Future of NCL

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May 13, 2020
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I was hoping to get advice about NCL. We recently rebooked Cruise for next year that was cancelled. After rebooking, we noticed articles last week about NCL possibility going out of business. We’re a bit unsettled and not sure if we should ask for a refund from them and book with another cruise line.
 

Neil Maley

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justlisa

Feb 12, 2019
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As Neil said they got funding that has positioned them better than some cruise lines. I have their stock, a booked cruise, and cruise next with them and I'm not especially worried.

Plus, since you already accepted the future cruise credit and used it I don't see them reversing that to then refund you. So probably best not to worry about something you can't change now anyways.
 
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jsn55

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Dec 26, 2014
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I was hoping to get advice about NCL. We recently rebooked Cruise for next year that was cancelled. After rebooking, we noticed articles last week about NCL possibility going out of business. We’re a bit unsettled and not sure if we should ask for a refund from them and book with another cruise line.
The news of the funding was announced almost at the same time we were getting worried, Tammy. I have two cruises booked with NCL, so you can bet I was paying very close attention! NCL is a new cruise line for us, but we are on a budget kick and are trying to save some money on travel. It would be awful if our budget choice turned out to be bankrupt by the time of our first cruise. So, for the moment, all is well. I don't think I've ever spent so much time concerned with the longevity of big corporations as during this virus crisis. You are to be commended on following up with this topic ... seems to me that forewarned is forearmed, and we can more easily handle the negatives if they show up.
 
Sep 18, 2018
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The issue is the press was right there to report bad news but totally ignored the news about the funding that they received.
Except for stories by Forbes, CNN, Bloomberg, the Wall Street Journal, NASDAQ, CNBC, Barrons, Cruise Industry News, MarketWatch and many newspapers and travel publications/sites. All of them covered the funding in the past week -- some wrapped within an overview of NCL's financial outlook.

The reality is that there are so many companies facing a dim outlook these days that one company's story can get lost in the influx of coverage for everyone. But the mainstream press has definitely covered NCL's funding.
 
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Neil Maley

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But I’m betting that many people get news from Facebook and we kept seeing the original story continually passed around well after the other stories were written. It seems only bad news is spread, not good.
 
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Teri Bergin

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Mar 12, 2016
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I have $ 1,000 in prepaid deposits to NCL. I'm hoping that they will survive because I love cruising with them.

If they do go under, you and I will be among many unsecured creditors.
 

Teri Bergin

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They have raised funding that will leave them able to run for 18 months without a single new booking coming in. Two weeks ago they had their biggest day of bookings in their history. They are in better shape than some of the other cruise lines right now.
I'm starting a new job in a couple of months, but I promised my travel agent that I would book a cruise soon!
 
May 30, 2019
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They have raised funding that will leave them able to run for 18 months without a single new booking coming in. Two weeks ago they had their biggest day of bookings in their history. They are in better shape than some of the other cruise lines right now.
I was part of their 'biggest day of bookings'. I, and I believe, many others, were actually rebooking cruises to use the cruise credit that was posted on May 1 with 25% bonus.
 
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smd

Mar 14, 2018
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They have raised funding that will leave them able to run for 18 months without a single new booking coming in. Two weeks ago they had their biggest day of bookings in their history. They are in better shape than some of the other cruise lines right now.
The new funding was debt paying 12.25% interest. To give you an idea of the risk perceived by the lenders, that's about 10% higher than investment grade corporate bonds.

Unlike cruise credits, the debt is also secured by NCL's assets. So while I agree that NCL is unlikely to go under in the short term, it would be a mistake to feel too comfortable holding these credits.
 
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Neil Maley

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The new funding was debt paying 12.25% interest. To give you an idea of the risk perceived by the lenders, that's about 10% higher than investment grade corporate bonds.

Unlike cruise credits, the debt is also secured by NCL's assets. So while I agree that NCL is unlikely to go under in the short term, it would be a mistake to feel too comfortable holding these credits.
It could be a mistake to hold ANY credits too long, whether it’s a cruise, air or tour.
 
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justlisa

Feb 12, 2019
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I mean, to be fair, I don't think a 10% higher risk is all that high. Even before the pandemic any market for over cost of the Cruise Next had basically disappeared. If you're talking Future Cruise Credits they're not transferable so no ability to sell those. So the only way to "not hold on to" the credits is to sail. I'll personally reassess on my next cruise, but I'll likely be replacing my Cruise Next on my next cruise with given information so far - especially since NCL sells them for half price and my NCL stock benefit cuts it to 70% off (ignoring whether my current OBC holds).

That being said, while I've bought a lot of those credits it's only because in the past I've used them less than 2 years from purchase. All my current credits are less than a year old. It's a personal decision of course. And of course it all predicates on them sailing again. They don't have to be at capacity to break even - Royal recently said it's 50% for old ships and newer are 30% - so as long as they ships are running at reduced capacity it helps.
 

smd

Mar 14, 2018
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I mean, to be fair, I don't think a 10% higher risk is all that high.
Well, it's not 10% riskier--It's 10% higher interest. Since investment grade bonds are yielding less than 2.5%, a simplistic interpretation would be that investors consider NCL to have 400% higher risk than a healthy company.
 

justlisa

Feb 12, 2019
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Well, it's not 10% riskier--It's 10% higher interest. Since investment grade bonds are yielding less than 2.5%, a simplistic interpretation would be that investors consider NCL to have 400% higher risk than a healthy company.
Gotcha. Using x% higher makes it confusion because I think see the % as a calculation to make vs an addition. As it being 10% higher than the normal vs adding 10 percentage points to the normal (I usually see this as 10 points higher, but that might not be universal).
 
May 15, 2016
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Gotcha. Using x% higher makes it confusion because I think see the % as a calculation to make vs an addition. As it being 10% higher than the normal vs adding 10 percentage points to the normal (I usually see this as 10 points higher, but that might not be universal).
You are correct. It is 10 percentage points higher. It is NOT 10% higher. That would be wrongly worded. Huge difference.
 
Sep 27, 2018
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The new funding was debt paying 12.25% interest. To give you an idea of the risk perceived by the lenders, that's about 10% higher than investment grade corporate bonds.

Unlike cruise credits, the debt is also secured by NCL's assets. So while I agree that NCL is unlikely to go under in the short term, it would be a mistake to feel too comfortable holding these credits.
The reason the interest rate is so high is that the NCL assets are of limited value. If NCL can't turn a profit running those ships, probably no other buyer for the ships will have any better success. The good news is that the lenders will be very flexible since those assets are more valuable in NCL's hands. Thus, expect that NCL will be able to run cruises unless the entire industry collapses.
 
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smd

Mar 14, 2018
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The reason the interest rate is so high is that the NCL assets are of limited value. If NCL can't turn a profit running those ships, probably no other buyer for the ships will have any better success. The good news is that the lenders will be very flexible since those assets are more valuable in NCL's hands. Thus, expect that NCL will be able to run cruises unless the entire industry collapses.
Yes, but there's a difference between continuing to run cruises and honoring cruise credits. If NCL is unable to service its debts and enters Ch11, the secured debts have a priority on the assets. It's possible that the company will continue operating while defaulting on some or all of its of its obligations, similar to the way GM continued to make cars even though they defaulted on some debt.
 
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