Norwegian Cruise Line (NCL) is considering new funding and possible bankruptcy protection due to business losses triggered by the coronavirus pandemic.
The company’s filing with the Securities and Exchange Commission (SEC) on Tuesday (May 5) indicated that its accounting firm had "substantial doubt" about NCL's ability to stay in business.
The company said in the filing that although it was in compliance with all debt agreements as of March 31, it might need waivers. Short of amending credit agreements, NCL said it could be forced to default, which would put it at risk of seeking bankruptcy protection.
Working in its favor is a $400 million investment in the cruise line’s subsidiary, NCL Corp, by the private equity fund L Catterton.
“We are pleased to execute this agreement with L Catterton, the largest and most global consumer-focused private equity firm in the world,” said Norwegian CEO Frank Del Rio in a statement.
The company is also looking to raise $350 million from a public offering of ordinary shares, with an option to purchase up to $52.5 million of additional ordinary shares, according to another company statement.
The L Catterton investment is contingent on the company raising at least $1 billion from other investors.
“The cruise industry has been very resilient over a long period of time, driven by strong secular tailwinds and a high level of guest satisfaction. People enjoy cruising, with many guests taking multiple voyages over time. 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,” Scott Dahnke, global co-chief executive officer of L Catterton, said in a press release.
The cruise line also said in another statement that it is proposing to sell $650 million in a private offering of exchangeable notes.
The Centers for Disease Control and Prevention (CDC) last month extended its No-Sail Order until July 24. Despite the pandemic, 2021 reservations for cruises are up 40 percent over 2019. Rescheduled canceled bookings due to the coronavirus account for 11 percent of the 2021 reservations.