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!! Report: NCL To Go Public!!

Seanote

By Seanote,
in Norwegian Cruise Line

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Seanote

Seanote

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From USA Today:

 

http://travel.usatoday.com/cruises/post/2010/10/norwegian-cruise-line-files-public-offering-form-s-1/128777/1

 

"Norwegian Cruise Line, the perennial underdog among major North American cruise brands, soon may be a public company.

 

The 44-year-old line's parent firm, NCL Corporation Ltd., today registered with the U.S. Securities and Exchange Commission to go public "as soon as practicable" with an offering of up to $250 million in shares.

 

In the filing, called an S-1 registration, the company says it intends to use the proceeds from the share sale to pay down some of a $750 million senior secured revolving credit facility, to fund future capital expenditures and for general corporate purposes."

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njhorseman

njhorseman

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might need some cash to purchase two new babies!

 

No, when they announced the new builds yesterday, they said they had already secured financing through a consortium of banks.

 

Reading today's press release announcing the S-1 filing, it's clear that at least some of the cash raised by the IPO would be used to retire a chunk of the $450 million senior secured debt, which carries a choking 11.75% interest rate. No company could possibly thrive and grow paying that much interest for very long.

 

NCL also released its 3rd quarter results today, and they were improved, with a GAAP net income of $93 million for the quarter...enough to bring the three quarter total for 2010 into the black, to the tune of about $60 million. NCL had a net loss of about $30 million through the first two quarters of 2010. But the third quarter and YTD profits have been held down by NCL's increased interest costs, due to those 11.75% notes, so they need to retire as much of that paper as they can as quickly as they can.

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njhorseman

njhorseman

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might need some cash to purchase two new babies!

 

No, when they announced the new builds yesterday, they said they had already secured financing through a consortium of banks.

 

Reading today's press release announcing the S-1 filing, it's clear that at least some of the cash raised by the IPO would be used to retire a chunk of the $450 million senior secured debt, which carries a choking 11.75% interest rate. No company could possibly thrive and grow paying that much interest for very long.

 

NCL also released its 3rd quarter results today, and they were improved, with a GAAP net income of $93 million for the quarter...enough to bring the three quarter total for 2010 into the black, to the tune of about $60 million. NCL had a net loss of about $30 million through the first two quarters of 2010. But the third quarter and YTD profits have been held down by NCL's increased interest costs, due to those 11.75% notes, so they need to retire as much of that paper as they can as quickly as they can.

 

Just took a very quick look at the S-1, and a piece of the financing committment for the two new builds does require NCL to retire about 100 million of the old senior debt, so part of the IPO proceeds will indirectly support the new builds.

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jame_g

jame_g

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It's usually very difficult for "Joe Public" to actually get a hold of the initial stock offered through the IPO. The financial institution usually has investors lined up prior to the offering. Company officers and their big customers/institutional investors usually manage to buy it all up. The casual investor typically doesn't get to buy until it hits the stock market unless the interest in the stock is weak. By the time "Joe Public" gets it, it's usually being turned around and sold at a profit already.

 

Something else that could possibly happen is that the stock is traded publicly for a few years, while NCL uses the cash to improve it's financial strength. Then once the company is on better competitive footing and has cash reserves, they repurchase all the public stock and take the company private again. I'm sure that Genting and Apollo are retaining a majority ownership so that they can exercise this option down the road.

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njhorseman

njhorseman

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So if I understand it correctly, Genting and Apollo are basically selling their joint ownership of NCL Corp. to the public?

 

And how does NCL America fit in? Will that continue to be privately held by Genting?

 

No, based on a quick read of the IPO, they are selling new shares to the public to raise capital, which will dilute their current 100% ownership of the company.

 

The estimated value of the IPO is $250 million. The current owners' (Genting, Apollo and TGP) shareholders equity is $1.763 billion. Keeping things simple, all other thinks being equal, the shareholders' equity after the IPO would be $2.013 billion, with the current ownership then controlling 87.6% of the company.

 

As far as I know NCLA is a subsidiary of NCL, not a sub of Genting, but I'd have to check that out to be certain.

 

Caution: I haven't had the chance to carefully and copmpletely read the S-1, so I could be making some incorret assumptions...but with the value of the IPO only being $250 million, there is no way they are selling their ownerhip, which is theoretically worth 1.763 billion.

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GigCrusier

GigCrusier

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This will be an interesting IPO to watch...

Just some random thoughts......

 

**** Does one sucessful Quarter equal a trend?

**** Capicity... How many new ships are being introduced in the industry?

**** Does anyone know the bottom line profit for the Epic vs. the fleet?

**** A new CFO with no cruise related experience ( just a comment)

**** Why is all the outstanding debt not being refinanced into lower rate options?

 

The open market will determine if there is a belief that NCL is a good investment risk.

