Norwegian Cruise Line (NYSE: NCLH) is the third-largest cruise operator in the world with nearly 9% global market share. The company currently has a fleet of 17 ships and have another 6 in construction. The cruise industry is one of the hardest-hit sectors as the COVID-19 pandemic sends the global economy into a tailspin.
As the pandemic spread across the world, governments have imposed travel bans and cities imposed lockdown to curb contamination. Earlier in the quarter, the CDC (Center for Disease Control) imposed an industry-wide no sail order on cruise operators till July 24th. As you may expect, this was harsh news for cruise operators due to the extremely high cost of operations of the business. In April, management stated that they expect a monthly cash burn of a staggering $110 million a month till operations don’t resume.
The outlook for the sector also looks bleak as social distancing becomes a new norm globally and the practice is impossible to be enforced on a cruise ship with thousands of people on board. The stock is currently trading 80% down YTD at $11 per share.
Last week, a scary SEC 8K filing by the company stating major survival concerns for the company due to debt obligations of $6 billion surfaced online giving investors a reason to panic (Seeking Alpha). The next day management announced that the company had managed to raise roughly $2.2 billion in fresh capital to remain afloat. This includes $400 million of senior equity carrying 7% interest, a $460 million issue of fresh equity, and two additional bond offerings of $1.54 billion. After taking the fresh capital into account, the company now has $3.5 billion of liquidity. (Forbes)
After announcing that the company had secured fresh capital, CEO Frank Del Rio announced that the company now has ample capital to survive 18 months even with zero revenue (Yahoo Finance). The company is expected to release Q1 2020 results on Thursday, analysts predict Norwegian to post a Q1 loss of $3.5 a share. (Barrons)