Norwegian Cruise Lines says there\'s \'substantial doubt\' about its ability to continue operating

• Norwegian Cruise Lines says there's "significant doubt" surrounding its finances and operations.
• The coronavirus pandemic has crippled all cruise operators, leading to empty ships, pay cuts, layoffs, and plummeting stock prices.

Norwegian Cruise Lines warned investors Tuesday that the coronavirus pandemic that stranded ships and cancelled voyages has "raised substantial doubt" about the company's ability to continue operations.

Even as competitors like Carnival plan to begin restarting operations as soon as August, Norwegian says there's no guarantee that people will be willing to travel again, posing a significant risk to its finances.

"The suspension of cruise voyages and decline in advanced bookings, as well as debt maturities and other obligations over the next year, and the fact that management's plan to obtain additional financing has not yet been completed, have 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 twelve months, assuming no additional financing or other proactive measures," it said in a regulatory filing.Advertisement

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To shore up its balance sheet, the company began offering $350 million worth of equity and more than $1 billion in debt for sale on Tuesday. That money will be used for "general corporate purposes," Norwegian said.

There's no guarantee it will be enough.

"The Company has been evaluating a number of financing transactions that, if successful, would provide net proceeds which are anticipated to be sufficient to provide the liquidity necessary to satisfy its obligations over the next twelve months, including the maintenance of minimum levels of liquidity required by certain of our debt agreements," Norwegian said in a "risk factor" update.Advertisement

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"There can be no assurance, however, that the Company will be able to complete any such financing transaction, raise sufficient additional capital, finalize additional amortization deferrals or that revenues will increase rapidly enough to offset operating losses that will provide with sufficient liquidity to satisfy its obligations over the next twelve months or maintain minimum levels of liquidity as required by certain of our debt agreements."

Shares of Norwegian plummeted as much as 13% in early trading Tuesday following the warning. Like most cruise stocks, Norwegian's market value has crumbled in recent months as the coronavirus spread rapidly through ships around the world and eventually forced the cancellation of virtually all voyages.

To cut costs, Norwegian has furloughed some corporate employees and cut pay as much as 20%, employees told Business Insider's Becky Peterson in April. That follows similar pay cuts and a shortened work week for shore-side employees announced in March. Advertisement

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Many employees are still stuck on board ships around the world. Business Insider has spoken with seven Norwegian Cruise Line, Carnival Corporation, and MSC Cruises crew members, most of whom remain trapped on their respective vessels. They addressed the fear, uncertainty, and frustration they have undergone as they continue to wait for the journey home.

"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 to fund resulting reductions in cash from operations," Norwegian said in the filing Tuesday.

"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."Advertisement

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