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RCI bankruptcy possibility - deposits and FCCs


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On 3/14/2020 at 10:11 PM, MoniMommy said:

I wonder why Royal is more likely to go bankrupt than NCL or Carnival?

NCLH is probably the weakest, RCL spent a lot of money last year on stock buy backs and increased their debt significantly.  As both NCLH and RCL have lower cash reserves and higher debt to equity ratios than CCL.  They also have substantially smaller access to revolving credit accounts.  Both NCLH (550 million) and RCL (850 million) tapped their revolving accounts last week.  CCL's has a revolving equity account 3 billion which they announced that they are tapping today.

 

So one would expect NCLH to go first, then RCL, followed by CCL if it gets to that.  Would expect it to be more of a wipe out of shareholders, with debt being restructured and paid with equity in the restructured company. Similar to what some of the major airlines have done.  I doubt that they would touch customers (deposits or credits) because if they did it would be the end of that company.

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1 hour ago, Oceansaway17 said:

 

and they did eventually pay back the gov't.  was a good decision.

And a lot of the money was not repaid as it bailed out pension funds and unions.  Plus the government was playing games with the stock prices they were using in the repayment figures.

 

Not only is the cruise industry not American companies they don't have a super strong union to grease the wheels to get a bailout through since hardly any of the workers are U.S citizens.

 

 

 

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22 hours ago, sfaaa said:

They don't? Do you know how much stuff cruise lines buy from US suppliers year round? And then there are economic spin offs associated with local taxes, hotels, restaurants,  airlines, taxi and travel industry retailers that employ many American workers. 

However, those spins offs are mostly in tourist areas, Florida, LA, SFO, Seattle.  The industry could go away and the tourist industry in those areas would still remain.  Maybe a bit slower, with hotel prices a bit cheaper (primarily in southern florida) but would not be death of the tourist industry in those areas.  As much as the CLIA tries to make a build up their numbers.

 

Lots of other places for the money to go with a bigger impact.

 

With that said even if a BK the cruiselines would probably not go away, instead the BK would mean a financial restructuring with shareholders getting wiped out, the debt holders getting equity in the restructured company, probably a hold on new builds, almost certainly some of the older ships retired.  However, the customers would probably remain whole with both deposits and credits.  If those are touched then the cruise lines would be dead.  As such the ancillary businesses would not be impacted.

 

If any help is offered it would be in the form of loan guarantees or lender of last resort, maybe in a BK.  However, in this case, unlike GM you do not have a big union to take care of.  So congressional support would seem to be limited to FL, CA, WA, AL and maybe a couple of others states with ports.

Edited by npcl
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1 hour ago, Oceansaway17 said:

 

and they did eventually pay back the gov't.  was a good decision.

While the Government did make money of the bank bailout portions, they lost money on the bailout of GM.  Also that bailout was a bit unusual in that the Union received priority over the debt holders, somewhat in conflict with US bankruptcy law.  It was only done that way because the WH indicated that they would not provide GM with the bailout money unless the Union was given priority.

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On 3/15/2020 at 5:39 AM, Borat said:

So for this cruise that was just cancelled for me, better off getting 100% refund as opposed to 125% FCC? Even if I have a cruise booked for the summer? Not really sure how realistic bankruptcy is at this point 

Take the money and run. 

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On 3/15/2020 at 8:18 AM, rimmit said:

The fact that RCL just increased their liquidity by $550 million is not fake news.
 

The fact they have 9 billion in long term debt is not fake news.

 

The fact they only had 244 million cash on hand is not fake news.

 

They increased the credit line to half a billion dollars.  A prudent business move to make sure they do not run out of operating cash.  Not necessarily a signal of bad financials in of itself.  Abd they got a good deal, LIBOR + 0.8% if I recall correctly.

 

Look at the flipside- their creditors would have to be complete morons to give them credit if they were in such dire straits.  Possible, but anything is possible.  A more likely explanation is  short sellers  😏

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11 minutes ago, mpk said:

 

Look at the flipside- their creditors would have to be complete morons to give them credit if they were in such dire straits.  Possible, but anything is possible.  A more likely explanation is  short sellers  😏

 

Old adage:  when you owe a little the bank owns you, when you owe a lot you own the bank.  Banks realize letting cruise lines go under diminishes their chance of eventually being repaid.  So to protect their position they hold their noses and lend more.  

