Viking Private Debt Refinancing

[Hanoj]

https://www.seatrade-cruise.com/finance/viking-refinances-720m-notes-sale

 

Raising capital at a lower interest rate to replace higher rate notes due in 2025. EBITDA still less than half of what it was in 2019, but appears to be trending toward a sound recovery. For example, the rate reduction (13% to 9.125%) will reduce annual debt service interest expense by about $28 million, assuming the new debt is equal to the debt being paid off. And, the reduction in the expected 9.25% rate to 9.125% lowers interest expense by $900K per year, depending on amortization terms.

[HHI Cruiser1]

Does anyone think Viking will relax their final payment requirements with this influx of cost savings?  Or maybe just offset current new ship costs and keep unpopular final payment business policy?  Customer focus would adjust final payment policy, but the balance sheet bottom-line could be focus.

[Heidi13]

7 hours ago, Hanoj said:

https://www.seatrade-cruise.com/finance/viking-refinances-720m-notes-sale

 

Raising capital at a lower interest rate to replace higher rate notes due in 2025. EBITDA still less than half of what it was in 2019, but appears to be trending toward a sound recovery. For example, the rate reduction (13% to 9.125%) will reduce annual debt service interest expense by about $28 million, assuming the new debt is equal to the debt being paid off. And, the reduction in the expected 9.25% rate to 9.125% lowers interest expense by $900K per year, depending on amortization terms.

 

Wish I had known about the offering, as I would have had a chat with my financial advisor regarding using some of the cash balance, since it is paying over 9%. Without any research, at first glance, it appears to be a reasonable risk for a good return.

[CurlerRob]

5 hours ago, Hanoj said:

Spam OP?

 

As a financial professional I think it’s newsworthy, especially since it is more difficult to obtain financial information about Viking as a privately owned cruise line. With Viking’s aggressive payment in full policy, vis-à-vis its competitors, independently reported news about Viking’s credit worthiness seems relevant.

 

Agreed - thank you for posting the link! You likely are aware that Viking's prior investors were TPG Capital and CPPIB, both in for about $500M each between 2016 and 2020. The statement that the debt offering was made available to institutions outside the US was interesting - I'm curious if that means the same two player will participate again.

 

Good financial move by Viking and a solid profit realized by the previous investors. Much nicer to hear a positive industry story rather than the angst over CCL. 🍺🥌

[Cienfuegos]

Debt offerings outside the US are often subject to different rules than those offered to institutions or qualified individual investors in the US.

 

Many US investment funds, private equity managers, and hedge funds maintain "off shore" affiliates in order to provide service to investors who aren't subject to US rules.

[May B]

9 hours ago, HHI Cruiser1 said:

Does anyone think Viking will relax their final payment requirements with this influx of cost savings?  Or maybe just offset current new ship costs and keep unpopular final payment business policy?  Customer focus would adjust final payment policy, but the balance sheet bottom-line could be focus.

No

 

Yes

 

its tuff to argue with success. Have you seen how many sailings have been oversold lately? 

 

 

[stephenandrew]

58 minutes ago, May B said:

No

 

Yes

 

its tuff to argue with success. Have you seen how many sailings have been oversold lately? 

 

 

I don’t know how the rest of the industry is doing, but the article referenced that 49% (I think) of their 2024 Ocean cruises were already booked.  Obviously people can cancel, but given that we are not quite halfway thru 2023, that struck me as pretty strong traveler interest in their product.  It doesn’t seem like ‘draconian” deposit requirements are hurting them very much.

[Cienfuegos]

One aspect to consider is how much of 2023 and 2024 booking has been done with vouchers for 2021, 2022 etc cruises.  Viking has likely been holding a liability on its balance sheet for future cruises, but the cash paid to Viking in 2019 for a 2021 cruise was spent long ago.

 

The practical result is Viking has an expense in 2023 (fuel, ports, labor, food, etc) but doesn't have an equivalent amount of new money to offset it. That shows up in slightly fewer staff, maybe some trims in the restaurants, higher fares for cash passengers now, etc

 

[KBs mum]

6 hours ago, stephenandrew said:

I don’t know how the rest of the industry is doing, but the article referenced that 49% (I think) of their 2024 Ocean cruises were already booked.  Obviously people can cancel, but given that we are not quite halfway thru 2023, that struck me as pretty strong traveler interest in their product.  It doesn’t seem like ‘draconian” deposit requirements are hurting them very much.

50% availability for 12 months away seems lower than usual, in the past the 'next year' has been nearly booked up, and we would be talking about bookings for 2025. 

We've noticed more inclusions and discounts than usual, catalogues are for next year not the year after now. 

 

We're keeping an eye on it, for us, Viking are no longer worth booking at full price, but we would book if the price was right for us

Edited June 29, 2023 by KBs mum

[stephenandrew]

1 hour ago, Cienfuegos said:

One aspect to consider is how much of 2023 and 2024 booking has been done with vouchers for 2021, 2022 etc cruises.  Viking has likely been holding a liability on its balance sheet for future cruises, but the cash paid to Viking in 2019 for a 2021 cruise was spent long ago.

