Business update from NCLH sees Omicron impact fading

In a business update today, NCLH said it will report a net loss for the fourth quarter and full year 2021 and expects a net loss until the resumption of regular voyages.

Positive adjusted net income in second half

Net cash from operations is expected to be positive during Q2 and the company currently expects to have positive adjusted net income for the second half.

Booked position

As of Feb. 6, the cumulative booked position for the first half 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, NCLH said 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 longer term with booked position and pricing meaningfully higher and at record levels when compared to 2019.'

Restart recap and update

NCLH began a phased relaunch of cruises in Q3 2021 and by the end of that quarter, had operated vessels totaling approximately 40% of the company's berth capacity.

Beginning in December the Omicron variant caused operational challenges and disruptions, including new travel restrictions and increased protocols at destinations, limiting port availability. This led to the cancellation of some voyages in Q4 and in Q1 2022, and the postponement of certain vessels' restart.

Currently, 16 of 28 ships, or 70% of NCLH berth capacity, are in passenger service. This excludes Norwegian Jade, paused beginning in December due to the cancellation of its South Africa and related itineraries resulting from Omicron-related travel restrictions and other operational challenges.

NCLH expects to have approximately 85% of berth capacity operating by the end of Q1 with the full fleet forecast to be carrying passengers during the early part of Q2.

Monthly average cash burn

Q4 monthly average cash burn was approximately $345m, slightly lower than the $350m estimated.

Liquidity

As of Sept. 30, total debt position was $12.4bn and liquidity, consisting of cash and cash equivalents and short-term investments, was $1.9bn.

Since then, additional actions to bolster liquidity include a $1bn commitment through Aug. 15, 2022, that, if drawn, 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 the company issued $1.15bn in 1.125% exchangeable senior notes due 2027. The initial exchange rate per $1,000 principal amount is 29.685 ordinary shares, equivalent to an initial exchange price of approximately $33.69 per ordinary share, subject to adjustment.

Also in November, NCLH repurchased $715.9m of its 6% exchangeable senior notes due 2024 for approximately $1.4bn. Then the company issued 46,858,854 ordinary shares to certain holders of the exchangeable notes in a registered direct offering. The proceeds went to redeem $236.25m of its 12.25% senior secured notes due 2024 and $262.5m 10.250% senior secured notes due 2026.

COVID protocols and CDC opt-in

As earlier reported, Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises all opted in to the US Centers for Disease Control and Prevention's now voluntary COVID-19 risk mitigation program. NCLH said the release of additional information about the program is awaited from the CDC.

The company's SailSAFE Global Health and Wellness Council, chaired by former FDA Commissioner Dr. Scott Gottlieb, continues to advise on health and safety protocols.

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