Norwegian Works to Stay Afloat With Financing and Cold Layup
Norwegian Cruise Line Holdings, the parent company of three cruise lines, confirmed that the majority of its fleet of 28 cruise ships is transitioning into cold layup as the company works to enhance its weakened financial position due to the impact of COVID-19. While the company is currently targeting resuming sailing July 1, 2020, they termed it a prolonged layup in a new business update.
Norwegian Cruise Line Holdings included in its update to investors a warning regarding the impact of the public health crisis on its business. They reported that due to the cruise suspension, decline in advance bookings and debt maturities and other obligations, the company does not currently have sufficient liquidity to meet its obligations over the next twelve months, assuming no additional financing or other proactive measures. This “raised substantial doubt about the Company’s ability to continue as a going concern,” with its independent registered public accounting firm, without the competition of the announced offerings.
Norwegian is taking steps to enhance its financial position through new offerings of stock, exchangeable and secured noted and a $400 million private placement to a private equity firm. They have also revised terms on some of the outstanding debt from their ships and are working to revise payments related to future new building projects. Additional, Norwegian is “undertaking meaningful reductions in ship operating expense including food, fuel, insurance, port charges and reduced crew manning of vessels during the suspension.” Among the actions, they have reduced marketing expenditures, temporarily shortened the work week and reduced work hours for shoreside employees or furloughed employees.
The company is also reducing costs by transitioning its fleet into cold layup. As part of the layup efforts, The Port of Virginia is providing berth space at Portsmouth Marine Terminal (PMT) for three of the Norwegian Cruise Line ships, Norwegian Encore, Norwegian Bliss, and Norwegian Spirit, through June 30, 2020. Prior to moving to Virginia, the three ships had been in Miami and offshore or the Bahamas, while Norwegian arranged for the crews to be flow home or transferred on to the company’s other ships for transportation home.
Credit The Port of Virginia
According to The Port of Virginia, currently there are less than 175 crew members on each ship, but the Centers for Disease Control and Prevention (CDC) is requiring all crew members to stay aboard the vessels while on berth. Further, the Port explained in a press release, “In order to be accepted into the Norfolk Harbor and allowed to dock at PMT, Norwegian Cruise Line had to submit crew manifests and a plan of operation during their stay at The Port of Virginia for review to the CDC, the U.S. Coast Guard and the Virginia Department of Health. Each agency approved the plan before the vessels were allowed into Virginia waters.”
Other cruise ships operated by Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises are currently in a variety of ports around the globe ranging from Port Rashid in Dubai, United Arab Emirates, and Mumbai, India to the waters around the Port of Los Angeles, Miami and the Bahamas. The Norwegian Star is currently en route to Southampton, England transporting crew from the company’s ships while the Norwegian Breakaway is current bound for Marseilles, France.
During a cold layup the crew is typically reduced to minimal levels while machinery is taken out of service and routine maintenance is deferred. The class societies also need to be notified of the change of status for the ship and depending on the total length of the layup the ship may require a survey before returning to service.