Norwegian Cruise Line Holdings had already begun developing “a comprehensive and multi-faceted strategy to enhance its already rigorous health and safety protocols to address the unique public health challenges posed by Covid-19” before it suspended its cruise operations, the company has said.
These included enhanced screenings, upgraded cleaning and disinfection protocols and plans for social distancing.
The company said that it was using Dr Scott Gottlieb, former Commissioner of the US Food and Drug Administration as an advisor to provide independent public health counsel. The Company was developing its next level of health and safety standards to prepare for the resumption of voyages.
Norwegian anticipated that ongoing ship operating expenses and administrative operating costs combined would range from approximately $70m to $110m a month during the suspension of operations.
It had reduced cruise operating expenses, which included costs associated with crew payroll, food, fuel, insurance and port charges. The majority of ships in the Company’s fleet were currently transitioning to cold layup.
It had significantly reduced or deferred marketing expense in the first half of the year.
It had introduced a temporary shortened work week and reduced work hours, with commensurate 20% salary reduction for shoreside staff.
It had furloughed some 20% of the shoreside workforce until July 31st.
The Company is covering the employee share of medical insurance premiums during the furlough period but has implemented a company-wide hiring freeze, paused employer 401(k) matched contributions, and suspended travel for shoreside employees across the organization.
The company has identified about $515m of capital expenditure reductions:
$345m, or a 65% reduction of non-newbuild capital expenditures for the remainder of 2020.
$170m in expected deferred capital expenditures for newbuild related payments through to March 31st 2021.
The Company said that it was currently finalizing documentation for deferrals of these payments. Upon completion, the company does not expect any newbuild related payments to have an impact on liquidity until April 2021.
Total capital expenditures, net of expected deferrals of newbuild related payments, for the remainder of 2020 is expected to be about $195m.
Norwegian has deferred about $385m of payments related to guaranteed financing by Euler Hermes Aktiengesellschaft, the official Export Credit Agency (EC) of Germany, through to April 2021. It has amended associated credit agreements to incorporate this debt deferral in connection with an industry-wide initiative, granting a 12-month debt holiday to provide interim debt service relief for amortization payments and financial covenants.
Norwegian was finalizing documentation for the deferral of the remaining approximately $155m of ECA-backed payments until March 31st 2021 with its other ECA lenders. Deferrals are to be repaid in eight equal semi-annual instalments following the Debt Holiday.
Norwegian has negotiated a 12-month deferral for approximately $150m of debt amortization until March 31st 2021 relating to the Term Loan A and Norwegian Jewel term loan. Deferrals are to be repaid 25% per year in equal instalments following the deferral period, with any outstanding balance paid in full at maturity.
It has extended its $230m Pride of America term loan by one year to January 2022, and its $675m Norwegian Epic revolving credit facility to March 2022.
Norwegian estimated that its monthly cash burn would be in the range of $120m to $160m a month during the suspension of operations.
This includes ongoing ship operating expenses, administrative operating expenses, interest expense (including approximately $12m of additional cash interest expense per month for the next 12 months for debt refinancings and new financing transactions) and expected capital expenditures. It excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings.