Norwegian Cruise Line says there’s ‘substantial doubt’ about its ability to continue as a ‘going concern’

Norwegian Cruise Line said there is “substantial doubt” about its ability to continue as a “going concern” as the coronavirus pandemic wreaks havoc on the industry, warning that it may need to seek bankruptcy protection.

The coronavirus 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 a securities filing published Tuesday. “These factors have raised substantial doubt about the company’s ability to continue as a going concern.”

Norwegian said it was in compliance with all of its debt agreements as of March 31, but couldn’t guarantee that going forward and may need to seek waivers from its lenders. If it cannot amend its credit agreements, the company said it is at risk of default, which would trigger immediate repayment of most of its debt and derivatives contracts. That could push it into bankruptcy.

If it’s not able to amend its debt agreements or obtain new financing to stay afloat, “our business and financial condition could be adversely affected and it may be necessary for us to reorganize our company in its entirety, including through  bankruptcy  proceedings, and our shareholders may lose their investment in our ordinary shares,” the company said. 

The company also announced it expects to report a loss for the quarter ended March 31 and on the year.

Separately, the company announced Tuesday morning that L Catterton, a private equity fund, invested $400 million in NCL Corporation, a subsidiary of Norwegian. 

Shares of the company fell more than 10{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in premarket trading on the two announcements.

The coronavirus pandemic has brought the global travel industry, and the cruise industry in particular, to a standstill across the world. With tight credit markets and the economic toll of Covid-19 remaining unclear, Norwegian, the smallest of the three major publicly traded cruise companies, said it’s concerned about whether it will be able to find financing to help it weather a potentially prolonged situation without any revenue.

The company said it had roughly $6 billion in long-term debt obligations as of Dec. 31. In March, the company fully drew down an $875 million revolving credit facility and a separate $675 million revolving credit line. The latter is due to mature on March 4, 2021.

In early March, as the virus spread rapidly among some cruise passengers, the State Department warned Americans against traveling by cruise ship. On March 14, the CDC issued a no-sail order for cruise ships and extended it on April 9 until July 24. 

This is breaking news. Please check back for updates.