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NCLH can go 18 months-plus in no-revenue scenario: Del Rio

CRUISE Frank Del Rio.jpg
The liquidity cushion 'gives everyone peace of mind.' Frank Del Rio said
The breathtaking $2.4bn single-day capital raise for Norwegian Cruise Line Holdings makes a total of $3.5bn in liquidity, securing the company for more than 18 months in a no-revenue environment, CEO Frank Del Rio told Seatrade Cruise News.

Eighteen months is 'a heck of a long time,' as he put it, and the effort 'far exceeded' expectations. 'It is a great testament to the investor community who believed in us. There's a lot of smart money on Wall Street.'

First quad issue

According to Del Rio, Goldman Sachs, which led the transactions, called it the first-ever quad issue — four tranches raised simultaneously. Each offering was upsized and the full exercise of greenshoe options, announced this morning, added 15% to the capital raised.

'It gives everyone peace of mind' — customers, travel partners, the investment community, employees, Del Rio said in a one-to-one interview that also touched on how fast NCLH got travelers home, what's happening with the crew, the company's high-profile public health advisor and when and how cruises may restart.

Quantum of capital, quantum of time

'We bought an insurance policy. In this uncertain world in which things are moving so quickly, in which we don't see the pandemic ending any time soon, and we are so dependent on the government and the public health authorities' decisions ... This was a prudent action, a quantum of capital that provides a quantum of time. We're delighted we were able to get this done.'

For NCLH, as a blue-chip, S&P 500 company, it was natural to hire top-tier Goldman Sachs to explore financial options. 'They understood our business,' said Del Rio, who had met with CEO David Solomon a couple times and hosted him for lunch on the new Seven Seas Splendor in February. He said Solomon 'took a personal interest in our company.'

As soon as cruises were suspended on March 13, Del Rio began talking with Goldman and the NCLH board about the need to secure additional capital 'just in case.'

Fast-changing scenario

He recounted the fast-changing scenario of the pandemic: 'Things that we thought were absolutely correct in early February were not by mid-February.' By March, it was clear the US Centers for Disease Control and Prevention and the White House coronavirus task force were honing in on the cruise industry.

'We didn't fool around'

Del Rio is proud of his company's response. 'We took swift action when the CDC said you should suspend cruises. We didn't fool around.' Accordingly, NCLH escaped the cruise ship outbreak headlines.

March 13, after getting off the phone with CDC, Del Rio ordered the two ships that were in the process of embarking not to sail. Robin Lindsay, EVP vessel operations, pointed out guests were already having lunch on board.

28-ship fleet halted within 10 days

Del Rio insisted it was imperative to get everyone home immediately, and by March 23 when Norwegian Jewel reached Honolulu, passengers were off all 28 ships in the fleet. Repatriating crew has been much harder and is ongoing. Del Rio agreed to the CDC protocols for their disembarkation.

'Money is no object,' he stressed. 'We still have nearly 10,000 crew we would like to get home as soon as possible. That will be down to 7,000 in a week's time.'

Meanwhile, 'We've been very, very fortunate we had very few [COVID-19) cases on our vessels, so our crew are very safe,' Del Rio said, adding nobody should have to be stuck far away at a time like this.

Of the cost cuts undertaken, it's been a priority to keep the team whole. So NCLH first shortened the work week to four days with a commensurate 20% pay reduction before recently announcing a temporary furlough of about 20% of shoreside employees.

'Toughest decision I've ever taken'

'The toughest decision I've ever had to make was to affect the lives of 700 or so families,' Del Rio said, recounting how he was once laid off, which was 'devastating to me, personally, and much more important, to my family. I don't take [layoffs] lightly.'

The furloughed workers are still employees, which means the company is paying its contribution to their health benefits — something really critical now. And Del Rio is hopeful those team members will be able to come back after the planned 90-day furlough.

Gradual restart, possibly in late Q3

As for when cruises can resume, that's not in the company's hands, but 'It could be as early as some time in the late third quarter or it could slip into the early fourth quarter.' Things will restart 'gradually, at a measured pace,' maybe five or ships a month. So it could be early 2021 before all 28 ships are operating.

The company is not currently drafting modified itineraries because it's unknowable which ports will be open. As Del Rio sees it, 'Until we know, it's best to keep what we have in place.'

People are still making cash bookings — as opposed to simply applying future cruise credits for canceled cruises — for 2020 and beyond. As disclosed in a recent filing, the 2021 booked position is essentially flat compared to the prior year at pricing that is down mid-single digits — not bad, in Del Rio's view, considering 2020 was looking to be another record-breaking year before COVID-19.

'People still want to book cruises,' he said. Loyal past guests and travel advisors support the company, and that gives cruising resilience, even in this unprecedented situation.

After eight weeks of shutdown, with 'all the bad publicity, we are still within shouting distance of last year's record ... So many people like what we do. They're going to come back.'

Former FDA Commissioner Scott Gottlieb on board

NCLH is using this pause to ensure operations are safe when the time comes. The prominent physician Scott Gottlieb, former US Food and Drug Administration commissioner, is providing 'invaluable' advice.

Del Rio said what concerns people most is having the confidence everything will be as safe as possible on cruise ships. 'And we first have to have that confidence ourselves,' he continued, 'that this is a robust and complete plan so I can look a cruiser in the eye: my mother, my son, my grandsons, and say cruising is safe.'