What If NCL files for bankruptcy? And we have cruises book ?

[Newleno]

14 minutes ago, Formula280SS said:

 

 

I also do not believe that air travel essential (to prevent the collapse of the economy) during this current 2-3 week period of requested (actually ordered) 6' spacing and 10 group requirements and limitations.

 

Just IMO.

 

 

 

 

Airlines CEO's and do nothing board members have made billions by the policy of stock buybacks, they saved no cash for a rainy day.  Now they get to keep their money, but the us taxpayer has to bail them out?  Nope go Chapter 11 BK, then let private enterprise take the risk of investing again, not the us taxpayer.  I concur not essential, plenty of those little planes they can fly around for essential services.

Edited March 19, 2020 by Newleno

[npcl]

8 minutes ago, Formula280SS said:

 

Regarding holding passenger deposits, I agree; however, I'd like to see an aging of how much is stratified by months ahead of cruise dates.  Again, I agree and I think you are 'on point on that.  Also keeping funds on canceled cruises and limiting to FCC keeps them leveraged-liquid with funds not intended to do that.

 

Regarding airlines, I don't have the some current research understanding of the fundamentals; however, if they 'straightened, why do they need $50-$75 billion already?  I don't have the answer at all, just wondering.

 

Thanks for the discussion.

Both the cruise lines and the airlines are similar industries in that both are capital intensive, highly competitive, low margin businesses.  The differences though are the airlines have a mostly unionized labor force, unlike the cruise industry which makes it difficult to cut costs there.  Airlines depend heavily on leased aircraft, compared to purchased ships so more monthly cash flow. Unlike the cruise industry they cannot take ships out to sea near the bahamas to anchor and eliminate port costs, they still have to pay for planes at airports, they still have to pay fees, in many cases, for landing slots even if they are not using them.  In Europe for example the laws have been that they still need to fly routes, even if they don't have passengers, to keep from permanently losing those slots.

 

Bottom line is the airlines had much better balance sheets, but less ability to lower operating costs during this period of near shutdown, where they are carrying maybe 15-20% of normal passenger load with 70% route cuts and 50% load factor (which is still dropping)

[npcl]

7 minutes ago, Newleno said:

Airlines CEO's and do nothing board members have made billions by the policy of stock buybacks, they saved no cash for a rainy day.  Now they get to keep their money, but the us taxpayer has to bail them out?  Nope go Chapter 11 BK, then let private enterprise take the risk of investing again, not the us taxpayer.  I concur not essential, plenty of those little planes they can fly around for essential services.

I would not have a problem with requiring the airlines to restructure as part of any bailout, but unlike cruise lines, there are some fundamental reasons why the US does need a viable avionics industry and US based airlines.

[npcl]

26 minutes ago, Newleno said:

On a plane people are coughing and sneezing all around you, you cant run you cant hide.  Oh please no one is cleaning surfaces in between flights, probably not even at night.  I had many a filthy tray table, Lot of old planes out there just filled with 15 year old 737 compartment dust right above your head, not to mention the filthy toilet rooms.  Please people do not fly and if you do fly self quarantine for 14 days, I feel so bad for the grocery workers, airline workers, and health care providers literally putting their life at risk for others.  Do Not Fly unless it is essential.

I am a million miler on a couple of different airlines and would certainly agree to limit any flights to essentia flights only.

 

There are numerous studies detailing airflow on a modern airliner with filtering and air flow

 

For example

 

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4626449/

 

Even in the case of someone sneezing and coughing the exposure is limited to a relatively small area on the aircraft.

 

One can mitigate risk to a great degree by cleaning the surface areas that they come in contact with, do not touch seat backs or other surfaces while moving through the plane.  I would also wear a mask if I did have to travel on a plane today.

Edited March 19, 2020 by npcl

[NJGeorge]

People cruise because they like it. No one in their right mind likes to fly, especially after 9/11.

Let the airlines bail themselves out. 

[Ptroxx]

16 minutes ago, NJGeorge said:

People cruise because they like it. No one in their right mind likes to fly, especially after 9/11.

Let the airlines bail themselves out. 

I actually enjoy flying.   Means I’m on my way to an exciting place to relax most of the time.   I even traveled this weekend.   The plan was almost full. 

[NJGeorge]

1 hour ago, Ptroxx said:

I actually enjoy flying.   Means I’m on my way to an exciting place to relax most of the time.   I even traveled this weekend.   The plan was almost full. 

