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Severe Cash Crises Maybe


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Giving cash refunds could be difficult for all the HAL brands.  For example, Princess says they have 50000 guests per month.  If each guest books a $1,000 cruise, this amounts to total cash refunds of $100,000,000.  If future cruise credits are selected, this will still result in obligations to provide cruises in the future with no offsetting revenue.  A cruise line does not hoard this cash until the time of the cruise, it's used to pay operating expenses, to repay long term debt and leases incurred to purchase ships.  Think about this.  It's makes for an interesting discussion at the least.

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Businesses, particularly large businesses have other, non-liquid assets that can be changed into cash. They commonly also have lines of credit, and lastly other avenues for borrowing. That is why many have called for lowering interest rates, so that businesses can deal with cash shortages during crises like this.

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Now that the President and federal government are involved in the cruisedemic things will work out for the cruise lines. I can't remember exactly what President Trump said but he certainly implied that the cruise lines would be helped out with these extra costs so they would not suffer undue hardship.

 

Lets face it once the Vice President and the feds met with the cruise CEOs last Saturday you knew something was in the works and we now know that they spent the week working out the deal and how the cruise lines would respond with the proper logistics (moving ships, disembarking passengers, getting passengers home etc).

 

 Shut your ships down for the 30 days and the Fed will help you out and so they did.

 

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7 minutes ago, YXU AC*SE said:

 

Um, no.   🙂       Scott.  

 

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Except the Prinsendam was sold in 2018, not in 2019.   She was leased back for a year and then transferred over to Phoenix Riessen.

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There had to be some wheeling and dealing going on because the feds did not ask the planes and trains to stop running. There's no way the cruiselines did this to be benevolent.  Regardless this is going to hurt cruiselines and to some extent airlines tremendously in the short term.  But for airlines people are still flying to some of those vacation spots that cruise ships now can't go to for 30 days. They just cancel the number of departures and funnel people so they are running fuller planes. 

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1 minute ago, kazu said:

 

Except the Prinsendam was sold in 2018, not in 2019.   She was leased back for a year and then transferred over to Phoenix Riessen.

 

I know ...  thats why I highlighted the line item.   Still not a whack of cake there though, esp when one is offsetting the opex of  increased berths  w/ KDAM and NADM coming online contemporaneously.    Scott. 

 

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1 hour ago, CruiserBruce said:

Businesses, particularly large businesses have other, non-liquid assets that can be changed into cash. They commonly also have lines of credit, and lastly other avenues for borrowing. That is why many have called for lowering interest rates, so that businesses can deal with cash shortages during crises like this.

As long as they have enough assets you can always borrow. It hurts any business ours were just coming out of our two slowest months of the year. I’m sure we will lose money at least tell June. Makes it really hard to make up for a poor showing five months long. As a owner you either have to use reserves if thats not enough a cash injection is required. They are big  enough that  government assistance will come. 

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Their operating expenses will decrease with them parked but won't disappear. But, they don't have any to just hand out refunds.

What I find funny is we have received 1 email about our May Alaskan cruise out of Seattle.  Cancel by 3/30 and get FCC......stay and get $200 OBC.  Just 1 email.......but I've received at least 3 emails a week telling me about their specials.

Don't think for once their sales department (although reduced at the moment) are not pushing cruises for later 2020 and 2021.  They still want that money coming in.

Robbing Peter to pay Paul?  Nah, just the way the cash flow works.

 

 

Edited by Alibaster McGillicutty
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2 hours ago, conwakr said:

There had to be some wheeling and dealing going on because the feds did not ask the planes and trains to stop running.

 

Umm...wait for it.....

 

"There have been internal discussions about restricting travel to areas in Washington state and other places considered “hot spots” for the virus. It’s unclear how far along they are in implementing them, people familiar with the matter told CNN. 

 

There are also preliminary conversations about halting some air or train travel between some major US cities as a potential additional step going forward." (3/14/2020)

Edited by ShipWalker
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3 hours ago, dag144 said:

... Princess says they have 50000 guests per month.  If each guest books a $1,000 cruise, this amounts to total cash refunds of $100,000,000 ...

