Solvency of Cruise Lines

[JMARINER]

Makes me wonder if Mr. Black from Apollo might have an eye out to buy back in for pennies on the dollar. He sold off his last 7% share of NCLH about 2 years ago for $51 per share. At one time Apollo owned about 33% of NCLH.

 

J

[Steve Q]

4 hours ago, bissel said:

Steve, so the choice may be between PE control vs. going out of business, right?

The one thing that appears to be certain is that Norwegian is going to raise capital. They could try the Debt markets, but Carnival recently had to pay almost 11% to access those markets. In today’s low interest environment, that tells you all you need to know about their financial condition. That was in addition to having to sell part of the company. I cannot imagine that Norwegian is in any better condition. It just does not seem feasible that they can remain exactly in their present condition without making significant changes. Time will tell.

[Travelcat2]

I find it interesting that Regent is owned by NCLH, Silversea is now partially owned by Royal Caribbean and Seabourn is owned by Carnival.  For some reason, luxury cruise lines do not do well on their own. Perhaps the ships are too small and need to be maintained meticulously.

 

When Regent was owned by PCH, there were no new ships and the food offerings were less than they are now (no lobster, filet mignon, etc. every night unless it was a special order.)

 

Also keep in mind that the majority of the Board of Directors of NCLH were on the Board of PCH so, leaving NCLH takes Regent into the unknown.  Based on past experience, it takes a while for new owners to learn what Regent cruisers expect.

[flossie009]

10 hours ago, Travelcat2 said:

Flossie - there are many other people that feel the same way about excursions and Destination Services as I do

............. and there are many others who feel the opposite way.

 

It is clear from your critical  posts on CC and elsewhere on social media that you and a senior member of Destination Services had an issue in the past. One of you is unable to recover from the experience and move on.

 

My opinion remains that Regent dropping included excursions in order to marginally decrease their prices will either have no impact on their future prosperity or may well be detrimental to their market share.

 

[GrJ Berkshire]

2 hours ago, flossie009 said:

............. and there are many others who feel the opposite way.

 

It is clear from your critical  posts on CC and elsewhere on social media that you and a senior member of Destination Services had an issue in the past. One of you is unable to recover from the experience and move on.

 

My opinion remains that Regent dropping included excursions in order to marginally decrease their prices will either have no impact on their future prosperity or may well be detrimental to their market share.

 

Totally agree with you, the inclusive nature is one of the best features of Regent

Keep well and safe and some day carry on cruising

[pappy1022]

Recent information from Barron's on cruise industry. 

 

The Big Three

With the coronavirus crisis keeping the cruise industry from sailing at least through mid-July, analysts have been trying to assess how much cash the three largest U.S. cruise operators are burning through each month and their remaining liquidity.

 

Company / Ticker	Estimated Monthly Cash Burn With No Revenue (mil)	Estimated Months of Liquidity
Carnival / CCL	$834	9
Royal Caribbean Cruises / RCL	441	7
Norwegian Cruise Line Holdings / NCLH	251	5

Note: these estimates assume that cruise operators can defer at least half of their payments on export credit loans that finance new ships.

 

Given the uncertain length of revenue disruption, investors have bailed out and shares of the big three cruise stocks have tumbled this year.

 

Company / Ticker	2018 Global Passenger Market Share	YTD stock Performance	Ship Deliveries *
Carnival / CCL	47.40%	-76.10%	5
Royal Caribbean Cruises / RCL	23	-72.4	4
Norwegian Cruise Line Holdings / NCLH	9.5	-80.4	1

*Initially scheduled for this fiscal year. Note: performance as of 4/23/20.

 

But intrepid investors might take heart that the industry has shown resilience during prior times of duress in recent years.

 

Time Frame	Historical Context	Price Decline Duration
2000 – 2003	2001 Recession / 9/11 Terror Attack / Iraq War / SARS	3 Years
2008 - 2009	2008 - 09 Recession	12-14 Months
January 2012	Costa Concordia Disaster*	10 Months

[bissel]

SteveQ, Thanks for your thoughts.

If a private equity firm gets involved, if it buys Regent, do Regent’s financial obligations for refunding cruises, go away or get reduced? In other words, what might happen to the unpaid refunds?

[Pcardad]

No change on a purchase of some equity.

[Steve Q]

5 minutes ago, bissel said:

SteveQ, Thanks for your thoughts.

If a private equity firm gets involved, if it buys Regent, do Regent’s financial obligations for refunding cruises, go away or get reduced? In other words, what might happen to the unpaid refunds?

Absent a bankruptcy filing, any acquirer of Norwegian would also assume all of its liabilities. Thus the capital infusion would be a net positive if your funds were being held by the company. If you are a shareholder, in theory your ownership would be diluted. That said, it is possible that any Private Equity firm could impose changes that might make the shares more valuable. It is a big unknown. I think it is fairly safe to say that new capital is going to be required. It is just a matter of its source.

[rallydave]

13 minutes ago, bissel said:

SteveQ, Thanks for your thoughts.