 

You must be short or able to fly first class and enjoy being in a herd.

 

[PelicanBill]

5 hours ago, Formula280SS said:

 

 A couple of thoughts and some information.

 

1.  NCLH Footnotes disclose the "ships are pledged as collateral" and, reading such, it appears some are on a ship basis or group of ship basis.  With different lenders, it makes for a wider number of already vested lenders to provide liquidity (which, IMO, correctly is the issue, whether it is 3 months @ closed, 3 more @ 50% and 6 more @ 75% capacity, or worse.  It is not, IMO, a Corporate "misdeed" that has caused this and the lending institutions cannot operate the cruise lines any better than existing Corporate structure.

 

2.  NCLH Footnotes disclose the PRINCIPAL obligations out 5-years (with attention to 1-year obligations) to add to interest.

 

 

3.  NCLH Financial Statements, specifically the Balance Sheet, provide the Net Assets at the prior year end (as a side note; the Market CAP of the stock was about $1.8B yesterday; or 27% of Net Assets.  IMO, there is not a "Capitalization Issue" it is, again, a "Liquidity Issue" for an unknown, BUT NOT INDEFINITE, period of time.

 

 

 

The reason companies enter bankruptcy is they run out of cash.

The immediate impact is

1. Can't make payroll

2. Can't pay suppliers

3. Can't pay debt service and default occurs

 

Look at the cash balance - stronger in 2019 than in 2018. That's good. But with ships idle and bookings down the question is how fast will they burn through that cash, and do they have any way to create any more cash or is that it?  When will it run out?

 

Chapter 11 reorganization depends on presenting a new business plan to exit bankruptcy that shows ability to make money again - you have to convince a financing source or two to put up the money to bridge you through bankruptcy and then afterward AND pay them back.  Usually that means restructuring the company and selling off assets to generate some money and have a leaner operation. At a high interest rate and with new board members and convenants of performance each quarter.

 

Source: done all this as a mid level executive in a global company.  

 

Edited March 19, 2020 by PelicanBill

[Formula280SS]

1 minute ago, PelicanBill said:

The reason companies enter bankruptcy is they run out of cash.

The immediate impact is

1. Can't make payroll

2. Can't pay suppliers

3. Can pay debt service and default occurs

 

Look at the cash balance - stronger in 2019 than in 2018. That's good. But with ships idle and bookings down the question is how fast will they burn through that cash, and do they have any way to create any more cash or is that it?  When will it run out?

 

Chapter 11 reorganization depends on presenting a new business plan to exit bankruptcy that shows ability to make money again - you have to convince a financing source or two to put up the money to bridge you through bankruptcy and then afterward AND pay them back.  Usually that means restructuring the company and selling off assets to generate some money and have a leaner operation. At a high interest rate and with new board members and convenants of performance each quarter.

 

Source: done all this as a mid level executive in a global company.  

 

 

Extremely familiar with Chapter 11 Public Corporation Reorganizations.

 

IMO, the COVID19 induced ones just don't meet the typical criteria for what such bankruptcy courts generally do.  Governance, Management, the CEO and CFO, by their actions or inactions, did not cause the COVID19 Pandemic and government shut-downs.

 

Again, IMO, the don't need a NEW BUSINESS PLAN as the business plan for 30-60 days ago didn't fail; a GLOBAL Pandemic evolved and affected all industries in all countries on the planet.

 

Also, IMO, they don't need to change their operations to be leaner; they were making almost 20% profits and have billions in equity.

 

I do agree with a previous poster with regards to cash liquidity; they need to establish higher cash reserves, higher line of credit facilities and really not rely on passenger prepaid fees for such a high % of financing cash flow.

 

Again, IMO, just doesn't meet the typical Chapter 11 reorganization characteristics, no need to sell assets and/or change the Board of Directors.

 

The instant a COVID19 'vaccine and/or 'drug-therapy (not my language) is found, the world can start to return to normal.

 

Just IMO.

 

Actually, at these stock prices, with the financing in place at the disclosed rates, NCLH could be a 'cheap target for a large hedge fund or deep pocket billionaire.

 

Thanks for the discussion.

[npcl]

12 minutes ago, PelicanBill said:

The reason companies enter bankruptcy is they run out of cash.

