Products You May Like
TOPLINE
Shares of Norwegian Cruise Line plummeted by up to 20% on Tuesday after the company warned investors that it may be forced to file for bankruptcy as the coronavirus continues to wreak havoc on the cruise industry.
One of the biggest cruise operators in the world could now be facing bankruptcy.
Sam Greenwood/Getty Images
KEY FACTS
In a filing with the Securities and Exchange Commission on Tuesday, Norwegian said there is “substantial doubt” about its ability to continue operating as it faces a liquidity crunch.
The “going concern” is that the cruise operator may not be able to amend its credit agreements, which puts the company at risk of default and bankruptcy.
The coronavirus pandemic has had a “significant impact” on Norwegian’s financial condition and operations, according to the filing.
The cruise operator said that the outbreak “is expected to continue to impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price.”
Norwegian’s stock price, trading near $60 at the end of 2019, has plunged 80% so far in 2020, now trading at just over $11 per share.
The company said it had roughly $6 billion in long-term debt obligations as of December 31, warning that it may “not have sufficient liquidity to meet its obligations over the next twelve months, assuming no additional financing.”
Crucial quote
Norwegian said that if it isn’t able to maintain enough liquidity, “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.”
Key background
Amid widespread shutdowns and lockdowns due to the coronavirus pandemic, the global travel industry has been ground to a halt. Cruise operators, like Norwegian and its competitors Carnival and Royal Caribbean, have been especially hard-hit by the standstill in their businesses. Norwegian had originally suspended its fleets on March 14, along with other cruise operators who did the same—but the shutdown is now extended through at least June 30.
Tangent
Norwegian also separately announced on Tuesday that it had raised $400 million from private equity fund L Catterton.
What to watch for
The company also confirmed that it expects to post a loss in the first quarter; it reports earnings next month.
Further reading
Carnival Will Resume Cruises From Three Ports In August (Forbes)
CDC Extends No Sail Order For Cruise Ships (Forbes)
Norwegian & Royal Caribbean Down 80%. Is Either Now A Good Value? (Forbes)
Cruise Execs Named To President’s Economic Revival Groups (Forbes)
Full coverage and live updates on the Coronavirus