If a private equity firm gets involved, if it buys Regent, do Regent’s financial obligations for refunding cruises, go away or get reduced? In other words, what might happen to the unpaid refunds?

Don't believe there is any possibility of NCLH selling off any of the 3 brands.  After all the purchase of PCH resulted in significant annual savings of over $50M due to combining the 3 cruise lines.  Selling off any of the cruise lines would increase the costs for all 3 and increased costs are certainly nothing that NCLH or any private equity would ever want especially at this point in time.

[bissel]

Okay, good. Thanks.

[bissel]

Rallydave, so you’re thinking they won’t go the private equity route and stay with an 11% bond?

Sorry for my simple questions about this. I have a very basic knowledge of the financial workings. Very basic.

[rallydave]

18 minutes ago, bissel said:

Rallydave, so you’re thinking they won’t go the private equity route and stay with an 11% bond?

Sorry for my simple questions about this. I have a very basic knowledge of the financial workings. Very basic.

NO.  I have no idea how this infusion of cash will work other than sure that it won't be by selling off any of the 3 lines.  Financially speaking selling off Regent, Oceania or NCL would increase the cost of business so much it would not make sense financially either now under these conditions or anytime else.

 

As I said, the bringing in Regent and Ocania to join NCL as thre separate cruise lines brought in the savings of being able to combine many of the business unites effecting fewer total people and other savings like buying in bulk, etc.  At the time of the purhase, the estimate was the combination would result in savings of approx. #25M annually.  There was a clause in the purhae agreement that if in the first year the savings met or exceeded $59 M a bonus would be paid.  In fact fdr received a bonus for that year of approx. $33M indicating that management had succeeded in meeting or exceeding the $50M savings.

 

That said imagine what the added costs would be to now break up the 3 cruise lines??  It is impossible to imagine any company would purchase one or more of the 3 knowing that costs would increase significantly for their purchased cruise line or for NCLH to sell know their costs would increase as well.   Would not be a smart business decision by either party.

[mrlevin]

35 minutes ago, rallydave said:

 Would not be a smart business decision by either party.

 

I agree; just wishful thinking on my part to envision an economically viable independent Regent headed by Jason.

[Travelcat2]

It is unfortunate that I am being misquoted repeatedly about the excursion issue.  I have absolutely not made any comment about removing or stopping included excursions.  Please reread my posts.  I don’t even think that it would be a good idea to stop included excursions.  If they stopped included excursions, Regent could easily lose customers - both present and future.

 

What I do think is that there should be a opt-out option.  If anyone wants to go back a few years and see posts from CC members that left Regent over this issue, it is likely still in CC archives.  On this thread, if you go back a few pages, there were people posting that they also would like a opt out option.  

 

It does seem that those of us that would appreciate an opt out option are those that sailed extensively with Regent and/or have traveled internationally quite a bit.  Regardless of this, going forward, some passengers may not be comfortable in an enclosed bus to go on an excursion - even if the bus were half full.  Heck, from reading CC recently, some people won’t sail at all because they don’t want to be on a cruise ship in close proximity to others.  So, given the current pandemic, passengers not willing to cruise at all, cruise lines need to do something to entice passengers back.  

 

So, if Regent can do something for their long time customers that saves them money, and does not require lowering the fare for everyone, it is a win-win situation.  IMHO, anything that Regent does to get more passengers cruising again is a good thing and is certainly good for their bottom line.  

[rallydave]

5 minutes ago, Travelcat2 said:

So, if Regent can do something for their long time customers that saves them money, and does not require lowering the fare for everyone, it is a win-win situation.  IMHO, anything that Regent does to get more passengers cruising again is a good thing and is certainly good for their bottom line.  

While your intentions are good, there is no way it is a win/win looking at the complete ramifications.  First of all you have said that it would be a simple checking a box.  Actually much more with software changes and the destinations staff who are already overwhelmed and not very helpful now having this added confusion.

 

Yes it would be a win for passengers wanting to opt out unless the credit was so small that the few excursions that the opt out people would want to book made the total cruise cost actually higher.  Don't laugh, it is a possibiity.  And most of all it would reduce Regent's gross income and net profit which is something no company will willingly do.

 

So it might or might not be a win for the customer and for shure a loss for Regent which is why it hasn't and won't happen no matter how much people keep pushing this not very well throughout idea.

[Pcardad]

Regent could reduce the fair by the cost portion of the excursions and maintain their net profit. However, as long as Regent continues to fill their ships, I would not expect them to do anything that is not in their interest.

[Travelcat2]

During my discussions with Regent on this issue, there was no talk of it costing more money.  It was simply something that they did not need to do at the time.

 

While I admittedly am not a math person, it would see to me that Regent’s gross income and net profit would not be affected by a change of this nature.  If this change brings in more customers, is that not more revenue?  

 

I’m not sure when Destination Services began programming Regent’s website.  Unless something dramatic has changed, this would be done by a different department - one that is less busy than usual (but will be slammed once the beginning of June  approaches).