Not to put too fine a point on matters, but I believe 50,000 guest refunds at $1,000 each would equal $50,000,000 and NOT $100,000,000.

Edited by avian777
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13 minutes ago, ShipWalker said:

 

There are also preliminary conversations about halting some air or train travel between some major US cities as a potential additional step going forward." (3/14/2020)

 

Good I think it is pointless to put thousands of people on a ship where you can fairly easily keep yourself distanced and put thousands of people on a plane where you are stuffed in like sardines or on a train where you are still close in contact with others far more than on a floating hotel of a cruiseship.  If we, as a country, are sincerely interested in keeping people from moving from region to region or to neighboring countries or even from coast to coast and everywhere inbetween then it has to include all modes of travel. I just had a few friends whose cruise got cancelled just book hotels for a week and hop on a plane to one of their planned cruise stops. I think what happened to the Princess cruise that was caught right in the middle of the virus explosion was like blinders - it is far more than "cruise ships" and more about the movement of people from here to there and the contact that occurs during that process in my opinion.  What might be telling are the results from all the people they quanantined from the other Princess ship . When all the passengers went into quarantine 2 tested positive. It will be interesting to know in the next couple weeks just how many test positive.    

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At the last filing CCL had total current assets of 2.059 billion including 518 million in cash and 444 million in net receivables.

 

Compared to that they had 9.127 billion in current liabilities including 4.735 billion of customer deposits (cruises not yet taken), 1.596 billion in the current amount of long term debt (due this period), short term borrowing 231 million.

 

As you notice the short term liabilities greatly outweigh the current assets.  They will certainly be refunding a substantial portion of the customer deposits (explains why they are willing to give up so much FCC to those that leave the deposits in place). They are also not getting the next round of deposits to replace the current set.

 

This does not even get to the profit/loss on operations.

 

While CCL does have approximately 45 billion is total assets, 4 billion is in goodwill and other intangibles, and 38 billion in property and equipment.

 

So the majority of assets are not very liquid.  Not sure how effectively they will be able to use them as collateral with the entire industry at risk.

 

Now they do have a 3 billion revolving line of credit that had 2.8 billion available when all of this started.  But that will burn through rather quickly.  

 

CCL is in better shape than NCLH and RCL. They are in even weaker shape.

 

As far as a bailout goes that would need to get through Congress, which might not be easy, since it would be bailing out large corporations, not even based in the US.  That have done their best to bypass US law and avoid any US taxes.  Probably the best that one will see might be in the form of loan guarantees or the Government acting as a lender of last resort more than any direct cash.

 

 

Edited by npcl
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5 minutes ago, npcl said:

CCL is in better shape than NCLH and RCL. They are in even weaker shape.

 

The Companies stock performance has shown this and did so as well in the 2008-2009 financial crisis.  RCL fell like a rock.  CCL fell, but not as severely.  I don't think NCLH existed at that time.

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7 minutes ago, conwakr said:

 

Good I think it is pointless to put thousands of people on a ship where you can fairly easily keep yourself distanced and put thousands of people on a plane where you are stuffed in like sardines or on a train where you are still close in contact with others far more than on a floating hotel of a cruiseship.  If we, as a country, are sincerely interested in keeping people from moving from region to region or to neighboring countries or even from coast to coast and everywhere inbetween then it has to include all modes of travel. I just had a few friends whose cruise got cancelled just book hotels for a week and hop on a plane to one of their planned cruise stops. I think what happened to the Princess cruise that was caught right in the middle of the virus explosion was like blinders - it is far more than "cruise ships" and more about the movement of people from here to there and the contact that occurs during that process in my opinion.  What might be telling are the results from all the people they quanantined from the other Princess ship . When all the passengers went into quarantine 2 tested positive. It will be interesting to know in the next couple weeks just how many test positive.    

