MIAMI — Norwegian Cruise Line Holdings, the parent company of NCL, Oceania Cruises and Regent Seven Seas Cruises, has updated its filing with the U.S. Securities and Exchange Commission with what amounts to a dire warning about its solvency amid the coronavirus crisis.
Amid the financial-speak typical of an SEC filing, NCLH outlines the circumstances facing the cruise company as the cruise industry looks ahead to its third month of operation suspensions.
NCLH says the temporary halt to sailings worldwide and the almost complete loss of forward bookings, as well as other financial obligations, have cast doubt on whether or not the company can continue “as a going concern”.
Summing up the situation brought on by travel restrictions amid the COVID-19 pandemic, NCLH says in its filing that “the factors described above, in particular the suspension of cruise voyages and decline in advanced bookings, as well as debt maturities and other obligations over the next year, and the fact that management’s plan to obtain additional financing has not yet been completed, 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 made the filing with the SEC today, saying it wanted to provide an update about its liquidity and management’s plans in anticipation of additional financing transactions.
“We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of such an outbreak,” says NCLH.
NCLH says that as of April 24, 2020, “advanced bookings for the remainder of 2020 were meaningfully lower than the prior year with pricing down mid-single digits. Booking trends indicate demand for cruise vacations in the medium and longer term with the booked position for 2021 slightly lower compared to same time last year at pricing that is down mid-single digits versus prior year.”
The company says that it expects to be required to pay cash refunds of advanced ticket sales with respect to a portion of our cancelled cruises. “All three brands [NCL, Oceania Cruises and Regent Seven Seas Cruises] have instituted programs for guests on canceled 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.”
As of March 31, 2020, “the Company had US$1.8 billion of advanced ticket sales. This includes approximately $850 million for previously announced voyage cancellations through June 30, 2020 where guests have the option of either a future cruise credit or a cash refund and approximately $350 million for voyages scheduled for the remainder of 2020.
“Depending on the length of the suspension and level of guest acceptance of future cruise credits, we may be required to provide cash refunds for a substantial portion of the balance, as guests on cancelled sailings were automatically awarded future cruise credits and have the opportunity to contact us to request a cash refund rather than future cruise credits.
“As of April 24, 2020, approximately half of the guests who have had their voyages cancelled and who have contacted us have requested cash refunds. There can be no assurance that the percentage of passengers that accept future cruise certificates over cash refunds will remain in this range as the number of cancelled voyages increases. Guests who have accepted future cruise credits may utilize those credits until December 31, 2022.
“The use of such credits may prevent us from future cash collections as staterooms booked by guests with such credits will not be available for sale, resulting in less cash collected from bookings to new guests; however, we may benefit from the onboard revenue from these guests. We continue to take future bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings which will offset a portion of the outflow from expected cash refunds.”