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57 minutes ago, Biker19 said:

General mood of the market.

The number one beneficiary of Quantitative easement and the stimulus package is the equity markets. There is a ton of cash floating out there available for investing.  Normally in this would result in spending on expansions, buying new equipment, hiring new workers etc.  But that is not possible or practical during a shut down.  Interest rates are too low to make bonds attractive.  Money needs to go somewhere.  While the prudent thing would be to use it first to reduce debt, that is unlikely when the debt has such a low interest rate.   Hence money is flowing to equity markets and causing inflation of stocks.  

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I know its unlikely, but the fact the stock went up today somehow reminds me of the housing market fall, but when it didn't fall when it should have nose dived. All in all, this could be just a delay of the inevitable.

 

Yep I watched the Big Short again... lol

Edited by csnarpy
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1 hour ago, csnarpy said:

Yep I watched the Big Short again... lol

 

Random note... the Big Short guy just bough a whole bunch of GameStop stock, apparently trying to trigger a short squeeze ahead of a proxy fight that's coming up. Even though pretty much everybody agrees GameStop is dead company walking, the stock price is skyrocketing. Sometimes the market is all about gambling and a big game of pass the potato, not having anything to do with the company's intrinsic value.

 

Not that I"m making the comparison to RCL or anything 🙂

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If anyone is interested, financial resources such as Seeking Alpha have recently made dispassionate evaluations of RCL stock.  The hard numbers show that today the assets of RCL are worth far, far less than it's liabilities.  More ominously, RCL's recent, high-cost loans surely have covenants that can force bankruptcy (if they don't, you must think those cold-blooded lenders have suddenly become Little Bo Peep's).

 

I more than doubled my money several weeks ago buying then selling RCL when there was the potential for a bailout in the air.  That does not exist today.

 

I may again risk pocket money if RCL gets close to $20 but it I won't see it as investing.  It will be the same as setting a couple of black chips on the pass line in Vegas.  At least there I get a free drink and a wink from the cocktail waitress.

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11 minutes ago, Wolf 8 said:

More ominously, RCL's recent, high-cost loans surely have covenants that can force bankruptcy (if they don't, you must think those cold-blooded lenders have suddenly become Little Bo Peep's).

 

It is not in a lenders best interest to force bankruptcy.  

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16 minutes ago, ed01106 said:

 

It is not in a lenders best interest to force bankruptcy.  

 

Actually, those covenants specify the point when the borrower's deterioration triggers bankruptcy.  Those same lending terms also prioritize the lenders for being made whole during bankruptcy proceedings.

 

You are correct in the sense that lenders always hope to enjoy being fully repaid with the agreed upon interest.  But loans to desperate companies like RCL include protections to assure, one way or another that the lender's will recover their investment. 

Edited by Wolf 8
typing error
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26 minutes ago, ed01106 said:

 

It is not in a lenders best interest to force bankruptcy.  

 

Old saying (paraphrase)... if you owe somebody a hundred dollars, they have you over a barrel. If you owe somebody a hundred million dollars, you have them over a barrel. 

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1 hour ago, Wolf 8 said:

 

Actually, those covenants specify the point when the borrower's deterioration triggers bankruptcy.  Those same lending terms also prioritize the lenders for being made whole during bankruptcy proceedings.

 

You are correct in the sense that lenders always hope to enjoy being fully repaid with the agreed upon interest.  But loans to desperate companies like RCL include protections to assure, one way or another that the lender's will recover their investment. 

 

Good point.

 

And they will have to sell assets to cover the debt.

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2 hours ago, ed01106 said:

It is not in a lenders best interest to force bankruptcy.  

 

1 hour ago, steveru621 said:

And they will have to sell assets to cover the debt.

 

I believe it was mentioned several times (document posted?) that RCL gives as collateral to Morgan Stanley all assets of all their other cruise lines that are not RCI ships... I believe that means in event of bankruptcy Morgan Stanley would get anything/everything related to Celebrity, Azamara, etc. So lend out $2.2 billion ... $2,200,000,000 ... at a whopping 12% and in default receive about $40,000,000,000 ... 40 billion ... in assets & ships. Win win for the lender from what I can see.