The immediate impact is

1. Can't make payroll

2. Can't pay suppliers

3. Can't pay debt service and default occurs

 

Look at the cash balance - stronger in 2019 than in 2018. That's good. But with ships idle and bookings down the question is how fast will they burn through that cash, and do they have any way to create any more cash or is that it?  When will it run out?

 

Chapter 11 reorganization depends on presenting a new business plan to exit bankruptcy that shows ability to make money again - you have to convince a financing source or two to put up the money to bridge you through bankruptcy and then afterward AND pay them back.  Usually that means restructuring the company and selling off assets to generate some money and have a leaner operation. At a high interest rate and with new board members and convenants of performance each quarter.

 

Source: done all this as a mid level executive in a global company.  

 

While I have not ever been in a company that has declared bk, I have been on senior management teams that have purchased some. Some just purchasing the assets out of liquidation.  Others where we negotiated a takeover that enabled the restructured business to return to operations.

[npcl]

8 minutes ago, Formula280SS said:

 

Extremely familiar with Chapter 11 Public Corporation Reorganizations.

 

IMO, the COVID19 induced ones just don't meet the typical criteria for what such bankruptcy courts generally do.  Governance, Management, the CEO and CFO, by their actions or inactions, did not cause the COVID19 Pandemic and government shut-downs.

 

Again, IMO, the don't need a NEW BUSINESS PLAN as the business plan for 30-60 days ago didn't fail; a GLOBAL Pandemic evolved and affected all industries in all countries on the planet.

 

Also, IMO, they don't need to change their operations to be leaner; they were making almost 20% profits and have billions in equity.

 

I do agree with a previous poster with regards to cash liquidity; they need to establish higher cash reserves, higher line of credit facilities and really not rely on passenger prepaid fees for such a high % of financing cash flow.

 

Again, IMO, just doesn't meet the typical Chapter 11 reorganization characteristics, no need to sell assets and/or change the Board of Directors.

 

The instant a COVID19 'vaccine and/or 'drug-therapy (not my language) is found, the world can start to return to normal.

 

Just IMO.

 

Actually, at these stock prices, with the financing in place at the disclosed rates, NCLH could be a 'cheap target for a large hedge fund or deep pocket billionaire.

 

Thanks for the discussion.

No matter what the cause their fault, not their fault, etc. If they run out of operating funds and cannot raise enough to get buy, it means default.  So a lot depends upon the terms upon which additional funds can be obtained, which depends upon how long this lasts.  3 month, probably not an issue as long as they can keep the majority of the deposit funds.  Over 6 months before normal return to business, I doubt they can avoid wiping out shareholders.

 

There are companies that declared BK after 9-11 where it was not their fault either.  Still went broke.

 

Considering what is going on in the rest of the markets, those billionaire hedge funds are taking a bath of their own. 

Edited March 19, 2020 by npcl

[Formula280SS]

2 minutes ago, npcl said:

No matter what the cause their fault, not their fault, etc. If they run out of operating funds and cannot raise enough to get buy, it means default.  So a lot depends upon the terms upon which additional funds can be obtained, which depends upon how long this lasts.  3 month, probably not an issue as long as they can keep the majority of the deposit funds.  Over 6 months before normal return to business, I doubt they can avoid wiping out shareholders.

 

Generally, yes I agree (especially about the 6 month mark); as well as for every restaurant, bar, hotel, etc. in the world.

Edited March 19, 2020 by Formula280SS

[PelicanBill]

5 minutes ago, Formula280SS said:

 

Again, IMO, the don't need a NEW BUSINESS PLAN as the business plan for 30-60 days ago didn't fail; a GLOBAL Pandemic evolved and affected all industries in all countries on the planet.

 

Also, IMO, they don't need to change their operations to be leaner; they were making almost 20% profits and have billions in equity.

 

I do agree with a previous poster with regards to cash liquidity; they need to establish higher cash reserves, higher line of credit facilities and really not rely on passenger prepaid fees for such a high % of financing cash flow.

 

Again, IMO, just doesn't meet the typical Chapter 11 reorganization characteristics, no need to sell assets and/or change the Board of Directors.

 

The instant a COVID19 'vaccine and/or 'drug-therapy (not my language) is found, the world can start to return to normal.

 

 

They WERE profitable. The question is WHEN will they be again?  If we have to weather a year before there is a vaccine and the law of the land is nobody over 50 go on cruises... for a year... how does that impact cash flow?

 

If they enter bankruptcy for running out of cash and the only way to fill cabins is at 50% fares... will they be able to make debt service?  I think the court will still have to look at all that since they just wiped out millions of people's investments to reorganize.

