Norwegian Sun
Photo Courtesy Norwegian Cruise Line
As Royal Caribbean is preparing to take delivery of the $1.4 billion-dollar Oasis of the Seas, one cruise line is having to face some harsh financial realities about their own newbuild plans.

Genting Hong Kong, stakeholder in half of Norwegian Cruise Line, issued a statement on Monday cautioning investors that there can be no assurance NCL will have sufficient cash flow and financing agreements to fund the company’s obligations one year from now.

Genting Hong Kong did point out that it has secured up to $970.5 million in export credit financing for Norwegian Epic, which will allow that vessel to be built as planned, and that it expects to have enough cash on hand to last another year. 

The report also states that, while the expect Norwegian Epic to be completed on time, if any delay was to occur it could impact the company both financially and operationally.  

What the report doesn’t say is that while they can afford to build Norwegian Epic, once it launches NCL may be so cash-strapped that the line is forced to either sell off some or all of their ships, which were placed as collateral against their current debt load, or cease operations altogether.

NCL stated in a press release dated November 5, 2009 that it had placed Norwegian Dawn, Norwegian Spirit, Norwegian Star and Norwegian Sun up as collateral in order to secure a Revolving Credit  Facility.  This freed up the necessary cash in order for NCL to complete Norwegian Epic and fund itself for the next twelve months.

Does that mean the future for NCL is doomed?  Not necessarily.  If NCL had a nickel for every time it almost went under, it wouldn’t be in financial trouble.  But Genting Hong Kong’s statement can be seen as a dire warning to potential investors, effectively stating “it’s out of our hands.”

Who is Genting Hong Kong, by the way?  You might remember them better as Star Cruises, the company that bought controlling interest of NCL back in 2001.  They have changed their name to Genting Hong Kong, effective November 30th. 

To read the Investor Release, go here and scroll down to the November 16, 2009 Corporate Announcement. 

 

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