Seabourn and the current issues surrounding the Corona Virus

[jenidallas]

This is definitely getting worse instead of getting better.  We are 24 days out from the next sailing and I feel 98% certain that it won’t be sailing.  (I am 100% certain j won’t be sailing on it.)
 

We already have a deposit down for a December holiday sailing.  I’m not feeling great about having any money tied up with Seabourn right now.  
 

Oh, and I’ve got my 100 shares of woefully devalued Carnival stock... really want to see them start making decisions to get healthy again!

[tv24]

This keeps getting deeper and deeper, and worse and worse.  The news from the Zaandam is disturbing and does have implications for Seabourn.  The CEO for Carnival Corp. was to have made an announcement about the future today, but that was postponed.  And now the Zaandam is a total nightmare, maybe worse than the Princess ships, further damaging the brand of cruising.  We are now seriously thinking of cancelling the Seabourn cruises that we have booked for the Fall and get out deposits back.  Decision tomorrow, after we consult our TA.

[Paulchili]

26 minutes ago, tv24 said:

  We are now seriously thinking of cancelling the Seabourn cruises that we have booked for the Fall and get out deposits back.  Decision tomorrow, after we consult our TA.

Probably a smart move for number of reasons.

[phillipahain]

Problem is if you cancel the cruise they keep the money as an FCC ...given the way Seabourn are behaving over cruise starting 22nd april thats the very  last thing we want plus theres no cruise at all next year that is of interest 

[Rambo_Trout]

Interesting article from the Financial Times:

 

https://www.ft.com/content/ebdab86c-6509-11ea-b3f3-fe4680ea68b5

 

Plus this from 'The Motley Fool'

 

Carnival (LSE: CCL) shares have been some of the worst-performing assets on the market this year. It’s no mystery why the stock has slumped over the past few weeks. The company owns the Princess Cruise brand, which operates Grand Princess and Diamond Princess, the cruise ships at the centre of the global coronavirus outbreak.

As of yet, we don’t know what impact this could have on Carnival shares in the long term. A week or two ago, management warned that if the company was forced to cancel all of its cruises across Asia, it could reduce earnings per share by more than 20%.

Unfortunately, it now looks as if the impact on the business could be much more significant. Reports suggest cruise bookings have fallen 50% over the past few weeks.

However, despite this uncertainty, Carnival shares could offer attractive returns for investors who are prepared to take a long-term view of the business.

Are Carnival shares worth buying?

It’s now clear that the virus outbreak will have a significant impact on the cruise operator. There’s a very high chance the operation will lose money this year, and there could be a hangover into 2021 as well.

This might force management to cut the company’s dividend. The cash for the payout, which costs the group around $1.3bn per annum, could be put to better use elsewhere. These short-term pressures are unlikely to leave a significant impact on the business. What’s more, it looks as if Carnival has plenty of financial firepower to weather the storm.

The most common reason why companies fail is debt. Indeed, businesses with a lot of debt look very intelligent in the good times but struggle in the bad. If the business falls out with its lenders, then it can quickly go under. This is the main reason why it looks as if Carnival can survive. The company’s balance sheet is relatively stable compared to its peers.

Net gearing — the ratio of debt minus cash to total shareholder equity — is less than 50%. What’s more, the company has lots of assets it can borrow against to unlock cash. This financial flexibility should help the business remain afloat through these tough times.

Upside of 100%?

As the risk of the company going bust is low, now could be the time to buy Carnival shares. The stock is trading at a price-to-book (P/B) value of just 0.5. This suggests the shares offer a wide margin of safety at current levels.

Further, while it might not make much sense to rely on the company’s dividend yield now, in the future, there’s no reason why the business cannot reinstate the payout at its current level. That suggests investors could receive a 10% dividend yield in future.

Considering all of the above, it might now be an excellent time to buy Carnival shares.

Edited March 28, 2020 by Rambo_Trout
Adding information

[ravenclaw]

 The U.S. entity Carnival Corp. is incorporated in Panama, ( to avoid paying U.S. income taxes, among other benefits) and its operational headquarters are in the city Doral, Florida.

