(TAN): Norwegian Cruise Line Holdings Ltd. (together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company”) has reported financial results for the second quarter ended June 30, 2020.
“In recent weeks, we have taken further action to bolster our liquidity position in response to the COVID-19 global pandemic, including our highly successful USD 1.5 billion gross triple-tranche capital raise in July, which we believe positions us to withstand a scenario of prolonged voyage suspensions,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd.
“Our guests continue to demonstrate their desire for cruise vacations in the future. Looking ahead, we made significant progress in our Roadmap to Relaunch with the formation of our Healthy Sail Panel, comprised of globally recognised public health experts, which is tasked with providing recommendations to advance our public health response to COVID-19 and inform us on the development of a science-backed plan for a safe and healthy return to cruising,” Rio said.
Balance Sheet
As of June 30, 2020, the Company’s total debt position was USD 10.3 billion and the Company’s cash and cash equivalents were USD 2.3 billion. The Company believes it was in compliance with all debt covenants.
In July 2020, the Company closed on a series of capital markets transactions to further bolster liquidity and extend its debt maturity profile. As a result of significant demand, oversubscription and the full exercise of the option to purchase additional ordinary shares and partial exercise of the option to purchase exchangeable senior notes, the total amount of gross proceeds were approximately USD 1.5 billion.
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The triple-tranche transaction consisted of (i) approximately USD 288 million public offering of common equity, (ii) USD 450 million 5.375% exchangeable senior notes and (iii) USD 750 million 10.25% senior secured notes, the proceeds of which were used in part to repay the existing USD 675 million short-term revolving credit facility.
Following the recent capital markets transactions, the repayment of the USD 675 million short-term revolving credit facility and customer deposit refunds payable, total pro-forma liquidity is approximately USD 2.8 billion as of June 30, 2020. Total shares issued and outstanding as of July 21, 2020 are 275.6 million.
“We continue to adapt to this unprecedented and fluid environment and take swift and proactive measures to reduce costs, conserve cash and enhance our liquidity profile. Our recent capital raises have enabled us to extend our debt maturity profile and secure additional liquidity providing us with a strong foundation to withstand the impact of COVID-19,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd.
Booking environment
Along with the broader travel and leisure industry, the Company has experienced swift and significant impacts related to the COVID-19 global pandemic which have resulted in voyage suspensions through October 31, 2020.
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All three brands have instituted programmes for guests on cancelled sailings as a result of the Company’s voyage suspension which include offering value-add future cruise credits typically for 125% of the cruise fare paid in lieu of providing cash refunds.
These future cruise credits are valid for any sailing through December 31, 2022. As of August 3, 2020, approximately 60% of the guests who have had their voyages cancelled have requested cash refunds. As of June 30, 2020, the Company had USD 1.2 billion of advanced ticket sales, including the long-term portion, which includes approximately USD 0.8 billion of future cruise credits.
The Company continues to take future bookings and receive new customer deposits and final payments on these bookings.
To provide additional flexibility to its guests, the Company has also introduced a new final payment schedule for all 2020 voyages which requires final payment 60 days prior to embarkation versus the standard 120 days.
COVID-19 action plan
The Company continues to take swift, proactive measures to further mitigate the financial and operational impacts of COVID-19. This action plan includes previously outlined cost reduction and cash conservation levers which include reducing operating and capital expenditures, improving the debt maturity profile and securing additional capital.
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The Company’s targeted monthly cash burn is on average, approximately US 160 million per month during the suspension of operations. This includes ongoing ship operating expenses, administrative operating expenses, interest expense, taxes and expected capital expenditures and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings.
This excludes debt amortization and newbuild related payments which are currently deferred through March 31, 2021. The new monthly cash burn estimate is at the high end of the previously disclosed range due to additional interest expense related to the July capital raise, maintaining more ships in warm layup due to various port requirements and weather restrictions, increased costs associated with fluctuating travel restrictions for crew and additional marketing investments.
Health and safety
In July, the Company announced a collaboration with Royal Caribbean Group to assemble a group of experts, the “Healthy Sail Panel”, which is tasked with developing recommendations for cruise lines to advance their public health response to COVID-19, improve safety, and achieve readiness for the safe resumption of operations.
The panel’s work will be “open source,” and can be freely adopted by any company or industry that would benefit from the group’s scientific and medical insights.
The Company has also successfully completed the safe repatriation of the vast majority of its shipboard team members to their homes around the globe. To date, the Company has repatriated over 21,000 shipboard team members, to over 75 countries, through a combination of chartered and commercial air flights as well as the use of certain of the Company’s ships.