On a plane you are in close proximity with a relatively few people for a relatively short amount of time.  You can clean any surfaces you come in contact with.  In modern planes the air is HEPA filtered and you can use the air vent over your head to direct air flow, minimizing the flow from even the people around you. On the plane you are only within 6 feet of maybe 15 people.  

 

On a ship, unless to stay in your room the entire time, you are constantly in close contact with a ever changing number of people in the dining venues, the lounges, the theaters, lines while boarding and disembarking the ship, jammed tenders, etc. Over a week cruise one has atleast incidental contact (within 6 feet) at one time or another with a large percentage on the people on the ship.  In that kind of environment URI's spread quite rapidly.  

 

 

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2 minutes ago, johnmik1 said:

The risk managers at Carnival would have thought of all of this and purchased business interruption insurance.It will have a hefty deductible but will pay most of all of these costs.

 

But, did that happen?  I have not read anything in the years of CCL's Annual Reports that indicate that such insurance was purchased.  

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2 hours ago, npcl said:

On a plane you are in close proximity with a relatively few people for a relatively short amount of time.  You can clean any surfaces you come in contact with.  In modern planes the air is HEPA filtered and you can use the air vent over your head to direct air flow, minimizing the flow from even the people around you. On the plane you are only within 6 feet of maybe 15 people.  

 

On a ship, unless to stay in your room the entire time, you are constantly in close contact with a ever changing number of people in the dining venues, the lounges, the theaters, lines while boarding and disembarking the ship, jammed tenders, etc. Over a week cruise one has atleast incidental contact (within 6 feet) at one time or another with a large percentage on the people on the ship.  In that kind of environment URI's spread quite rapidly.  

 

 

This is a perfect point. I would also like to add that, with the possible exception of some QM2 crossings, travel by ship is almost 100% for pleasure rather than transportation. If every mode of travel was shut down and the populace essentially became prisoners in their homes I can’t imagine how people would react. 

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6 minutes ago, johnmik1 said:

The risk managers at Carnival would have thought of all of this and purchased business interruption insurance.It will have a hefty deductible but will pay most of all of these costs.

 

Carnival's most recent SEC 10-K filing states they do not have business interruption insurance.  

 

Insurance

 

a.  General

 

We maintain insurance to cover a number of risks associated with owning and operating our vessels and other non-ship related risks. All such insurance policies are subject to coverage limits, exclusions and deductible levels. Insurance premiums are dependent on our own loss experience and the general premium requirements of our insurers. We maintain certain levels of deductibles for substantially all the below-mentioned coverages. We may increase our deductibles to mitigate future premium increases. We do not carry coverage related to loss of earnings or revenues from our ships or other operations.

 

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2 minutes ago, cruiserchuck said:

 

Carnival's most recent SEC 10-K filing states they do not have business interruption insurance.  

 

Insurance

 

a.  General

 

We maintain insurance to cover a number of risks associated with owning and operating our vessels and other non-ship related risks. All such insurance policies are subject to coverage limits, exclusions and deductible levels. Insurance premiums are dependent on our own loss experience and the general premium requirements of our insurers. We maintain certain levels of deductibles for substantially all the below-mentioned coverages. We may increase our deductibles to mitigate future premium increases. We do not carry coverage related to loss of earnings or revenues from our ships or other operations.

 

As a stockholder,I think a lawsuit against every director who voted to exclude this coverage should be brought!

 

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6 minutes ago, johnmik1 said:

As a stockholder,I think a lawsuit against every director who voted to exclude this coverage should be brought!

 

 

According to its most recent 10-K, Royal Caribbean also does not have business interruption insurance.  Likewise, NCL does not mention business interruption in its discussion of insurance it carries.  It appears that it was common for cruise lines to not carry it.  Up until recently, that probably saved them a lot of money.  

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Go bigger guys,

even if they have/had  the insurance, the question becomes how far is/was the risk spread across the underwriting/re-insurance industry deep pockets. Are they going to be solvent when all the shoes finish dropping

Edited by old mike
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