Norwegian Cruise Says New Funding Means It Will Survive Crisis

(Bloomberg) -- Norwegian Cruise Line Holdings Ltd. said Wednesday that a $2.23 billion fundraising effort has secured its future -- a day after telling investors its survival was in jeopardy.

Norwegian started Tuesday with a warning to investors: With its cash position weak and the cruise industry shuttered due to Covid-19, it couldn't guarantee it would continue as a going concern.

But by late Tuesday, the company had secured new financing from bond and equity investors that provide for “well over 12 months” of potential voyage suspensions.

The biggest chunk of the new funds came from a $675 million bond sale priced to yield 12.575% -- a rate that would have been unthinkable at the start of the year. Norwegian raised a further $750 million from exchangeable notes; $400 million from ordinary shares; and $400 million from an affiliate of private equity firm L Catterton.

“When the transactions are completed, the additional liquidity alleviates management's concern about the company's ability to continue as a going concern for the next 12 months,” Norwegian said Wednesday.

Like Carnival Corp. and Royal Caribbean Cruises Ltd., Norwegian halted new cruises in mid-March as the rest of the nonessential economy closed down. A series of Covid-19 outbreaks at sea raised questions about the safety of the industry.

Norwegian is also facing probes into its conduct during the pandemic. In a filing Tuesday, Norwegian said it has been cooperating with investigations into its marketing practices.

Florida Attorney General Ashley Moody had previously announced such an investigation, but the company said it has received notifications from “other attorneys general” as well. A Miami New Times report in March cited leaked emails showing some members of Norwegian's sales team had been instructed to use false and misleading talking points about the coronavirus to sell cruises.

The company said a one-year suspension of cruising isn't the most likely scenario, but it's preparing for the worst. Overall, the company now has about $3.5 billion in liquidity, Norwegian said.

Norwegian shares rose as much as 6.8% to $11.94 on Wednesday, after plummeting 23% a day earlier. The share sale cut the Norwegian equity pie into finer slices, a process called dilution that typically hurts existing owners.

James Hardiman, an analyst covering cruise lines for Wedbush Securities, said the new liquidity position will probably last Norwegian closer to 18 months.

“To get there, they've diluted existing shareholders and lowered future earnings power, but to me this seems like a good trade-off to insure the long-term solvency of the company,” Hardiman said via email.