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11 hours ago, Hoopster95 said:

 

 

I believe it was mentioned several times (document posted?) that RCL gives as collateral to Morgan Stanley all assets of all their other cruise lines that are not RCI ships... I believe that means in event of bankruptcy Morgan Stanley would get anything/everything related to Celebrity, Azamara, etc. So lend out $2.2 billion ... $2,200,000,000 ... at a whopping 12% and in default receive about $40,000,000,000 ... 40 billion ... in assets & ships. Win win for the lender from what I can see.

That is not how it works.  
 

1. If liquidated those assets would sell for considerably less than $40b

 

2. MS would get priority on the proceeds of the assets, up to the amount owed.  If anything remained it would be divided among other debt holders.  

 

3. This is also assuming that there aren’t existing debt holders with a security interest in those assets (doubtful). 

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Sold my remaining RCL and CCL stock this morning - my personal view of the recovery for the cruiselines has changed for the worse, so I will take my ~20% return over 4 weeks and sit on the sidelines for now, ready to jump back in if warranted.

 

Having originally been of the opinion that some return to cruising would begin July/August -  I am now having difficulty seeing cruises restarting within the next 6 months - and there is so many variables at play, I fully expect cruise stocks to retest recent lows and even then, I can't say I would jump back in in the absence of a more positive outlook for a return normality.

 

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At this point, IMHO, the only thing that will save the cruise lines are outside companies.  Maybe Disney, American Express, or some white knight with an unexpected offer.  Most likely anyone wishing to get into the cruise industry will buy the ships at fire sale prices after the bankruptcy.  RCI will restructure and move on with a much smaller fleet.

 

The debt load will crush them sooner or later.

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I have been watching the stock for RC and also NCL and Carnival. I wish I would have bought back when it went down to $20 because at this point I could have sold and doubled my money. I'm still waiting to pull the trigger and not sure when (or if) I want to jump in at this point. I wouldn't be doing it for any OBC or dividends and certainly not doing it with money that if I lost it then it would devastate my wallet. Merely for the thrill (and hopes) that I could make an extra buck (or course you never know...and once again I'm kicking myself for not jumping in when it was so low and now doubled what that would have been). I haven't been buying and selling on the market for many years and I'm a little rusty...but, thinking about jumping back in again with several "affordable" stocks. 

 

I really hope the cruise lines recover and not file bankruptcy. I can't wait to get back to cruising but I feel like it's going to be quite some time before that happens. 😞 

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I wanted to own RCL since last year when I took my maiden cruise voyage. $120 was too rich for me at the time. Everything was too rich for me on the market. An earlier message here by a more knowledgeable shareholder offered a piece of historical fact that in 2009 stock traded at 1/6 of previous highs. That discussion was back in February when stock was over $70. So I set my limit buy at $22.50. Orders got filled quicker than I expected. I intended to keep shares happily ever after. However, what happened over the last month make me more worried than before. Investors are still way too giddy. I sold 1/3 of my RCL holding when I doubled my money way too quickly. I sold my remaining position yesterday. Not quite a double but literally years of normal stock appreciation in a solid company achieved in four weeks.

The travel industry is on ice. Yesterday CNBC's interview with the chair of Expedia was extremely grim. I now put a 40% chance that my end-of-September cruise in Europe might not happen. Two weeks ago I was 100% certain that ships will sail everywhere as of August 1st.

 

I still have over 90% confidence that RCL won't go the bankruptcy way to get themselves out of current predicament. However, I also have a lot less confidence in the ability of global economy to weather pandemic with just a single-digit decrease in GDP. When I apply these theories to RCL then I don't feel that I'd be willing to buy shares at $22.50. I think that with what is known now, acquisition price in high teens is a safer bet. I do already have limit buy orders in place at those levels. If that doesn't happen then I still should be able to buy stock at most in the forties in six months time after a couple of disastrous quarterly releases.

I'm posting this here so that I can check back at the end of the year to analyze where I was mistaken in my own ideas at this time.
 

 

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On 4/14/2020 at 4:41 PM, zekekelso said:

 

Old saying (paraphrase)... if you owe somebody a hundred dollars, they have you over a barrel. If you owe somebody a hundred million dollars, you have them over a barrel. 

Not if they have 100 billion dollars, then it is a rounding error.

 

Besides the bond holders, will most likely get shares in the reorganized company.  I have no doubt that the cruise lines will declare BK at some point. The issue is that they cannot do it too soon.  There needs to be some certainty to when they will be able to sail again prior to doing so.