[Newleno]

2 minutes ago, npcl said:

No matter what the cause their fault, not their fault, etc. If they run out of operating funds and cannot raise enough to get buy, it means default.  So a lot depends upon the terms upon which additional funds can be obtained, which depends upon how long this lasts.  3 month, probably not an issue as long as they can keep the majority of the deposit funds.  Over 6 months before normal return to business, I doubt they can avoid wiping out shareholders.

there aint gonna be the demand and their aint gonna be the disposal income, for a long time coming

[Formula280SS]

1 minute ago, PelicanBill said:

 

They WERE profitable. The question is WHEN will they be again?  If we have to weather a year before there is a vaccine and the law of the land is nobody over 50 go on cruises... for a year... how does that impact cash flow?

 

If they enter bankruptcy for running out of cash and the only way to fill cabins is at 50% fares... will they be able to make debt service?  I think the court will still have to look at all that since they just wiped out millions of people's investments to reorganize.

 

As per reply to NPCL above, I agree that the 6-month of no operations could end it all (for one heck of a lot of business in a lot of industries).

 

Hoping for a 'vaccine.

 

Hoping for drug therapy (treatments).

 

GLTA.

 

I probably won't worry about Norovirus ever again!!!!!!!!!!

[npcl]

3 minutes ago, Formula280SS said:

 

Generally, yes I agree (especially about the 6 month mark); as well as for every restaurant, bar, hotel, etc. in the world.

I tend to track the bond market as a leading indicator about how some people much smarter than I am think about companies and industries and while information about NCLH is not available the short term bond for CCL and RCL are not looking good;

 

CCL 3.95% 10/15/20    now at 29.831 YTM

RCL 2.65%  11/28/20   now at 17.247 YTM

 

This is up with Occidental Petroleum  and Macys.

[sfaaa]

2 hours ago, npcl said:

Both the cruise lines and the airlines are similar industries in that both are capital intensive, highly competitive, low margin businesses. 

This description pretty much applies to the entire hospitality industry including hotels and restaurants. It's a tough business to be in especially during an economic downturn.

[Formula280SS]

2 minutes ago, npcl said:

I tend to track the bond market as a leading indicator about how some people much smarter than I am think about companies and industries and while information about NCLH is not available the short term bond for CCL and RCL are not looking good;

 

CCL 3.95% 10/15/20    now at 29.831 YTM

RCL 2.65%  11/28/20   now at 17.247 YTM

 

This is up with Occidental Petroleum  and Macys.

 

Oh, a bond guy.  I've known some really smart ones from 2008.  Learned a lot back then.  Retired 3-4 years later 😀; had been waiting for that crash for 30 months.

 

I'm not posting now from an investor posting perspective, but am very familiar with the terms.  You are correct, the bonds are a very good indicator of the risk; yet the stock is selling hoping for what appears to be similar multiples on a 'turn around than if they alternately bought the bonds and they were made whole (via reorganization for example; no guarantee as the above cost/yield you posted indicate).

 

Thanks.

 

[npcl]

2 minutes ago, Formula280SS said:

 

As per reply to NPCL above, I agree that the 6-month of no operations could end it all (for one heck of a lot of business in a lot of industries).

 

Hoping for a 'vaccine.

 

Hoping for drug therapy (treatments).

 

GLTA.

 

I probably won't worry about Norovirus ever again!!!!!!!!!!

There are some drugs that are showing efficacy in Japan a Fujifilm drug Avigan that is a wide spectrum treatment for flu, seems to work if used early to slow down virus replication.  You have remdesivir that is also showing promise.  However, it will take time.  First to really test efficacy.  Second to ramp up production to generate the volumes needed.  

 

I put this into 3 stages.  This round for which we need isolation as much as possible (rather disappointed that this is going to be quick after seeing the pictures out of Florida and Texas beaches).  The next round in the fall for which we might have some treatments for the seriously ill and maybe if Avigan works out a preventive drug for health care workers. The third round next year by which time we just might have vaccine.

[npcl]

5 minutes ago, Formula280SS said:

 

Oh, a bond guy.  I've known some really smart ones from 2008.  Learned a lot back then.  Retired 3-4 years later 😀; had been waiting for that crash for 30 months.

