our 147th anniversary reminds us that Holland America Line has one of the deepest histories and richest legacies in the cruise industry,” said Orlando Ashford, president of Holland America Line. “We stand on a solid foundation built by those that came before us over nearly a century and a half, and just as they weathered uncertain times, we will as well. Holland America Line will be back taking guests around the world as soon as we can, and we can’t wait to welcome everyone back on board.” Since 1873, Holland America Line has traveled to all seven continents, offered decades of world cruises and explored Alaska for more than 70 years. Each time a new ship joins the fleet it’s a celebration of this legacy and marks the next chapter in the company’s history. Learn more about the company’s history at

 

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To help our loyal guests look forward their next cruise, new short-term Book with Confidence cancellation policies are available for cruise bookings with departure dates through Oct. 15, 2020, and a generous Cancellation Protection Plan (CPP) is always available for purchase right up until the cancellation policy for a booking is in effect. CPP permits cancelling for any reason and provides cash refunds.

Additional offers that feature perks and savings will have cruisers dreaming of travel in 2021 and beyond. A special 147th Anniversary Edition Gift Card is available for a limited time at hollandamerica.com. When purchased by May 31, 2020, a bonus $100 will be added with purchase of a $500 gift card or a $200 bonus with the purchase of a gift card for $1,000 or more.

TOP PICTURE: Stephen Card painting of Nieuw Amsterdam

BELOW: Historical picture of Pier 40 in New York (Photo credits: Holland America Line)