Norwegian Cruise Line Holdings Ltd.(together with NCL Corporation Ltd., today provided a business update on the impacts of COVID-19 and its continued resumption of cruise operations.
COVID-19 and Resumption of Cruise Operations
In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with ships initially operating at reduced occupancy levels. By the end of the third quarter, we operated vessels totaling approximately 40% of our berth capacity.
Beginning in December 2021, the spread of the Omicron variant of COVID-19, with its increased transmissibility, caused several operational challenges and disruptions, including new travel restrictions and increased protocols in ports of call limiting port availability, which led to the cancellation of certain voyages in the fourth quarter of 2021 and first quarter of 2022, and the postponement of the restart of certain vessels. As of the date hereof, 16 of our 28 ships, or 70% of our berth capacity, are operating with guests onboard. This excludes a vessel that was paused from service beginning December 2021 due to the cancellation of its South Africa and related itineraries as a result of travel restrictions and other operational challenges due to the Omicron variant. We expect to have approximately 85% of berth capacity operating by the end of the first quarter of 2022, with the full fleet expected to be back in operation during the early part of the second quarter of 2022.
On January 14, 2022, we announced that our three brands have opted into the U.S. Centers for Disease Control and Prevention’s (“CDC”) COVID-19 Program for Cruise Ships Operating in U.S. Waters (the “Program”), the agency’s voluntary COVID-19 risk mitigation program for foreign-flagged cruise ships operating in U.S. waters. The Program was announced in connection with the expiration of the Temporary Extension and Modification of Framework for Conditional Sailing Order on January 15, 2022, and we await the release of additional information about the Program from the CDC. In addition, as part of our SailSAFE health and safety program, our SailSAFE Global Health and Wellness Council, chaired by the former head of the U.S. Food and Drug Administration, Dr Scott Gottlieb, continues to advise the Company on health and safety protocols in light of advancements in medicine and technology.
Booking Environment and Outlook
Net booking volumes at the beginning of the fourth quarter of 2021 continued to demonstrate week-over-week sequential growth after the slowdown in booking activity caused by the Delta variant of COVID-19. Net booking volumes in the latter part of the fourth quarter of 2021 were negatively impacted by the Omicron variant of COVID-19, primarily for close-in voyages in the first and second quarters of 2022. In recent weeks, net booking volumes have continued to improve sequentially. As a result of the impacts from Omicron, as of February 6, 2022, the Company’s cumulative booked position for the first half of 2022 is below the extraordinarily strong levels of 2019, while the second half, when the full fleet is expected to be back in operation, is in line with the comparable 2019 period. Concurrently, pricing for the first half, second half and full-year 2022 are above the record levels for the same time in 2019, even when including the dilutive impact of future cruise credits. Booking trends for 2023 demonstrate continued strong demand for sailings in the medium and long term, with booked positions and pricing meaningfully higher and at record levels when compared to 2019.
Liquidity, Cash Burn and Financial Action Plan
We continue to take proactive measures to enhance liquidity and financial flexibility in the current environment. As of September 30, 2021, our total debt position was $12.4 billion and our liquidity, consisting of cash and cash equivalents and short-term investments, was $1.9 billion.
We have taken the following additional actions to enhance our liquidity profile and financial flexibility since September 30, 2021:
- In November 2021, NCL Corporation Ltd. (“NCLC”) entered into a $1.0 billion commitment through August 15, 2022, that provides additional liquidity to the Company. If drawn, this commitment will convert into an unsecured note maturing in April 2024. The Company has not drawn and currently does not intend to draw under this commitment.
- In November 2021, NCLC issued a $1.15 billion aggregate principal amount of 1.125% Exchangeable Senior Notes due 2027 (the “2027 Exchangeable Notes”), which includes the full exercise of the initial purchasers’ greenshoe option. The initial exchange rate per $1,000 principal amount of 2027 Exchangeable Notes is 29.6850 ordinary shares, which is equivalent to an initial exchange price of approximately $33.69 per ordinary share, subject to adjustment in certain circumstances.
- In November 2021, we repurchased $715.9 million aggregate principal amount of our 6.00% Exchangeable Senior Notes due 2024 (the “2024 Exchangeable Notes”) for approximately $1.4 billion.
- In November 2021, the Company issued 46,858,854 ordinary shares to certain holders of the 2024 Exchangeable Notes in a registered direct offering. The proceeds of such offering were used to redeem $236.25 million aggregate principal amount of our 12.25% Senior Secured Notes due 2024 and $262.50 million aggregate principal amount of our 10.250% Senior Secured Notes due 2026, including any accrued but unpaid interest thereon, to pay related premiums, fees and expenses, and for general corporate purposes, including the repurchase of a portion of the 2024 Exchangeable Notes.
Our monthly average cash burn for the fourth quarter of 2021 was approximately $345 million, slightly lower than our prior estimate of $350 million for the fourth quarter of 2021. The cash burn rate includes ongoing ship operating expenses, administrative operating expenses, interest expenses, taxes, debt deferral fees and non-newbuild capital expenditures and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings, newbuild related capital expenditures and other working capital changes.
Outlook
While we cannot estimate the impact of the COVID-19 pandemic on our business, financial condition or near- or longer-term financial or operational results with certainty, we will report a net loss for the fourth quarter and full-year ending December 31, 2021, and expect to report a net loss until we are able to resume regular voyages.
As a result of Omicron variant-related impacts to operations in the first quarter of 2022, we now expect net cash provided by operating activities to be positive during the second quarter of 2022. Despite the impact of the Omicron variant on the booking environment, and based on our current projections and market and public health conditions, we expect to have positive Adjusted Net Income1 for the second half of 2022.
Edited by: Stephen Morton
.jpg){kind=tracking}