Edited by npcl
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I have been in RCL at about 26 and out at 44.  Only 500 shares, so no big deal.  I have been trying to wrap my head around RCL debt and value of ships.  The recent 10-K shows the following debt in millions:

 

Senior notes $1,746

Secured senior notes 663

Unsecured term $2,807

Unsecured revolver $165

Commercial paper $1,434

USD unsecured term $3,520

Euro unsecured term $677

Financed leases $230

 

Total 11,242

 

Net property and equipment $25,467

 

Now creditors are all in different positions.  It appears from the 10K that very little of the debt is secured by ships, although I believe debt taken on to increase liquidity since the 10K does have ships as collateral.  So, the question is what are the value of these ships in the event of liquidation?  If creditors believe there is large value, then they will not rush to put RCL in banktrupcy.  On the other hand, if they are worried about the value then perhaps some creditor will act precipitously and start a stampede.

 

I would think, since the P&E is net of depreciation of some $10,000, that RCL's assets are sufficient to allow it to go for some time in the future and give creditors reason to be confident.  Anyone agree or disagree?

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1 minute ago, partiamo said:

I have been in RCL at about 26 and out at 44.  Only 500 shares, so no big deal.  I have been trying to wrap my head around RCL debt and value of ships.  The recent 10-K shows the following debt in millions:

 

Senior notes $1,746

Secured senior notes 663

Unsecured term $2,807

Unsecured revolver $165

Commercial paper $1,434

USD unsecured term $3,520

Euro unsecured term $677

Financed leases $230

 

Total 11,242

 

Net property and equipment $25,467

 

Now creditors are all in different positions.  It appears from the 10K that very little of the debt is secured by ships, although I believe debt taken on to increase liquidity since the 10K does have ships as collateral.  So, the question is what are the value of these ships in the event of liquidation?  If creditors believe there is large value, then they will not rush to put RCL in banktrupcy.  On the other hand, if they are worried about the value then perhaps some creditor will act precipitously and start a stampede.

 

I would think, since the P&E is net of depreciation of some $10,000, that RCL's assets are sufficient to allow it to go for some time in the future and give creditors reason to be confident.  Anyone agree or disagree?

Better off looking at current assets vs current liabilities.  The issue is not total assets vs debts it is cash flow over the next 18 months.

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I understand that a stressed company has to have liquidity to see it get back to profitability.  I think RCL has pulled together sufficient liquidity to get it to September and probably December.  However, whenever I look at a stressed company I also take into account their debt and liquidation value in the event that some creditor gets antsy and leaves the reservation.  Believe me, I have seen that happen.

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2 minutes ago, partiamo said:

I understand that a stressed company has to have liquidity to see it get back to profitability.  I think RCL has pulled together sufficient liquidity to get it to September and probably December.  However, whenever I look at a stressed company I also take into account their debt and liquidation value in the event that some creditor gets antsy and leaves the reservation.  Believe me, I have seen that happen.

Considering that the entire industry is in danger, the value of a cruise ship on the market is pretty close to scrap value. The reported numbers are pretty meaningless. There will be no buyers, until there is a clear idea of when the industry will restart.  As such, while the cruise lines will restructure, unless this ends surprisingly soon.  They cannot until they have a path to recovery.  As a result the debt holders will not force them into BK until there is a path.  The debt might be sold at a discount, but a BK at the wrong time will leave debt holders with pennies on the dollar, BK at the right time leaves them with equity in cruise line with the potential for success. Probably a much smaller cruise line. I expect that as many as half of the existing cruise ships will not sail again with passengers for their existing owners.

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1 hour ago, npcl said:

Better off looking at current assets vs current liabilities.  The issue is not total assets vs debts it is cash flow over the next 18 months.

In a default situation where certain business performance or going concern conditions are not met, long term debts can suddenly become payable on demand. 

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10 minutes ago, sfaaa said:

In a default situation where certain business performance or going concern conditions are not met, long term debts can suddenly become payable on demand. 

Only if the debt holders feel that it will give them the best chance to get paid.  In this case if there is no clear path forward forcing default would give them pennies on the dollar.  On the other hand if their is a path forward, they can make more money when that occurs.  Timing is everything in a default.

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