 

Pcardad - just saw your post and agree that Regent would not consider this change if their ships are full (see first paragraph of this post).  Actually, the whole point of my bringing this issue up again was due my being misquoted repeatedly on this issue.

[rallydave]

8 minutes ago, Pcardad said:

Regent could reduce the fair by the cost portion of the excursions and maintain their net profit. However, as long as Regent continues to fill their ships, I would not expect them to do anything that is not in their interest.

Don't see how that would work.  Yes, that would work assuming everyone took at least one tour every port.  We know that is not true as for anyone not taking a tour in a port now Regent makes the total cost of the tour while you are only reducing by the net portion thus Regent would lose the net portion they would have gotten had the customer not taken the tour.

[Pcardad]

Accounting has already proportioned a customer's fare down to such a degree that they can identify the portion allocated for excursions and the profit from excursions. More than enough data points for a solid statistical analysis. It would be nice to opt out of them. For some, they are great. For others, not so much. One of the greatest benefits is that Regent will not leave you on the pier if the excursion runs late. 

 

A bit of info....the Destinations Desk has the ability to make a custom excursion for you and book it as a Regent excursion which means you are protected if it runs late. Have done this before a few times including an overnight to a safari in Africa. The Destination Managers are generally EXCELLENT...the staff runs the range from brand new to excellent. It can't be an easy job.

 

 

[rallydave]

3 minutes ago, Travelcat2 said:

I’m not sure when Destination Services began programming Regent’s website.  Unless something dramatic has changed, this would be done by a different department - one that is less busy than usual (but will be slammed once the beginning of June  approaches).

Never said destinations would probram the software.  They have to differentiate between people opting in and opting out and with their already known difficulty managing everyone having the excursions it would be a nightmare for them to accurately manage this new difference.

 

And, of course Regnet would NOT discuss with you or anyone outsinde the company their financials but, your suggestion would be a bookkeeping nightmare that would be difficult to accurately manage with the likelyhood of loss of profit because as you know the ships are almost always full so no reason to reduce income and profit that will not increase bookings.

[BBWC]

Looks like Germany is providing a bit of a bailout (also for Royal Caribbean)

https://www.cruiseindustrynews.com/cruise-news/22833-norwegian-makes-moves-on-ship-finance-deals-gains-386-million.html

[1982CruzStart]

22 hours ago, mrlevin said:

 

Sort of like "Canadian dollar at par;" Regent is able to discount cruises for Canadian while still keeping USA prices higher and not honoring onboard price guarantee.

I don't think allowing an opt out option is at all like 'Canadian dollar at par'. I would say the 'Canadian dollar at par' equates more closely to the discounts offered in the UK and Europe. 

As the number of US customers far surpasses the number of Canadian cruisers the impact on Regent's bottom line could be far greater by the large number of loyal US customers wanting to opt out than the few Canadians taking advantage of the 'at par' cruises offered.  We have never taken an 'at par' cruise but i have looked at them. They are the cruises that are the least popular and Regent is trying to sell them off without breaking their no US discounting policy. 

I don't know how Regent not honoring their onboard price guarantee has anything to do with 'at par' cruises.  The one time we had a price guarantee opportunity, Regent honored ours. Sorry if that didn't happen for you but not sure why that has anything to do with my comments on opting out.

If fact i said i understood why people might want to opt out, i just didn't think Regent would go for it because of the potential negatvie impact by the large number of repeat  US cruisers that might want to take advantage of an opt out. 

[mrlevin]

5 minutes ago, 1982CruzStart said:

 

I don't know how Regent not honoring their onboard price guarantee has anything to do with 'at par' cruises.  The one time we had a price guarantee opportunity, Regent honored ours. Sorry if that didn't happen for you but not sure why that has anything to do with my comments on opting out.

If fact i said i understood why people might want to opt out, i just didn't think Regent would go for it because of the potential negatvie impact by the large number of repeat  US cruisers that might want to take advantage of an opt out. 

 

It has everything in the world to do with not honoring their onboard price guarantee.  Canadian at par doesn't violate it (as not available in USA); dumping overseas doesn't violate the onboard price guarantee (as not available in USA).  I wish Regent would get rid of that stupid guarantee so that they can offer last minute deals to Americans too.

 

As far as opting out of excursions, two separate topics.  This thread is about solvency of cruise lines and not just about excursions.

 

Just my two confederate sense.

 

Marc

 

PS I freely choose to sail Regent even though I don't agree with all their decisions.

[Dolebludger]

While I do think an "opt-out" option for included excursions would be a good idea in the future, since their were so many "never cruse Regent again" posts when  the inclusion was announced. However, right now Regent has bigger fish to fry. It has to find a way to get cruising again! With the CDC order currently banning cruises that use US ports until late July (and other bans in foreign destinations being indefinite), Regent will have been idle for at least four months -- incurring major expenses all the while. Any longer delays, and there could be big problems.