Not aware of Panama bankruptcy laws, but if Carnival was incorporated in the United States, they would probably explore the option of filing  for bankruptcy under Chapter 11 reorganization laws to settle at reduced rates with debtors, ( loans, bond holders, suppliers, travel agencies, booked passengers and even crew wages/benefits). Has happened numerous times in the U.S. with airlines.

Edited March 28, 2020 by ravenclaw
typo

[westmount]

There was a little announcement yesterday that the FDA has approved a 15 minute test for the Coronavirus, and in the end, cruise passengers And port authorities want to know that their ship is.

 The virus itself is very lethal without a vaccine to vulnerable patients, but there’s a lot of things that can kill us as well that society accepts. If we presume a vaccine can be ready within a year or so, and testing be easily administered in a few minutes, then I can see people ready to start flying , cruising and going back to whatever activities they did before. 
  Lockdowns will only work for 90 days at the most, and possibly two/three weeks in western societies, so while I really doubt cruise lines will be operating this year, it’s not like President Yoda is going to stop Carnival from commencing operations, the market place will. 
  The three major operators are owned by very deep pocketed groups, there will not be any chapter 11s, as they will not be giving up ownership control. If anything, they will give decent terms to get a few billion from private equity or bakers. The business is a monopoly, cash rich, and has a captive market. 
  These fleets should have shut down a month before they did, no excuses, as they had time bombs being  loaded onto every ship without a security check. 
 In any case, all we really need is a five minute test  done before passengers get on, followed by every port city being free of people spreading the virus, followed by a vaccine produced , followed by people getting their jobs back, followed by life getting back to normal, followed by Seabourn surviving followed by them settling with passengers followed by finding a cruise we want to take. 
  First things first, there are still sick  passengers out there at Sea with no port, that will be on the front page for awhile, and that story is not over yet, so let’s hope the situation doesn’t get worse, but it’s not looking that way,. 
  Cross our fingers for everyone on board. 
 

[zelker]

7 hours ago, tv24 said:

This keeps getting deeper and deeper, and worse and worse.  The news from the Zaandam is disturbing and does have implications for Seabourn.  The CEO for Carnival Corp. was to have made an announcement about the future today, but that was postponed.  And now the Zaandam is a total nightmare, maybe worse than the Princess ships, further damaging the brand of cruising.  We are now seriously thinking of cancelling the Seabourn cruises that we have booked for the Fall and get out deposits back.  Decision tomorrow, after we consult our TA.

 

Although we are still waiting to see what Seabourn does re: canceling cruises in the coming months so that we can (hopefully) get a refund (we're on Ovation, 28 days, sailing May 23rd out of Lisbon), not knowing what the future holds for the next year or two, we requested that the two FCDs they were holding be refunded now.  Did the same thing with our six FCD's that HAL has AND cancelled our late fall 2020 and early 2021 cruises with HAL.  We've already taken a 75% hit on the CCL stock we bought last year so no sense letting them hold more of our money.

[MsMermaid]

3 hours ago, ravenclaw said:

 The U.S. entity Carnival Corp. is incorporated in Panama, ( to avoid paying U.S. income taxes, among other benefits) and its operational headquarters are in the city Doral, Florida.

Not aware of Panama bankruptcy laws, but if Carnival was incorporated in the United States, they would probably explore the option of filing  for bankruptcy under Chapter 11 reorganization laws to settle at reduced rates with debtors, ( loans, bond holders, suppliers, travel agencies, booked passengers and even crew wages/benefits). Has happened numerous times in the U.S. with airlines.

I guess if they don't want to pay taxes in the US, they don't get a bailout from those who do.

 

[MightyQuinn]

3 hours ago, zelker said:

 

Although we are still waiting to see what Seabourn does re: canceling cruises in the coming months so that we can (hopefully) get a refund (we're on Ovation, 28 days, sailing May 23rd out of Lisbon), not knowing what the future holds for the next year or two, we requested that the two FCDs they were holding be refunded now.  Did the same thing with our six FCD's that HAL has AND cancelled our late fall 2020 and early 2021 cruises with HAL.  We've already taken a 75% hit on the CCL stock we bought last year so no sense letting them hold more of our money.

 

We plan to do the same.  We're going to request refunds of two FCDs we have with Seabourn, although I'm sure we'll be stuck at the back of the long refund line.  We also have a fairly hefty amount on deposit for a 45-day cruise in Feb/21 that we're holding on to at the moment, but we may cancel closer to final payment.

