Norwegian Cruise Line flags “going concern” risk

Written by Nick Blenkey
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A 14-page form 8-K filed with the SEC today by Norwegian Cruise Line’s parent Norwegian Cruise Line Holdings (NYSE: NCLH) paints a grim picture of the impact of the coronavirus on the company and, by extension, most major cruise linings.

In the filing, the company says that says that the ongoing effects of COVID-19 on its operations and global bookings have had, and will continue to have, a significant impact on its financial results and liquidity, and that the negative impact may continue well beyond the containment of the outbreak.

“This is the first time that we have completely suspended cruise voyages, and as a result of these unprecedented circumstances, we are not able to predict the full impact of such a suspension on our company,” says the filing. “In addition, the magnitude and duration of the global pandemic is uncertain. Consequently, we cannot estimate the full impact on our business, financial condition or near- or longer-term financial or operational results with reasonable certainty, but we expect to report a net loss on both a U.S. GAAP and adjusted basis for the quarter ended March 31, 2020 and the year ending December 31, 2020.”

In the filing, the company says that at December 31, 2019, and March 31, 2020, it was in compliance with all of its debt covenants.

“If we do not continue to remain in compliance with these covenants, we would have to seek additional amendments to these covenants,” says the filing.”However, no assurances can be made that such amendments would be approved by our lenders. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which could have a material adverse impact to our operations and liquidity.”

The filing says that “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.”

Elsewhere, the filing says “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.”

In the filing, the company says “The COVID-19 outbreak has resulted in unprecedented operational challenges for the cruise industry generally as well as the company. In addition, the company is in the process of finalizing its goodwill and trade name impairment analysis. The company is therefore unable to file the First Quarter Form 10-Q on its customary schedule. The company expects to file the First Quarter Form 10-Q no later than May 15, 2020.

Access the full filing HERE

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