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Substantial Doubt of 'Going Concern'


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Thanks for facts and keeping on point @cksv.  NCLH has 214.53M shares outstanding with a $2.4B market cap before all this shoring up of their access to financing. So basically if they issue all their ordinary shares in the offering (@$11 each) plus those extra allocated by June, that would be about $460M and existing shareholders will be dilluted by around 19-20%.   I am guessing these newly issued shares will be used for the below notes and Catterton investment, at least I hope because otherwise issuing even more new shares for those would be a significantly larger dilution. 

 

Anyhow, on top of the ordinary shares being issued, they have $1.425B of exchangeable and senior secured notes.  The $750M exchangeable can become shares at a 25% premium (@$13.75) to the ordinary share offering price, so that could be another dilution of around 25% if coming from newly issued shares (granted at a currently unappealing premium price). Unclear if any ordinary stock is involved for the senior notes. The $400M from Catterton can also be exchanged into ordinary shares, so that would be another dilution of probably 10+% if coming from newly issued shares.   

 

Just quick calculations and read through of the press releases, so perhaps I missed some finer points......but my take away is they should be well financed to weather another year of stormy markets BUT it all is being paid for at double digit interest rates and severe dilution of shareholders (albeit, still a better option than bankruptcy), some of which should already be reflective in yesterday's 23% price fall.

 

http://www.nclhltdinvestor.com/press-releases

Edited by pghflyer
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https://www.barrons.com/articles/norwegian-cruise-line-aims-to-raise-1-4-billion-stock-slides-51588689119 

 

A short but good article about the financial situation.  It states analysts can't tell how much cash NCL is burning each month but agree they have 6 to 8 months, before the stock/bond offerings and additional debt they are seeking.  Don't watch the stock price.  Watch news of success in sales of the offerings and any new debt they secure.

 

Success at raising the money needed leaves them in a still vulnerable position.  They will have a lot of debt due in 2024 and double-digit interest and financial covenants to meet to avoid debt being called in.  I work for a company that survived Chapter 11. We had to sell 1/3 of the company to form a new company that was considered viable to be financed going forward. A few years later, we had to file a Going Concern because one large piece of debt was coming due and there was not sufficient cash.  We succeeded to sell a division to raise enough money to pay off one debt and refinance some other. We are hopeful we can remove the Going Concern after 2 quarters (I think).   I offer this as an example of how this all works.

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Less than 20 years ago ncl was in danger of a Carnival takeover.  They had some junk bonds due to Carnival and sold a couple ships and made good on the bonds/avoiding the hostile takeover.  
 

What they’re doing right now makes sense.  They’re one of many companies that raise $ this way.  I know Del Rio is someone to villanize but sounds to me like he’s showing us why he’s in charge.  I remember reading how much these guys are paid in stock. I’d guess he has a strong desire to keep the business afloat and successful.  
 

I have faith that the cruise industry will be different but survive and our economy isn’t on the verge of utter collapse. This virus is nasty but we’re intelligent enough to overcome the obstacles it’s posing.  I know Noro isn’t as deadly as covid-19 but cruise lines wouldn’t survive if you had a great chance of catching noro onboard.  They figured ways to keep noro at bay and they’ll do the same with Covid-19. 

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4 hours ago, pghflyer said:

 Just quick calculations and read through of the press releases, so perhaps I missed some finer points......but my take away is they should be well financed to weather another year of stormy markets BUT it all is being paid for at double digit interest rates and severe dilution of shareholders (albeit, still a better option than bankruptcy), some of which should already be reflective in yesterday's 23% price fall.

 

The whole post was great, I only wanted to comment on this section. And that is to say I will take a 50% haircut as a shareholder gladly since there is an upside if my other option is a 100% haircut with no opportunity for an upside due to bankruptcy, as you mentioned. The 2000-2001 telecom bust and dot con bust was painful.

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16 hours ago, deliver42 said:

So is the story about NCL. This was started by NCL, not the media.

 

You are of course incorrect. The story about NCL by the media was not a proper reading of the SEC filing. The media made up a story that didn't exist based on the filing. They either did it because it sounded sexier or they have reporters sadly lacking the skills to read SEC filings.

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With the equity issuance in place @ $11 and calculating the exchanged-convertible debt 25% premium, looks like NCL will have the ability  to "sustain" for a year+ which may allow them to update their 8K and 10Q for the subsequent events (debt and equity capital raise) and withdraw the 'Going Concern" disclosure.

 

Their 1st quarter 10-Q is expected to report a preliminary first-quarter loss of $1.8 billion to $1.93 billion, compared with a profit of $118.2 million in the same quarter last year. However, it is expected that that includes impairment losses, which include charges off of intangible assets goodwill and trade names, are expected to be between $1.54 billion and $1.66 billion for the quarter due COVID 19.

Edited by Formula280SS
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14 hours ago, Fido Chuckwagon said:

Perhaps, but no way no how does the middle ground involve the resumption of cruising anytime soon.  Cruising was and is a huge vector for this thing.  As we learned from the Diamond Princess way back in February, all it takes is *one* person to infect half of a cruise ship.  Those people then return home and cause outbreaks everywhere.  Cruising absolutely played a huge role in spreading this thing, especially in the Caribbean.

 

Cruise ships were NOT a "huge vector", they were tiny compared to the number of people allowed to travel to and from China even after the virus became known.

 

Out of 3,500+ on the Diamond Princess only 712 got infected, so actually 20%, not 50% (half of a cruise ship).