Assuming CCL doesn't fall off the board, we're still happy with our investment.  We bought 100 shares at $29.69 in 1998 and have more than recouped that amount in dividends and OBC over the years. 

[3418ahl]

Funny, when our Ovation cruise was cancelled, I booked a new cruise for August.  They managed to process my payment within 24 hours.  I decided that was to soon to cruise again and cancelled.  They have not managed to return my payment for eight days.

[zelker]

1 hour ago, 3418ahl said:

Funny, when our Ovation cruise was cancelled, I booked a new cruise for August.  They managed to process my payment within 24 hours.  I decided that was to soon to cruise again and cancelled.  They have not managed to return my payment for eight days.

 

Sorry but I'd say 8 weeks might be a more reasonable expectation for your refund.

[3418ahl]

7 minutes ago, zelker said:

 

Sorry but I'd say 8 weeks might be a more reasonable expectation for your refund.

This is just a return for a deposit I made.  If they can process your deposit within 24 hours, why can't they manage to return it?

[zelker]

Yes, I realize that but it's a new reality now and you're only fooling yourselves if you expect things to be handled the way they were even two months ago. 

 

I just did the same thing with Holland America and Seabourn both and was told to expect delays since cancelled cruises (whether you cancel or they cancel) and requesting refunds of FCDs ALL go through the same accounting department.  So basically we all have to get in line.  We figure if we get it sooner it's a bonus but we're not holding our breath so we won't be disappointed if it really does take 8-9 weeks.

Edited March 28, 2020 by zelker

[3418ahl]

3 minutes ago, zelker said:

Yes, I realize that.  I just did the same thing with Holland America and Seabourn both and that's what I was told.  Cancelled cruises (whether you cancel or they cancel) and requesting refunds of FCDs ALL go through the same accounting department.  So basically we all have to get in line.  We figure if we get it sooner it's a bonus but we're not holding our breath.

My point is that somehow they have enough people to still process the PAYMENTS within 24 hours, just not the refunds!

[norm2002]

26 minutes ago, 3418ahl said:

My point is that somehow they have enough people to still process the PAYMENTS within 24 hours, just not the refunds!

 

I am not an apologist for how long they are taking to issue a refund but there is a difference. They cannot treat a reservation as confirmed until they have put through the credit card details and at least put a hold on the funds.

[zelker]

1 hour ago, 3418ahl said:

My point is that somehow they have enough people to still process the PAYMENTS within 24 hours, just not the refunds!

 

Getting angry isn't going to gain you anything.  It is what it is.  Just accept it and move on.  

 

[Robisan]

9 hours ago, Rambo_Trout said:

Plus this from 'The Motley Fool'

 

 

Considering all of the above, it might now be an excellent time to buy Carnival shares.

 

This was published March 15th and may only reflect the view of the author (a Carnival shareholder) at this time, but it appears Motley Fool has changed their view.

 

Will Carnival Survive the COVID-19 Crash?

Mar 27, 2020 at 9:57AM

 

Conclusion:

 

Based on the obligations Carnival has ahead, it has a challenging future, and investors buying now may simply be buying a sinking ship. They should be on the lookout for better-positioned companies in the market.

 

More from the article:

 

Here are Carnival's debt maturities by year as of Nov. 30, 2019.  

Year -- Annual Debt Maturities

2020 -- $1.83 billion

2021 -- $1.92 billion

2022 -- $1.35 billion  

2023 -- $2.23 billion

2024 -- $680 million

Thereafter -- $3.63 billion

Total -- $11.63 billion

 

Since that November date, Carnival withdrew the remaining $2.8 billion of its $3.0 billion revolving credit facility, which expires in 2024, to bolster the $518 million in cash it had on the balance sheet.   What investors will want to note is the debt that's coming due in the next year while this crisis will be in effect.

 

~~~

 

According to its 2019 10-K, Carnival has committed $4.81 billion in 2020 to new ships, $3.62 billion in 2021, and a total of $14.53 billion in future orders. Management recently said there's $2.8 billion of liquidity available to fund ships this year and $5.9 billion for deliveries in 2021 and beyond. But there will still be a shortfall of about $2 billion this year alone.  

 

These new ships will not only result in cash outflows to complete and deliver, but they'll also increase operating costs just to keep them afloat. This is not a time when Carnival needs an expanding fleet.

 