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Even with all the FCC stuff going on, they are going to take quite a hit on returning the taxes and port expenses for cancelled cruises.  Don’t think they would try to add that as part of the FCC seeing how I don’t think FCC can be used to pay that for a future cruise.  Hopefully they kept that in a separate account.  

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On 3/15/2020 at 9:01 PM, LMaxwell said:

What we do know is we are in for a health crisis and world economic crisis that I don't think anyone alive has experienced or can predict the outcome of. 

 

There is going to be wholesale socio-economic change on a scale I don't think any of us can understand or process yet.  

 

I wish there was a "sad" button.... "like" doesn't seem appropriate in the circumstances....

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On 3/15/2020 at 2:56 PM, sfaaa said:

If CCL goes down, so are the creditors. Go ahead and pull the plug.

 

 

agreed, their creditors are the ones that should be really nervous.   anyone want to buy a huge depreciating maintenance sucking asset for an industry struggling? lol

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3 hours ago, mpk said:

 

They increased the credit line to half a billion dollars.  A prudent business move to make sure they do not run out of operating cash.  Not necessarily a signal of bad financials in of itself.  Abd they got a good deal, LIBOR + 0.8% if I recall correctly.

 

Look at the flipside- their creditors would have to be complete morons to give them credit if they were in such dire straits.  Possible, but anything is possible.  A more likely explanation is  short sellers  😏

Depends upon the terms of the loan. A credit line of half a billion is not very much. If the terms put it first in line of the debt holders it can be a good idea even in case of a BK.

 

The following is from RCL's feb 22 10k filing

 

Total Current Assets  $1.162 billion, including cash and cash equivalents of 244 million, trade and other receivables of 306 million.

 

Compared to Total current liabilities of 7.952 Billion.  Which includes customer deposits of 3.428 Billion, Accounts Payable of 543 million, Current portion of long term debt 1.187 Billion, Commercial Paper 1.434 Billion

 

With Current Liabilities being 7X Current Assets, with Customer Deposits being 15X cash on hand.  One can easily see why RCL is trying to hold onto the deposits and using FCCs rather than cash refunds.  It also means that without cash flow from ongoing operations they will be in trouble fairly quickly unless they can get some rather large loans.

 

You can also see that 500 million is a drop in the bucket so to speak.

Edited by npcl
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I'm sure many corporations are looking at this Black Swan event as an opportunity to restructure or refinance long term debt as a strategic way to improve the overall financial health of the org.  Airlines have been beaten by the 737max debacle and may also be opportunistic in taking steps to reduce overhead. My very average crystal ball sees M&A activity discussions happening as we speak.  At a minimum, the corps that come out ahead will have learned to structure liability more efficiently (like the banks supposedly did).

Edited by DoubleGG
typo
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3 minutes ago, DoubleGG said:

I'm sure many corporations are looking at this Black Swan event as an opportunity to restructure or refinance long term debt as a strategic way to improve the overall financial health of the org.  Airlines have been beaten by the 737max debacle and may also be opportunistic in taking steps to reduce overhead. My very average crystal ball sees M&A activity discussions happening as we speak.  At a minimum, the corps that come out ahead will have learned to structure liability more efficiently (like the banks supposedly did).

However, the credit markets are acting a bit strange right now, even with the feds massive injection of liquidity.  At this point I think they are looking more at survival, not M&A.  As far as the big 3 airlines go, the government would not allow any merger between them, and they will also not let one of those 3 fail.  The good news is no one needs the 737Max capacity now and probably not for quite a while. 

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Just now, npcl said:

However, the credit markets are acting a bit strange right now, even with the feds massive injection of liquidity.  At this point I think they are looking more at survival, not M&A.  

Markets are strange and not reacting similarly to other sell off events.  The capital infusion doesn't seem to have a buoying effect - yet. M&A could be an easier sell to creditors in efforts to get debt refinanced through equity and/or increased long term debt payments.  Creditors love efficient marketplaces and reduced competition.

 

5 minutes ago, npcl said:

As far as the big 3 airlines go, the government would not allow any merger between them, and they will also not let one of those 3 fail.  The good news is no one needs the 737Max capacity now and probably not for quite a while. 

