By Paula Seligson, Jonathan Levin and Crystal Tse (Bloomberg) — Norwegian Cruise Line Holdings Ltd. is pledging ships and two islands as part of a plan to raise as much as $2 billion to survive the travel industry shutdown.
The cruise line operator is tapping investors for the sale of $600 million of junk bonds that may price as soon as Tuesday and will have a maturity of four years, according to people with knowledge of the transaction, who asked not to be identified because the details are private. The bond is being offered with a coupon of 12.25% to 12.5% with a discount between 98.5 to 99 cents on the dollar, which would yield around 13%, other people with knowledge of the deal said. Books close at 2 p.m. in New York.
A representative for Goldman Sachs Group Inc., which is leading the sale, declined to comment.
The financing also includes $650 million of exchangeable notes, a public offering of $350 million ordinary shares and a $400 million investment by an affiliate of private equity firm L Catterton, which will be entitled to nominate one director to the company’s board, according to a statement.
Norwegian said in a regulatory filing on Tuesday that disruption from the pandemic and debt maturities over the next year have raised “substantial doubt” over its ability to remain a going concern, assuming no additional financing. Norwegian also said it would delay its first-quarter earnings report. Preliminary earnings showed the company expects a first-quarter net loss of as much as $1.93 billion.
The company’s shares fell as much as 24% to $11.03 in New York trading and were down 75% this year through Monday’s close.
Norwegian said the junk bond will be secured by first-priority claims on two of the company’s vessels, two islands used in the operations of its business and intellectual property. The debt has already received significant interest from investors, Bloomberg News previously reported.
The new exchangeable notes are expected to carry a 20% to 25% conversion premium with a coupon between 5.75% and 6.25%, according to terms reviewed by Bloomberg. The stock sale does not have an offering range. Both are expected to price Tuesday evening in New York.
Norwegian’s revenue has been squeezed as governments around the world instruct their residents to stay at home for all but essential travel to stem the spread of Covid-19. It has suspended cruises until at least June 30, recently furloughed about 20% of its workforce and is burning about $110 million to $150 million of cash each month, according to an April 27 news release.
The company’s 3.625% unsecured notes due in 2024 have fallen to distressed levels. They last traded at 64.125 cents on the dollar — from above par in late February — for a yield of 14.6%, according to Trace data.
Norwegian is also improving liquidity by an additional $1 billion through a series of amendments on existing loans that allows the company to defer certain debt payments, according to a filing. Some of this relief has already been granted and some is dependent on the company successfully raising at least $1 billion in financing by June 30.
“Contingent on completion of the transactions, the company expects to have approximately $3 billion of liquidity,” a spokesperson for Norwegian said in an email to Bloomberg. It will leave the company positioned to withstand well over 12 months of voyage suspensions in a potential downside scenario, the spokesperson added.(Updates with bond price talk in the second paragraph.)
–With assistance from Gowri Gurumurthy, Davide Scigliuzzo, Drew Singer, Crystal Kim and Sally Bakewell.
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