~~~

 

Let's now focus on Carnival's cash situation in 2020 because ... the company is already in a difficult position.  

Item  -- Available (Obligations)

Cash (Nov. 30, 2019) -- $518 million

March 13, 2020, revolving credit drawdown -- $2.8 billion

New ship commitments -- ($4.8 billion)

New ship liquidity -- $2.8 billion

2020 debt maturities -- ($1.83 billion)

Total -- ($512 million)

 

That last line best explains why cash refunds haven't been forthcoming in a timely manner. The whole article is worth a read.

 

I think the niche Seabourn business unit is small enough (just five ships) and well positioned to be sold or spun off if Carnival doesn't survive, though it's also possible another line could acquire the ships for use under their brand.

 

Looking at the cruise industry at large, I just don't see how it resumes until there is a vaccine that has been fully implemented worldwide, which is unlikely to occur before mid-2021 at best. Testing alone won't solve the problem. Even if you can assure pax and crew are 100% negative at embarkation, every port call is an opportunity for infection. From the port's POV, every ship not tested immediately prior to arrival is a potential carrier. Finally, of course, you need pax willing to resume travel without fear of being stuck on a floating petri dish of disease. Absent near eradication it's hard to see how cruising as usual can resume.

 

[teamflames]

2 hours ago, 3418ahl said:

This is just a return for a deposit I made.  If they can process your deposit within 24 hours, why can't they manage to return it?

They can but it’s a basic rule of business ie accounts receivable vs account payable - extend your cash flow as long as possible. They could refund much quicker if they needed to. Imagine if bailout money was promised if refunds were finalised we would all have our money before the end of the day.

[sleeper9]

The world is struggling with this awful pandemic.  Our health care systems are on the verge of being overwhelmed.  People are dying alone in ICUs, no friends or family allowed.  Businesses are shuttered and unemployment is ramping up to unheard of levels.  People suddenly without their paychecks can't make rent or afford their health insurance premiums.  The stresses on families and individuals is increasing daily.  People are worrying about their own health, the health of their children, their parents and grandparents.

 

What a nice break from reality to come to this forum and hear people stressing over whether they might have to settle for a 100% FCC, worrying if they may not get their refund in 2 weeks, but in 8-12 weeks, concerned that Seabourn isn't giving them the level of customer service they would like during this crisis.

 

I have an upcoming cruise, that yes I know will be cancelled.  Yes, they will get around to cancelling it, probably sooner than later.  Would I like the cash back in my account? Sure!  Might I receive a FCC instead? Very possibly.  What I don't plan to do is stress over it.  Seabourn is operating out of Seattle which means employees working from home.  Seabourn has safely gotten all of their passengers home, Covid-19 free.  Now they are dealing with the logistics of crew, ships, suppliers, and closed ports while the world around them changes by the hour. For the sake of all of the crew, the agents, the tour guides, the hotels, and the countless local economies they fuel around the world, I pray for their success in weathering this crisis. 

 

I suggest we all take a deep breath and relax.  In the mean time keep yourselves and your communities safe.  See if there is a way you can support your truly stressed and overworked health care providers.

 

I'm looking forward to raising a glass onboard a Seabourn ship in the future, hopefully the not too distant future.  Stay Safe!

 

 

 

[cruiseej]

12 hours ago, Rambo_Trout said:

Interesting article from the Financial Times:

 

https://www.ft.com/content/ebdab86c-6509-11ea-b3f3-fe4680ea68b5

 

Reading this requires a subscription to the FT. Could you copy a portion of the text, or a screenshot of part of the article, just so we'd know what you were referencing. Thanks.

[cruiseej]

10 hours ago, westmount said:

All we really need is a five minute test  done before passengers get on, followed by every port city being free of people spreading the virus, followed by a vaccine produced , followed by people getting their jobs back, followed by life getting back to normal, followed by Seabourn surviving followed by them settling with passengers followed by finding a cruise we want to take. 