 

I'm not posting now from an investor posting perspective, but am very familiar with the terms.  You are correct, the bonds are a very good indicator of the risk; yet the stock is selling hoping for what appears to be similar multiples on a 'turn around than if they alternately bought the bonds and they were made whole (via reorganization for example; no guarantee as the above cost/yield you posted indicate).

 

Thanks.

 

I suspect the variances are because this is all new territory (1918 is a bit far back to use it as a model and it is about the only thing close) and no one has any idea how long this is going to last and how fast business will pick up afterwards.  While everything across the spectrum has been selling off and thus impacting bond prices, the cruise lines have been doing far worse than the rest.

 

As in the ancient curse may you live in interesting times, these are in fact interesting times.

[Formula280SS]

2 minutes ago, npcl said:

There are some drugs that are showing efficacy in Japan a Fujifilm drug Avigan that is a wide spectrum treatment for flu, seems to work if used early to slow down virus replication.  I've been following that; apparently used in South Korea also. You have remdesivir that is also showing promise.  However, it will take time.  First to really test efficacy.  Second to ramp up production to generate the volumes needed.  Yep.

 

I put this into 3 stages.  This round for which we need isolation as much as possible (rather disappointed that this is going to be quick after seeing the pictures out of Florida and Texas beaches).  We are in Florida, Hutchinson Island Stuart FL, Jensen Beach.  When the Spring Breakers were subject to closed beaches at FLL and MIA, they moved north to ocean communities that had to deal with them and close beaches.  Now they are passing through here; Sheriffs on ATV's patrolling all day long.  We are shuttered in an incredible resort, with bars and restaurants closed, pools and fitness center, sitting on our ocean balconies looking at these "inconsiderate, immature" kids (I was one, married one and raised three also).  The next round in the fall for which we might have some treatments for the seriously ill and maybe if Avigan works out a preventive drug for health care workers. The third round next year by which time we just might have vaccine.  Agree, agree.

 

[npcl]

5 minutes ago, Formula280SS said:

We are in Florida, Hutchinson Island Stuart FL, Jensen Beach.  

We were supposed to be in Sydney now, getting ready to do 3 cruises, including one back to Honolulu with the intent of flying to Florida afterwards to buy a house in that area near Port St Lucie.  That plan is very much on hold.

 

 

[luv2kroooz]

Just reading that Carnival ships could be used as hospitals during the crisis. It would be nice if NCL could participate too. Could be a little revenue for them during this time. This happened during a hurricane a while back, if I recall correctly.

Edited March 19, 2020 by blcruising

[em-sk]

6 hours ago, npcl said:

Both the cruise lines and the airlines are similar industries in that both are capital intensive, highly competitive, low margin businesses.  The differences though are the airlines have a mostly unionized labor force, unlike the cruise industry which makes it difficult to cut costs there.  Airlines depend heavily on leased aircraft, compared to purchased ships so more monthly cash flow. Unlike the cruise industry they cannot take ships out to sea near the bahamas to anchor and eliminate port costs, they still have to pay for planes at airports, they still have to pay fees, in many cases, for landing slots even if they are not using them.  In Europe for example the laws have been that they still need to fly routes, even if they don't have passengers, to keep from permanently losing those slots.

 

Bottom line is the airlines had much better balance sheets, but less ability to lower operating costs during this period of near shutdown, where they are carrying maybe 15-20% of normal passenger load with 70% route cuts and 50% load factor (which is still dropping)

 

In the US airlines actually have long-term multi-year leases for the gates.  So they are paying fees for parking spaces for the ones they leave at the gate.  They still need to pay to park aircraft once they fill up the gate space.  They are probably sending them to desert where there are airports and contractors that focus in maintaining aircraft in storage. 

 

In Canada, Europe, Asia it not normal for gates to be dedicated to a specific airline so they would pay based on the time it spends at the gate.

 

I think the biggest different between the is the regulatory stricture.  Every airline has a home country and for the most part every flight starts or ends in its home country.  The inflight crew under the labour laws of its home country and therefore unionize. 

 

Cruise ships operate under flags of convenience subject to the labour laws of that country and mostly employee people who are not citizens of that country.  It is almost like they are trying to avoid the long term liability associated with being an employer.  

[CI66774]

On 3/18/2020 at 2:54 PM, ano said:

The fact that cruise lines register in other countries to skirt US employment laws and taxes doesn't bode well to a bailout by US taxpayers. 

NCL Holdings is domiciled in Bermuda. It seems to me Bermuda should be bailing the company out....if any country.