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SLSD

Seabourn and the current issues surrounding the Corona Virus

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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

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6 hours 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.


We were told by Seabourn on Friday that the current backlog for processing refunds to credit cards is 60 to 90 days. I don’t know if that is because they have to process so many or because they are out of cash. Or both. 

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2 hours ago, sleeper9 said:

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!

 

 

 

It is possible to compartmentalise. My feeling on Covid19, healthcare, my family etc are different to what we discuss on here specific to Seabourn.

My views that Seabourn is delaying payment as a normal part of business to extend cash flow rather than simply because they are overwhelmed with manual processes is a completely separate issue with my thoughts on what is happening elsewhere.

I also suggest if you are looking for a positive break a bit thread about the virus is not the new to participate in. I can suggest the Seabourn sailors fb page, lots of positive posts on there from people reminiscing or sharing what they are up to at home. 

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1 hour ago, florisdekort said:


We were told by Seabourn on Friday that the current backlog for processing refunds to credit cards is 60 to 90 days. I don’t know if that is because they have to process so many or because they are out of cash. Or both. 

Not good news, Floris, but thanks for passing it along.

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Logic dictates that they are working on recapitalizing, and thus future cruise credits the only currency that will be coming shortly. If they were to file for protection, everyone will be happy with a future credit, as it is possible a new firm would not honour any past obligation. 
the ship builders are the ones in trouble, so I imagine their backers or nations will be front and Center in any bailout. If you have a crystal ball, just look where the jobs are located in the industry and you’ll see where the money will come from, it always does. Florida will pay, Italy will pay, Asian countries who citizens are major parts of the crews will pay.

the airlines started giving future credits for flights they canceled , see no reason the cruise lines don’t announce the same policy. Want to go sue the cruise line? Remember the flags they fly on the ships, there’s a reason for it. They are literally nations on their own, make their own rules and will survive.There  will be plenty of time to buy the stock, but if you want a good date, try the day the NBA announces play is restarting with a live crowd.

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19 hours 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.

 

13 hours ago, florisdekort said:


We were told by Seabourn on Friday that the current backlog for processing refunds to credit cards is 60 to 90 days. I don’t know if that is because they have to process so many or because they are out of cash. Or both. 

 

I think it's worth noting that there are significant differences in processing payments and refunds. Processing a payment is automatic or nearly so; just think about making any online purchase, where processing can be instantaneous. But refunds in most cases require some amount of manual processing. With large sums, you can be sure that refunds must be reviewed and approved by someone to make sure they're paying out the correct amount. Cruise cancellations are more complex, likely requiring a bit of manual review and processing. People make multiple payments, often via different credit cards. Credit cards which were charged, in some cases a year to two earlier, may have been closed or have new account numbers. Then there are travel agents who get paid commissions; TAs typically get paid after final payment but before cruising, so there's added accounting and tracking because those commissions paid need to be written off. Add to that that the policies for cruise cancellations have changed several times in terms of what is refundable and what is convertible to FCC, so automated rules in computer systems need to be revised or manually overridden. Some cancellations have excursions, pre- or post- hotels, and other paid extras which need to be voided.

 

In my business (which is nothing like cruises), processing refunds doesn't take long, but probably takes 3 to 5 times the amount of time and documentation than a sale does. I don't know the inner workings of a cruise line's systems, but I can understand that it takes much more human action and review to issue refunds than it does to process payments. And a cruise line like Seabourn probably had a handful of people who processed refunds, while now they suddenly have to process a hundred times more refunds than normal, so new staff need to be trained to do refunds while everyone is working from home. 

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16 hours ago, Robisan said:

 

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.

 

 

Yes, Robisan,

 

I saw this one after I had posted.

 

I do honestly believe that Seabourn will survive, and Carnival too, although it may need a White Knight.

 

Their treatment of clients should have been a whole lot better, and I hope that they learn from this experience.

 

If one does not sail with Seabourn, who else meets or exceeds their cruising experience?

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Not sure this has been mentioned previously but in this day and age of eliminating redundant positions within companies that "merge", wouldn't it make sense that since Princess, HAL, and Seabourn are all part of the Holland America Group of Carnival, that there is only one Accounting group that processes claims for all 3 lines?  (e.g., for sure there is only one Employment department that handles all 3 lines)  So if this is the case, one can only imagine the magnitude of cancellations this one Accounting group is dealing with at the moment.

 

Food for thought ……….

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12 hours ago, westmount said:

Logic dictates that they are working on recapitalizing, and thus future cruise credits the only currency that will be coming shortly. If they were to file for protection, everyone will be happy with a future credit, as it is possible a new firm would not honour any past obligation. 

My husband, the long time business bankruptcy lawyer says that it IS likely that a new buyer WOULD honor past obligations as goodwill would be a part of he value of the cruise line.  He says this based on a careers's worth of business cases.  

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2 hours ago, SLSD said:

My husband, the long time business bankruptcy lawyer says that it IS likely that a new buyer WOULD honor past obligations as goodwill would be a part of he value of the cruise line.  He says this based on a careers's worth of business cases.  

Can we hold him to it and sue him if he is wrong? 😃

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6 hours ago, Paulchili said:

Can we hold him to it and sue him if he is wrong? 😃

Ha!  He is so happily retired by the way.  Unlike most lawyers who never want to retire, he is loving it.  I do miss discussing all the legal issues of his cases.  The situation of the cruise lines is most interesting--just from a business and financial point of view.  We would love to know who their lenders are.  My husband thinks they probably use asset based lenders.  

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