 

Oh, I'm glad that's all we need! 😉

[robertmartha]

THANK YOU SLEEPER9 - could not agree with you more!

 

Stay well and stay safe in Washington ! From one hot spot (NYC) to another!

[Rambo_Trout]

15 minutes ago, cruiseej said:

 

Reading this requires a subscription to the FT. Could you copy a portion of the text, or a screenshot of part of the article, just so we'd know what you were referencing. Thanks.

 

Sorry, I should have done that initially.

 

Carnival is an oddity. The London listing of the Miami-based cruise line operator is a legacy of its 2003 hostile takeover of P&O Princess Cruises, which it won on a pledge to be dual-listed. The stock also stands out as the FTSE 100’s biggest faller in the year to date, down more than 60 per cent. As of Friday morning the aggregate value of Carnival’s UK and US lines was £2.5bn ($3.2bn) lower than when the P&O takeover took effect almost 17 years ago, when the combined fleet was 62. It is now 104. Judging whether this sell-off is an overreaction demands answers to two key questions: how long it will take for coronavirus to be brought under control, and what will be left of the industry when that moment comes. Until that becomes clear there is no possibility of anchoring forecasts and calculating future values. Investing becomes gambling. And, as this week’s record-breaking falls show, most investors are reluctant gamblers. The viral outbreak has become an existential crisis for the industry. Carnival’s competitors have fared even worse so far this year, with Wall Street-listed Norwegian Cruise Line and Royal Caribbean each down about 80 per cent. Cruises have been targeted because no sector looks as poorly positioned to cope. The disease has spread through the winter “wave season”, the industry’s key quarter when ship owners race for early bookings so they can at least break even for their year’s scheduled sailings. Demand and capacity are often hard to match as ships are typically delivered up to five years after ordering and have price tags with nine figures. Then there is the much-discussed problem of demographics. About one in seven cruise ship passengers is over 70, putting them in the highest risk category for Covid-19. After decades of stories about outbreaks of norovirus, the operators already had a poor reputation for keeping them healthy. A Covid-19 case on Carnival’s Diamond Princess is used by epidemiologists to benchmark incubation rates, having resulted in 700 infections and eight deaths. Carnival this week announced it would suspend for two months all sailings under its Princess brand, which accounts for about a fifth of its fleet and targets older holidaymakers wanting longer tours. While the action should protect the Princess brand from further damage, it may not help the long-term viability of its product. One certainty is that 2020 is a write-off. Booking cancellations were reported to be running at around 50 per cent even before Italy’s nationwide lockdown and the US’s ban on incoming European travel. Offers of big discounts on future bookings have allowed operators to keep hold of customers’ deposits, delaying any crunch on working capital. But increasingly generous terms and flexibility in the customers’ favour could be storing up cash flow problems for later. US president Donald Trump has talked in vague terms about state assistance but what that means in practice — if anything — is anyone’s guess. Even if cruise line operators are somehow treated as too big to fail, it is not obvious why they are candidates for bailouts. Carnival’s debt covenants, in common with its main peers, are framed mostly around balance sheet values. Eroding these buffers would take deep writedowns of equity value and significant losses over several years, which does not look very likely, as managements move into cash protection mode. There may well be failures among the smaller, weaker players. But that would make an already cartel-like industry even more concentrated. In 2016 Macquarie estimated a replacement cost for Carnival’s fleet of nearly $54bn, more than twice the company’s current shrunken enterprise value of just over $21bn. In any assumption other than an L-shaped recovery, the risks of failure are not yet that extreme. So can a valuation argument be built around those facts alone? Potentially — with the caveat that everyone to try so far has regretted it very soon after. The first quarter has been one that proves the dictum that no matter how bad things are, they can always get worse. For some, however, it looks like a gamble worth taking. James Hardiman, analyst at Wedbush Securities, says that while his targets for the stock “feel somewhat like an exercise in futility”, there is logic behind them. “If these companies do not go out of business, they will most likely double or triple in value over the course of the next 12-18 months,” he wrote in a report this week. “While speaking in these terms is understandably nauseating to some investors, others will eventually see this as a big moneymaking opportunity.” * This column was amended on 14 March to correct the prices of ships

[HappyFeet13]

Thanks, Rambo_Trout.  Great explanation!