What happened
Cruise stocks fell on Thursday after Norwegian Cruise Line Holdings (NASDAQ: NCLH) He said he would seek to raise almost $ 1.2 billion to withstand the COVID-19 crisis.
At the close of trading, Norwegian shares fell 15.6%. Royal Caribbean (NYSE: RCL) and the two actions of Carnival, Carnival Corporation (NYSE: CCL) and Carnival Plc (NYSE: CUK), also decreased by 7.6%, 9.7% and 6.3%, respectively.
And that
Norwegian is trying to raise $ 925 million through debt deals. It also intends to sell at least $ 250 million in shares. The embattled cruise company needs the cash to finance its operations, while its ships remain trapped in port due to navigation restrictions imposed by health authorities.
Rising debt levels are a dark cloud looming over the cruise industry. Image source: Getty Images.
Norwegian’s capital increases follow those of Carnival, which recently issued debt of nearly $ 1.3 billion. The carnival debt was expensive; The notes he sold had interest rates of more than 10%. Norwegian Notes may have a similar cost.
Now what
With their ships unable to set sail, Royal Caribbean, Norwegian and Carnival are losing cash. Carnival alone is losing approximately $ 650 million per month.
To bear such brutal losses, the major cruise lines have had no choice but to take on huge debts in recent months. The problem is that this debt comes with heavy interest payments, making it difficult for Royal Caribbean, Norwegian and Carnival to be profitable again, especially if the COVID-19 crisis continues to reduce demand for cruise vacations in 2021.