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On 5/5/2020 at 10:22 AM, tallnthensome said:

They need more than $400 million. That will float them a few more months but that doesn’t even take into consideration the amount of money still owed in cash refunds. This fall season with Hurricanes and a full length season of flu/Corona starting in September will stick a knife in them .

Looks like they caught a big fish, an investor with $2 billion. Avoided the fillet knife. 

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1 hour ago, scottca075 said:

 

You are of course incorrect. The story about NCL by the media was not a proper reading of the SEC filing. The media made up a story that didn't exist based on the filing. They either did it because it sounded sexier or they have reporters sadly lacking the skills to read SEC filings.

 

Both !

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19 hours ago, ECCruise said:

Yep.  There was a LOT of market for Enron.  Until there wasn't.

 

Except Enron cheated, and cooked their books for years.  That's not the case here.  Completely different situation.

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21 hours ago, Fido Chuckwagon said:

Yeah, this.  It’s very likely that FCC’s are worthless or near worthless.  Nobody is going to pay $100 for a $250 FCC right now.  $25 is pushing it.

 

Worthless eh? So I cannot get $500 down on a cruise today with 2 of them?

 

We shall see.

 

NCL just announced  yesyerday they will have enough money for 12 months of no sailing. 

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20 hours ago, Fido Chuckwagon said:

To everyone who thinks NCL survives in some form even if it ends up getting bought by another company, remember that these ships are expensive even just to park and idle and keep maintained.  When this is all over there are going to be *way* too many cruise ships worldwide versus demand.  It’s entirely possible that most of these ships end up mothballed and sold for scrap when the company goes under.

 

What fantasy land are you living in? LOL

 

" possible that most of these ships end up mothballed and sold for scrap"

 

when that date arrives make sure you are well armed and have plenty of ammo

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12 minutes ago, NightOne said:

 

when that date arrives make sure you are well armed and have plenty of ammo

Just looked at my receipt, that date was march 3, guess I was a little head of the curve.

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I have reluctantly  decided to cancel my cruise .  I booked last August...was to sail  this November. Since , way before final payment..at least I will get my deposit back .  Even if NCL is sailing this fall, I do not feel comfortable sailing (-especially with pre existing conditions which put me at risk) .  And the way things are going..not so sure there will be cruising out of NYC in the fall.  The NJ/NY area is under lots of emergency protocols and it will be a very long time before this area is anywhere near "normal".  

 

I am truly disappointed . 

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Well the part that is interesting is that they could do a Chapter 11 reorg and get out of some debt and obligations but not go out of business.  I see that as more likely vs just closing down and liquidating.

They seem to be based in Florida so the usual bankruptcy laws would apply.  It might help get them out of any new ships they were planning on building or at least push them out and who knows what other contracts they had signed for food/fuel?

 

Much like the airlines and other industries have done bankruptcy does not mean the end,  just a change in the debt!

 

 

 

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15 minutes ago, Newleno said:

Just looked at my receipt, that date was march 3, guess I was a little head of the curve.

 

So on March 3rd most of the cruise ships were mothballed and sold for scrap? Good thing the ship I got off on on March 13th was not one of them.

 

Um OK...

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15 minutes ago, Norwegian Cruise Line said:

We are eager to begin welcoming our loyal guests aboard as soon as possible. Please see our recent announcements for more information about our financial position here: http://www.nclhltdinvestor.com/press-releases

 

I appreciate you posting, but I think what many of us would like to hear is when is "as soon as possible."  Is NCL planning to wait until July 27 when the no sail order expires to begin cruising, or perhaps you are working with the CDC to approve a plan prior to July 27, or perhaps you have decided or you feel CDC has decided to wait longer before resuming cruising.

 
I realize that your bookings have fallen dramatically; but until you follow in Carnival's footsteps and convey some specific plans I think your dry well is likely to continue.
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On 5/5/2020 at 9:33 AM, Nclcruise1415 said:

I'm not about to believe every single article that comes from the media. NCL has been able to put off some loans for up to a year on some of their ships and they're currently working different avenues (like many other lines) to protect and increase capital.

 

As much as you like to read the fear mongering articles you can also find articles that are telling what the lines are doing to protect themselves.

 

Hmmm This was Quoted from the Company itself. For once this is real. They have an agreement to receive 400 Million USD IF they can garner another 1 BILLION in funding. This is to sustain them thru. If that funding is not a go then this is a reality for NCL. I am not bad mouthing NCL. I like them. However,,,

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19 hours ago, Fido Chuckwagon said:

Perhaps, but no way no how does the middle ground involve the resumption of cruising anytime soon.  Cruising was and is a huge vector for this thing.  As we learned from the Diamond Princess way back in February, all it takes is *one* person to infect half of a cruise ship.  Those people then return home and cause outbreaks everywhere.  Cruising absolutely played a huge role in spreading this thing, especially in the Caribbean.

Not the Caribbean,, Maybe Japan, Australia but not the Caribbean. 

 

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3 hours ago, steveknj said:

 

Except Enron cheated, and cooked their books for years.  That's not the case here.  Completely different situation.

Completely different, NCL is a paragon of honesty, ethics and virtue!

 

https://people.com/travel/norwegian-telling-employees-lie-customers-coronavirus-protect-profits/

 

https://www.miaminewtimes.com/news/coronavirus-norwegian-cruise-line-leaked-emails-show-booking-strategy-11590056

 

Oh...

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