How Long Will Norwegian Cruise Line's Liquidity Last After Capital Raise?

Cruise operators remain docked, as the CDC has extended its "no sail" orders through Sept. 30. The protracted suspension in the wake of the COVID-19 pandemic has severely impaired the financials of these companies.

Despite recent fundraising, the liquidity position in the cruise sector remains precarious.

The Cruise Line Analyst: BofA Securities analyst Andrew Didora has Neutral ratings on shares of Norwegian Cruise Line Holdings Ltd NCLH and Carnival Corp CCL.

The analyst reduced his price targets for Norwegian shares from $19 to $17 and for Carnival shares from $17 to $16.

Didora has an Underperform on Royal Caribbean Cruises Ltd RCL with a price target lowered from $40 to $$39. 

The Cruise Line Thesis: Cruise lines continue to burn cash with operations suspended, Didora said in a Tuesday note. (See his track record here.)

The companies face record refunds and minimal new spending on cruises given the global travel restrictions and the rise in U.S. cases, the analyst said. 

BofA Says Norwegian Has 15 Months Of Liquidity: Norwegian plans to use the $1.4 billion in proceeds from the debt and equity offering it announced last week to pay down its $675-million revolver, Didora said.

With beefed-up liquidity of $3 billion, a cash burn rate of $120 million to $160 million per month and an estimated $35 million per month in cash refunds, the analyst said he expects Norwegian's liquidity to last through November 2021.

This estimate assumes continued suspension of cruises and no improvement in cash refunds. 

Carnival's Cash Runway To End In Mid-2021? Carnival's pro forma liquidity position is estimated at $11.6 billion, taking into account the $1.3 billion debt raised this week and the $2.8 billion raised in June.

The analyst estimates Carnival's cash burn rate at $900 million per month.

"At these cash burn rates, we estimate CCL has sufficient liquidity to fund its requirements through July 2021."

Factoring in an estimated $45-million cash burn per month and the $5.6 billion in new capital raised in the second quarter, BofA estimates that the company has sufficient liquidity to get through to October 2021 even in a worst-case scenario.

The Cruise Line Price Action:

Norwegian shares were rising 1.88% to $15.17 at last check Tuesday, while Carnival Cruise was up 2.87% at $15.43. Royal Caribbean shares were 2.18% higher at $53.54. 

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