Big 3 will remain no matter what.  I could see one make a play to buy a struggling budget airline to incorporate that brand into it's portfolio.  I was forecasting this before the recent events.  It makes far more sense to own the cattle car than compete with it.  Halo brands could then function as a premium product.  

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Well if current modeling is correct this wont start slowing down till July or August.  Even then we still don't know what the rest of the world will look like.  You might only be able to sail in 1 region at that point.  Would that keep the company afloat.  I doubt it.  If they are financially strained already I would bet they will go under.   They wont go out of business as bankruptcy just mean they will restructure.  I also find it shocking that they made 10.95 billion last year yet they have no money?  Should have 4-5 billion on hand for emergencies.

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15 minutes ago, in rod we trust said:

I hope royal Caribbean go bankrupt  .  don't like them one bit what so ever so wont even think of shedding a tear for them 

and there stock price shares are just dropping by the day . serves them right 

 

Yes, you are correct.  THEIR stock price has declined by the day.  As has nearly every other stock in every market world wide.  Bankruptcy is a tool, not a personal plague - unless you take into consideration all the shareholder's that would lose their money, the employees who could lose jobs, etc.  Not liking a company is pointless contribution to this post.  

Edited by DoubleGG
proper punctuation
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17 minutes ago, in rod we trust said:

I hope royal Caribbean go bankrupt  .  don't like them one bit what so ever so wont even think of shedding a tear for them 

and there stock price shares are just dropping by the day . serves them right 

 

Hey old mate we thought we got rid of you.

come back to the Australian forum we miss you

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20 minutes ago, in rod we trust said:

I hope royal Caribbean go bankrupt  .  don't like them one bit what so ever so wont even think of shedding a tear for them 

and there stock price shares are just dropping by the day . serves them right 

 

I’ll start a new thread for you?

we need some entertainment 

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On 3/15/2020 at 4:01 PM, Ocean Boy said:

You know what I haven't seen posted lately? When someone would get upset with RCI about some issue and say they were going to try some other cruise line or other type of vacation and then someone else would post the obligatory... there are plenty of people to take your place, don't let the door hit you in the a$$.

I know, when the new short Caribbean Cruises for 2020-2022 were released 6 days ago and when I let everyone know on here...nobody cared, or even responded

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25 minutes ago, Chiliburn said:

Hey old mate we thought we got rid of you.

come back to the Australian forum we miss you


I bet they will still build the pier in Brisbane, when they continue to sail.😉

 

If RC declares bankruptcy will they have to payout on the Chloe case I wonder.  That would be substantially less than all the others needing payment. 

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1 hour ago, A&L_Ont said:


I bet they will still build the pier in Brisbane, when they continue to sail.😉

 

If RC declares bankruptcy will they have to payout on the Chloe case I wonder.  That would be substantially less than all the others needing payment. 

Well at the suite party on voyager,radiance and ovation over the last season the chief officers said ! ! ! ! !

Wonder Of The Seas will be based in Australia over our season.

 

Can you imagine that big anchor going through Yarra bay yacht club roof.

 

 

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2 hours ago, Chiliburn said:

Hey old mate we thought we got rid of you.

come back to the Australian forum we miss you

thanks but no thanks   and hopefully rci collapse , ill buy one of there boats and use it as a on the water rental appartments for the uni students 

 

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Shares of Carnival Corp. (ccl) plunged 11% in morning trading Monday, after the cruise operator said it was expanding the pause of its fleet operations to all brands globally, citing the COVID-19 pandemic. The company had previously announced pauses of its cruises by its continental Europe and North American brands. Separately, the company said it has notified its lenders that it will fully draw on its facility agreement, as it borrow about $3 billion under the agreement for six months in order to boost its cash position. "The corporation believes the ongoing effects of COVID-19 on its global bookings and operations will have a material negative impact on its financial results and liquidity," the company said in an 8-K filing with the Securities and Exchange Commission. "The corporation is taking additional actions to improve its liquidity, including capital expenditure and operating expense reductions, and pursuing additional financing." The stock has plummeted 63% over the past month, while the S&P 500 (spx) has shed 27%

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