Norwegian Cruise Line warns of ‘substantial doubt’ it will survive

Norwegian Cruise Line, the world’s third-largest cruise operator, has warned there is “substantial doubt” that it will be able to stay in business.

The company, which is listed on the New York stock market, said: “Covid-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which adversely affects our ability to obtain acceptable financing.”

In a filing with the US Securities and Exchange Commission (SEC), Norwegian said the difficulties it had experienced arranging emergency funding had “raised substantial doubt about the company’s ability to continue as a going concern, as the company does not have sufficient liquidity to meet its obligations over the next 12 months”.

Shares in Norwegian, which operates cruises in the Caribbean, the Mediterranean and the Bahamas, slumped 19% to $11.60 (£9.30) in early trading in New York on Tuesday. The shares were changing hands for $60 each in January.

Cruising has been among the worst-hit of all industries. All operations have been suspended since mid-March and analysts have warned it is difficult to imagine how cruise ships could operate under socially distant conditions.

Dozens of Covid-19 fatalities have been linked to cruises, with passengers and crew dying while at sea and after disembarking. The ships have been described as “floating petri dishes” of the virus and passengers have had to stay in quarantine onboard ships in Japan and the US.

Norwegian’s rivals Carnival Corporation and Royal Caribbean Cruises have also warned about their prospects, and the value of their shares has collapsed by about three-quarters since the start of the year.

The industry was left out of the US government’s $2.3tn stimulus package for troubled companies, as all the big players are incorporated outside the country. Norwegian is registered in Bermuda.

“The current, and uncertain future impact of the Covid-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price,” the company said in the SEC filing on Tuesday.

However, Norwegian also said it had secured a $400m investment from US private equity firm L Catterton.

Scott Dahnke, the global co-chief executive of L Catterton, said: “The cruise industry has been very resilient over a long period of time, driven by strong secular tailwinds and a high level of guest satisfaction. People enjoy cruising, with many guests taking multiple voyages over time.

“The industry has overcome numerous challenges in the past, and we expect that the industry will rebound and prosper with even further enhancements to their already rigorous health and safety protocols in place in the future.”

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