Financial Performance

Norwegian Cruise Line Issues ‘Going Concern’ Alert

With cruise sailings suspended, the company says it may not have sufficient liquidity to meet its debt obligations over the next 12 months.
Matthew HellerMay 5, 2020
Norwegian Cruise Line Issues ‘Going Concern’ Alert

Norwegian Cruise Lines indicated Tuesday it may not be able to stay afloat, citing the effects of the coronavirus pandemic that has shut down the global cruise industry.

The smallest of the three major publicly traded cruise operators said in a regulatory filing that it has experienced “substantial impacts” related to the outbreak, including the suspension of cruises and a decline in advanced bookings.

The crisis, it warned, has “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.”

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Norwegian also announced Tuesday it had raised $400 million from private equity firm L Catterton, but the funding is contingent on management raising another $1 billion from institutional investors.

In trading Tuesday, the company’s shares sank 21.8% to $11.30.

“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,” L Catterton CEO Scott Dahnke said in a news release.

Norwegian, which operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands, had roughly $6 billion in long-term debt obligations as of Dec. 31.

As CNBC reports, “The coronavirus pandemic has brought the global travel industry, and the cruise industry in particular, to a standstill across the world.” The U.S. government has extended its no-sail order for cruise ships until July 24.

Norwegian said it was in compliance with all of its debt agreements as of March 31 and had “taken several measures to improve our liquidity through refinancing existing debt amortization.” It has also identified $515 million in capital spending cuts.

Rival Carnival Cruise Lines has said it will resume some North American sailings on Aug. 1. But Norwegian warned that the cruise suspension may be extended again and it could not predict “when any of our ships will begin to sail again or when ports will reopen to our ships.”

Norwegian Cruise Line via Getty Images