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Norwegian Cruise Line raises ‘substantial doubt’ about its viability

The company says it may not be able to continue as a ‘going concern’ amid the economic turmoil of the coronavirus pandemic

The Norwegian Gem cruise ship leaves the Port of Miami on April 14. (Cliff Hawkins/Getty Images)
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Norwegian Cruise Line this week said it had “substantial doubt” about its ability to meet its financial obligations as a “going concern” while its industry remains in limbo because of the coronavirus.

In a securities filing Tuesday, the Miami-based cruise company said it expects to see hits to operations, growth, reputation, cash flow, share price and more as customers weigh whether it is safe or even feasible to travel. Bookings for the rest of 2020 are “meaningfully lower” than last year even with deep discounting, with declines projected for 2021 as well.

The following day, the cruise company said it had secured more than $2 billion of additional liquidity, shoring up its ability to withstand months of cancelled voyages.

“When the transactions are completed, the additional liquidity alleviates management’s concern about the Company’s ability to continue as a going concern for the next 12 months," the company said Wednesday.

The pandemic has taken a particular toll on the industry, which faced immediate scrutiny for continuing to sail even as the number of onboard infections surged. Cruise companies have been under a no-sail order from the U.S. Centers for Disease Control and Prevention since mid-March; it expires July 24.

Still, passenger demand is unlikely to bounce back once travel advisories and restrictions are lifted. And cruise lines are dependent on travel agencies, suppliers and other vendors linked to the industry.

“Due to the uncertainty surrounding the duration and severity of this pandemic, we can provide no assurance as to when and at what pace demand for cruise vacations will return to pre-pandemic levels, if at all,” the company said in its Tuesday filing.

The filing said that if the government provides disaster relief assistance, or related payments tied to the impact of the coronavirus, that could come with restrictions on executive officer pay, share buybacks or prepayment of debt until the money is repaid or redeemed in full.

Cruise industry’s decision to keep sailing after the coronavirus was detected on a ship helped carry the virus around the globe, health experts say

“We cannot assure you that any such government disaster relief assistance, or other governmental assistance due to the impacts of COVID-19, if passed, will not significantly limit our corporate activities or be on terms that are favorable to us or at all,” the company said in a U.S. Securities and Exchange Commission filing.

A Washington Post investigation last month found that the deadly virus infected passengers and crew on at least 55 ships sailing from nearly every continent, about a fifth of the global fleet. As of April 25, The Post found, at least 65 people who had traveled or worked on the ships have died, though the full scope of fatalities remains unknown.

Health experts say the toll was partly driven by the industry’s decision to continue sailing for weeks after the virus was found in early February on a cruise ship off the Japanese coast. Passengers around the world said many cruise officials did not immediately isolate passengers in their cabins or report that signs of sickness had been detected. In some cases, they said, passengers were told the illness had not made its way on board.

Some company crew members have yet to disembark from their ships, the regulatory filing said. Norwegian Cruise Line said it is working to bring all its employees home but that doing so is affected by limited commercial or chartered flights, plus government restrictions on how people can safely disembark.

“We have been, and will continue to be further, negatively impacted by related developments, including heightened governmental regulations and travel advisories, including recommendations and orders by the U.S. Department of State, the CDC and the Department of Homeland Security and travel bans and restrictions, including the CDC’s No Sail Order, each of which has impacted, and is expected to continue to significantly impact, global guest sourcing and our access to various ports of call,” the company said Tuesday.