Cash-Strapped Norwegian Cruise Line Spikes on $2.2 Billion Lifeline

Norwegian Cruise Line Holdings Ltd. (NCLH) raised about $2.2 billion in a mix of stocks and debt sales to bolster its cash coffers so it can survive well over 12 months of voyage suspensions during the coronavirus pandemic.

The cruise operator’s shares jumped 5.1% to $11.69 in midday U.S. trading.

The capital markets transactions, led by Goldman Sachs, include a $400 million public offering of common stock, a $750 million offering of exchangeable senior notes, a $675 million offering of senior secured notes, and a $400 million private investment from global consumer-focused private equity firm L Catterton.

The announcement comes after Norwegian Cruise Line warned on Tuesday that it had “substantial doubt” about its ability to fund its operations in the coming 12 months. Fierce stay-at-home restrictions to contain the fast spread of the coronavirus pandemic has brought global travel to a standstill resulting in the shutdown of the cruise ship and airline industries, which in turn has put pressure on companies’ cash flow.

Following the completion of the offerings, the cruise operator said it will have about $3.5 billion in liquid assets and will be “well-positioned to weather COVID-19 impacts,” it said.

“This significantly strengthens the company’s financial position and it now expects to be positioned to withstand well over 12 months of voyage suspensions in a potential downside scenario,” Norwegian Cruise said in a statement. “The company has taken a swift and proactive approach to protect its future given the significant uncertainty and unknown duration of the COVID-19 global pandemic.”

Shares in Norwegian Cruise Line took a 23% nosedive in the past five days, taking this year’s plunge to 80%.   

Wedbush analyst James Hardiman reiterated his Buy rating on the stock with a price target of $26, saying that the market reaction is exaggerated.

“What seems to be getting missed is that the company now has the cash in place to survive until mid-to-late 2021 even under a worst case net cash outflow scenario,” Hardiman wrote in a note to clients.

Overall, Wall Street analysts have a Moderate Buy rating on the stock based on 5 Buys, 6 Holds and 1 Sell. The $23.70 average price target implies a staggering 101% upside potential in the shares in the coming 12 months. (See Norwegian Cruise Line stock analysis on TipRanks)

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