 

The practical result is Viking has an expense in 2023 (fuel, ports, labor, food, etc) but doesn't have an equivalent amount of new money to offset it. That shows up in slightly fewer staff, maybe some trims in the restaurants, higher fares for cash passengers now, etc

 

Interesting point that never occurred to me.  Your suggestion certainly seems plausible given the events of the past few years.

[stephenandrew]

5 minutes ago, KBs mum said:

50% availability for 12 months away seems lower than usual, in the past the 'next year' has been nearly booked up, and we would be talking about bookings for 2025. 

We've noticed more inclusions and discounts than usual, catalogues are for next year not the year after now

You may well be correct.  I have absolutely no idea what historical levels of advanced bookings are.  And as the previous poster suggested, perhaps some of the current future bookings reflect the utilization of vouchers for past cruises that were canceled due to the pandemic.  I guess over all, I see these as points of interest, rather than issues of direct impact (on me at least).  Cruising to me is like pizza…some have been better than others, but I’ve never had a bad one.  Ha!

[Hanoj]

11 minutes ago, KBs mum said:

50% availability for 12 months away seems lower than usual, in the past the 'next year' has been nearly booked up, and we would be talking about bookings for 2025. 

We've noticed more inclusions and discounts than usual, catalogues are for next year not the year after now. 

 

We're keeping an eye on it, for us, Viking are no longer worth booking at full price, but we would book if the price was right for us

Compared to when? Viking is introducing new ocean ships to beat the ban unabated. Trouble with using percentages for year to year comparisons is that with the introduction of Saturn, Viking has increased its capacity across the fleet by 80% (not counting the expedition ships) since early 2020. At some point I expect they will saturate their market and begin experiencing diminishing returns. Degrade the overall customer experience ( which includes booking) and this will happen sooner. 

[KBs mum]

34 minutes ago, Hanoj said:

Compared to when? Viking is introducing new ocean ships to beat the ban unabated. Trouble with using percentages for year to year comparisons is that with the introduction of Saturn, Viking has increased its capacity across the fleet by 80% (not counting the expedition ships) since early 2020. At some point I expect they will saturate their market and begin experiencing diminishing returns. Degrade the overall customer experience ( which includes booking) and this will happen sooner. 

From what we have seen they are at, or near that point now. There are a lot more 'negative' or 'what about another line' type posts on here and other websites than there were even last year. 

A shame as the product was good, but to fill the ships they are trying to appeal to a market sector that buys on price and is used to discounts (nothing wrong with that! ) rather than a sector that will pay full price and book a long time in advance to get previous good quality. 

 

In the latest cruise catalogue we noticed that for each itinerary there was a note saying itineraries are subject to change. We accept the usual weather type risk of a missed port, but makes us think that booking  because of a desire to visit the ports mentioned is likely to lead to disappointment, as the implication is that all arrangements are speculative

Edited June 29, 2023 by KBs mum

[uktog]

I would rather a cruise line refinanced debt when there was an advantageous deal around than didn’t. Given rising commodity costs globally every one is looking for opportunities to reduce some aspect of their outgoings and I see nothing untoward with the transaction that’s been completed 

[stephenandrew]

16 hours ago, KBs mum said:

From what we have seen they are at, or near that point now. There are a lot more 'negative' or 'what about another line' type posts on here and other websites than there were even last year. 

A shame as the product was good, but to fill the ships they are trying to appeal to a market sector that buys on price and is used to discounts (nothing wrong with that! ) rather than a sector that will pay full price and book a long time in advance to get previous good quality. 

 

In the latest cruise catalogue we noticed that for each itinerary there was a note saying itineraries are subject to change. We accept the usual weather type risk of a missed port, but makes us think that booking  because of a desire to visit the ports mentioned is likely to lead to disappointment, as the implication is that all arrangements are speculative

You clearly have some big issues with Viking.  I’m not saying you are wrong as I haven’t been on one of their ships yet, so have no first hand experience to match against, what sounds like, your multiple cruises over a, presumably, relatively long period of time.  Obviously, I hope my experience will be very different than yours.  It seems to me that on the whole, most of the posters here seems to still enjoy the product, not withstanding some frequently mentioned issues regarding, dining, wine, and customer service.  And certainly, those are not insignificant….not trying to minimize them, but to a degree those issues are subjective.  The food I hate may be the food you love.  Anyway, I hope you find a cruise line that is more like the “Old Viking”.  Viking, by my standards, isn’t cheap, so if you aren’t enjoying it, you should look elsewhere.  I know I would.  I’ll try and remember to let you know what I think when I get back from my trip.

[KBs mum]

2 hours ago, stephenandrew said:

You clearly have some big issues with Viking.  I’m not saying you are wrong as I haven’t been on one of their ships yet, so have no first hand experience to match against, what sounds like, your multiple cruises over a, presumably, relatively long period of time.  Obviously, I hope my experience will be very different than yours.  It seems to me that on the whole, most of the posters here seems to still enjoy the product, not withstanding some frequently mentioned issues regarding, dining, wine, and customer service.  And certainly, those are not insignificant….not trying to minimize them, but to a degree those issues are subjective.  The food I hate may be the food you love.  Anyway, I hope you find a cruise line that is more like the “Old Viking”.  Viking, by my standards, isn’t cheap, so if you aren’t enjoying it, you should look elsewhere.  I know I would.  I’ll try and remember to let you know what I think when I get back from my trip.

