Norwegian Cruise Line Stock Down 20% after the Statement of Possible Bankruptcy Protection Need

Updated on May 6, 2020 at 1:31 pm UTC by Steve Muchoki · 3 min read
Norwegian Cruise Line Stock Down 20% after the Statement of Possible Bankruptcy Protection Need
Photo: Norwegian Cruise Line / Instagram

Norwegian Cruise Line (NCLH) stock closed yesterday with a drop of over 20% to trade at $11.14, after the company warned it may have to seek bankruptcy, saying there is substantial doubt about its ability to rebound from the coronavirus crisis.

Norwegian Cruise Line Holdings Ltd (NYSE: NCLH) is experiencing a different kind of storm that has resulted in its stock market shedding almost 80% since the beginning of the year. As of yesterday, its stock closed the day at a whopping loss of over 20% to trade at $11.14. The company expects to report a loss for the first quarter and also for the year. In the pre-marker now the stock is up 2.95%, at $11.51.

The challenges facing the Norwegian Cruise Line have emanated from the ongoing coronavirus outbreak that has seen several cruise ships become a sort of COVID-19 epicenter. With the decline in its product demand, its future remains bleak, even after the crisis subsides.

The shares fell drastically during the black Thursday, whereby they were trading at around $58 only to tumble below $10 level. With the virus still pushing people to observe social distancing, the company will be left with no choice than to close the business and file for bankruptcy.

Analyzing its market chart, the 4-hour chart is indicating the stock might be preparing for another dip below the previous low. The case is similar to the weekly chart, which is showing there might be a second wave that could push the stock on its knees.

Norwegian Cruise Line and Coronavirus Effect on Its Stock

Depending on the management’s ease of flexibility and its balance sheet strength, its business might start from negative after the crisis. Separately, the company announced on Tuesday morning that L Catterton, a private equity fund, invested $400 million in NCL Corporation, a subsidiary of Norwegian.

The CEO of Norwegian, Frank Del Rio, said:

“We are pleased to execute this agreement with L Catterton, the largest and most global consumer-focused private equity firm in the world”.

In a securities filing, the company said it complied with all of its debt agreement as of March 31, however, it could not guarantee that it may need to seek waivers from its lenders. According to the company, if it cannot be in a position to amend its credit agreement, then it faces a risk of defaulting.

This would then trigger immediate repayment of most of its debts, hence the need for filing for bankruptcy. The company is hoping to raise $1.6 billion from issuing a mix of stock and bonds.

In the statement, the company said that if it is not able to maintain enough liquidity, then its business and financial condition could be adversely affected and it may be necessary to reorganize itself entirely.

“We cannot predict when any of our ships will begin to sail again or when ports will reopen to our ships. Moreover, even once the travel advisories and restrictions are lifted, demand for cruises may remain weak for a significant length of time and we cannot predict if and when each brand will return to pre-outbreak demand or pricing,” concluded the company.

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Steve Muchoki
Author: Steve Muchoki

A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies. Mythology is my mystery! "You cannot enslave a mind that knows itself. That values itself. That understands itself."

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