NCLH Raises “Substantial Doubt” About Its Future

Norwegian Cruise Line Holdings Ltd. (NCLH) announced an investment of up to $400 million by a private equity firm even as it warned of “substantial doubt” about the company’s ability to continue as a “going concern.”

NCLH, which outlined numerous steps to improve its liquidity in an SEC filing May 5, 2020, also said reorganization is a possibility.

“If we are not able to fulfill our liquidity needs through operating cash flows and/or borrowings under credit facilities or otherwise in the capital markets, 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.”

NCLH said the Covid-19 pandemic, the suspension of cruise operations and drop-in advanced bookings “have raised substantial doubt about the company’s ability to continue as a going concern, as the company does not have sufficient liquidity to meet its obligations over the next twelve months, assuming no additional financing or other proactive measures.”

NCLH—which operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises—said it also has or will act to increase liquidity, extend debt maturities, delay obligations and reduce operating costs.

“In addition, the company has been evaluating a number of financing transactions that, if successful, would provide net proceeds which are anticipated to be sufficient to provide the liquidity necessary to satisfy its obligations over the next twelve months, including the maintenance of minimum levels of liquidity required by certain of our debt agreements,” NCLH said in the SEC filing.

“There can be no assurance, however, that the company will be able to complete such transactions and raise sufficient additional capital or take other actions that will provide it with sufficient liquidity to satisfy its obligations over the next twelve months or maintain minimum levels of liquidity as required by certain of our debt agreements.”

Private equity firm L Catterton explained the rationale for its investment in NCL Corp. at this time.

“The cruise industry has been very resilient over a long period of time, driven by strong secular tailwinds and a high level of guest satisfaction. People enjoy cruising, with many guests taking multiple voyages over time,” said Scott Dahnke, global co-CEO of L Catterton.

“The industry has overcome numerous challenges in the past, and we expect that the industry will rebound and prosper with even further enhancements to their already rigorous health and safety protocols in place in the future. We couldn’t be more excited to support the team at Norwegian as they work through this suspension of travel and begin to commence operations after their voluntary suspension of voyages,” Dahnke continued.

Currently, NCLH voyages have been suspended through June 30, 2020, but that may be extended “depending on the status of the CDC No Sail Order, the development of the COVID-19 outbreak and any additional voluntary suspensions we may determine appropriate.”

Other steps NCLH has taken include cutting operating expenses, furloughing 20 percent of its shoreside employees through July 31, reducing salaries by 20 percent, and implementing a hiring freeze. The furloughed employees won’t be paid but will continue to receive health benefits if they’re covered by a company-sponsored plan.

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