I was talking about business model, target demographic and feedback trends. 

On our last cruise it seemed that people new to Viking thought it was OK to good, those returning thought it OK to bad

Viking are still a decent cruise line but not as outstanding as they were. They are staying the same, and in some ways have gone backwards, as other lines evolve, and so are now one of several similar.

We would book with them again, but only if we see a good offer. We used to book two years out paying full price to get the room we prefer. 

We judge companies on how well they do whatever their business model is. A good quality budget option can be better than a poor quality expensive option. 

Edited June 30, 2023 by KBs mum

[uktog]

Maybe on these boards, as is seen on other boards there is a case of familiarity breeds contempt amongst some frequent cruisers with some rose tinted glasses back to what was remembered (or imagined) about the good old days.  

s no bad thing that people try other lines, whilst some stay away for ever, others realise either the grass on the other side was not actually greener or they find that works for what they want now but there is a snag.  For many we know who discovered on finding what they wanted now, the per day rate was over £75+ more per person per day - some are happy/able to do that others trim their expectations and return to their original line of choice.

There is no right or wrong answer but its better to move on rather than hark on if thats the right thing for us

[THR]

All I can say is I read a lot of negative posts prior to this cruise we are currently on. Again, I have no historical points of comparison, but we are pretty discerning with our food in particular. 
 

We have found it to be pretty good, and glad we didn’t listen to a lot of the negativity and cancel. Taken a lot of photos and will post a separate review when we have better internet. 

[KBs mum]

The subject of this thread being Viking's financial performance and business model, the question is not so much how/have Viking changed, but are they level with or ahead of the competition, either other cruise lines or land based options. 

Can they keep past customers and add new to fill the ships, changes may mean loosing existing customers. Alternatively can they get sufficient new customers, but to do that they need a point of difference, which they may no longer have, and they are in a competitive sector up against the luxury/premium parts of the megaship corporations. 

Perhaps only time will tell, but rapid expansion in a competitive marketplace, fuelled by stock sales and finance rarely ends well, particularly with covid disruptions in the mix. 

Hopefully they will be OK

Edited June 30, 2023 by KBs mum

[milling73]

On 6/28/2023 at 9:51 PM, HHI Cruiser1 said:

Does anyone think Viking will relax their final payment requirements with this influx of cost savings?  Or maybe just offset current new ship costs and keep unpopular final payment business policy?  Customer focus would adjust final payment policy, but the balance sheet bottom-line could be focus.

Other countries get final payment 90 days out, instead of our "usual full payment within 30 days of booking".  I think this has less to do with Viking's generosity or lack of, than laws within that country as to how far in advance a company may collect payment for a future trip.  (this has been confirmed by some UK travelers I met).  So for those of us who would like to stop paying the full amount of our trip - a year or more in advance..we need to contact our Congress Representatives to amend our laws as well.

[rmalbers]

On the cruise credit left topic: I couldn't believe how many people that were on Viking Octantis (Great Lakes) at the end of last summer, were doing it on covid cruise cancel credits.  I have no idea how much cruise credit is left in the system but I'm sure there is some.  On Celebrity ships, their biggish issue is getting crew on board and up to speed.   On the financial side, all the lines took on a ton of debt and that will take years to work thru the system, even assuming full ships. 

[KBs mum]

1 hour ago, milling73 said:

Other countries get final payment 90 days out, instead of our "usual full payment within 30 days of booking".  I think this has less to do with Viking's generosity or lack of, than laws within that country as to how far in advance a company may collect payment for a future trip.  (this has been confirmed by some UK travelers I met).  So for those of us who would like to stop paying the full amount of our trip - a year or more in advance..we need to contact our Congress Representatives to amend our laws as well.

It may be more to do with deposit and cancellation regulations. In the UK deposit is 25% of cruise cost, not refundable in most circumstances, and we don't have cancel for any reason insurance. Essentially we are less inclined to book then cancel. My understanding is that Australia and New Zealand deposits are around 1000 US with similar cancellation terms. 

The final payment a long way out in the US may be a way to get passengers to commit rather than book and cancel on a whim, which may result in empty cabins if cancellations are late

[THR]

As a data point, ours was $500 AUD per person, although that might have increased. Non refundable. 

[harbourside]

Now $1000.00 Aust. per person. Non refundable.  I have always only paid $500.00 but this had gone  up when I booked my last cruise.  I did query it, but this is now the new norm.

[Jim Avery]

Seemingly every cruise line board has posts like this.  Who could have imagined how our worlds have changed in three short years.  Cruises are lucky to still be there.  Look at the decline in retail shopping, and the airlines (OMG).  Even our favorite local restaurants have cut back on quality and service.  Then throw in the heavy inflation of the last couple of years and it seems a slowdown is inevitable.  I would prefer seeing Viking delay or cancel fleet expansion and work to make what already exists a better product.  Just wishing.