 

I do wish the company much sucess and really like the new look.

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msescada

msescada

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I'm actually an analyst...so I do this for a living...and I've only quickly reviewed the document. Please note that just because the first filing seems to indicate an offering of $250 million doesn't mean that's all they'll offer. Companies frequently limit the initial filing amount to reduce the amount of the initial fee to the SEC. That way if market conditions change, the company won't have spent more money for no reason (and it's similar to the way we book the cruise, put the deposit down on two even tho four or five may be traveling and add the others when we're sure closer to the final payment date).

 

It's no wonder that NCL is more profitable than it has been...look at all of the perks we don't have anymore (whatever happened to Freestyle 2.0, for example?). Look at all the things they've found to charge for onboard.

 

Don't get me wrong, I like NCL for my cruises and still choose to sail with them. But I also see what they've been doing in preparation for an IPO or just simply to improve cash flow. I just think that at some point they have to open the spigot a little to recreate some of the value they've taken away during the recession. It will be interesting to watch this deal get done. It's clearly linked to the financing for the new builds, directly or indirectly, and this is very likely the first is a series of refinancings. Once a company issues equity, the debt capital markets are MUCH easier to access, especially now. I wonder what a well capitalized NCL (something we haven't seen for a while) will look like?

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newmexicoNita

newmexicoNita

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From USA Today:

 

http://travel.usatoday.com/cruises/post/2010/10/norwegian-cruise-line-files-public-offering-form-s-1/128777/1

 

"Norwegian Cruise Line, the perennial underdog among major North American cruise brands, soon may be a public company.

 

The 44-year-old line's parent firm, NCL Corporation Ltd., today registered with the U.S. Securities and Exchange Commission to go public "as soon as practicable" with an offering of up to $250 million in shares.

 

In the filing, called an S-1 registration, the company says it intends to use the proceeds from the share sale to pay down some of a $750 million senior secured revolving credit facility, to fund future capital expenditures and for general corporate purposes."

 

I had heard not too long ago this might happen. I am tempted to buy a few shares if and when it happens.

 

Nita

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Dajbman22

Dajbman22

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I wonder how long it will be before NCL stock is on those sites where you can buy the one share of some well known corporation and pay an exorbitant fee (as well as pressure to buy an expensive framed certificate of your one share).

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bob brown

bob brown

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No, based on a quick read of the IPO, they are selling new shares to the public to raise capital, which will dilute their current 100% ownership of the company.

 

The estimated value of the IPO is $250 million. The current owners' (Genting, Apollo and TGP) shareholders equity is $1.763 billion. Keeping things simple, all other thinks being equal, the shareholders' equity after the IPO would be $2.013 billion, with the current ownership then controlling 87.6% of the company.

 

As far as I know NCLA is a subsidiary of NCL, not a sub of Genting, but I'd have to check that out to be certain.

 

Caution: I haven't had the chance to carefully and copmpletely read the S-1, so I could be making some incorret assumptions...but with the value of the IPO only being $250 million, there is no way they are selling their ownerhip, which is theoretically worth 1.763 billion.

Thanks for that explanation.

I was under the impression that when Apollo bought in from Genting, that NCL America was not a part of the deal.

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njhorseman

njhorseman

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Thanks for that explanation.

I was under the impression that when Apollo bought in from Genting, that NCL America was not a part of the deal.

 

The following organizational chart and list of wholly owned subsidiaries of NCL taken from the SEC filing confirm that NCL America is a subsidiary of NCL, not Genting:

 

http://edgar.sec.gov/Archives/edgar/data/1318742/000119312510236693/g44793g13o13.jpg

http://edgar.sec.gov/Archives/edgar/data/1318742/000119312510236693/dex211.htm

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njhorseman

njhorseman

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Posted
This will be an interesting IPO to watch...

Just some random thoughts......

 

**** Does one sucessful Quarter equal a trend?

**** Capicity... How many new ships are being introduced in the industry?

**** Does anyone know the bottom line profit for the Epic vs. the fleet?

**** A new CFO with no cruise related experience ( just a comment)

**** Why is all the outstanding debt not being refinanced into lower rate options?

 

The open market will determine if there is a belief that NCL is a good investment risk.

 

I do wish the company much sucess and really like the new look.

 

To take a stab at your first and last questions:

 

One successful quarter doesn't constitute a trend, but this is the second consecutive year with substantially improved results over the recent past...and indication that Apollo's management is moving the company in the right direction.

 

To answer your second question, look at your first question. ;) The financial marketplace is not yet convinced NCL will be sufficiently profitable on an ongoing basis.

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